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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
SMT HEALTH SERVICES INC.
(Name of Subject Company)
SMT HEALTH SERVICES INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
784585 10 1
(CUSIP Number of Class of Securities)
JEFF D. BERGMAN
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
SMT HEALTH SERVICES INC.
10521 PERRY HIGHWAY
WEXFORD, PENNSYLVANIA 15090
(412) 933-3300
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing this Statement)
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Copies To:
RONALD BASSO, ESQ.
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
ONE OXFORD CENTRE
301 GRANT STREET, 20TH FLOOR
PITTSBURGH, PA 15219-1410
412-562-3943
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is SMT Health Services Inc., a Delaware
corporation (the "Company"). The principal executive offices of the Company
are located at 10521 Perry Highway, Wexford, Pennsylvania 15090. The title of
the class of equity securities to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is the common
stock, par value $.01 per share (the "Common Stock"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer disclosed in the Tender Offer
Statement on Schedule 14D-1 dated June 30, 1997 (the "Schedule 14D-1") filed
by Three Rivers Holding Corp., a Delaware corporation ("Parent") and its
wholly-owned subsidiary Three Rivers Acquisition Corp., a Delaware corporation
("Purchaser"), to purchase all outstanding shares of Common Stock (the
"Shares") at $11.75 per share, net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer to
Purchase dated June 30, 1997 (the "Offer to Purchase") and the related letter
of transmittal (which, as amended and extended from time to time, together
constitute the "Offer"), copies of which are filed as exhibits hereto.
As set forth in the Offer to Purchase, the principal executive offices of
each of Parent and Purchaser are located at 1301 Avenue of the Americas, 38th
Floor, New York, New York 10019.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b)(1) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described under the headings "Board of Directors, Board
Compensation and Committees," "Executive Compensation and Other Information,"
"Certain Relationships and Related Transactions" and "Security Ownership of
Certain Beneficial Owners and Management" in the Information Statement of the
Company attached to this statement as Annex A (the "Information Statement").
The Information Statement is being furnished to the Company's stockholders
pursuant to Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 issued under the Exchange Act in
connection with the Purchaser's right (after consummation of the Offer) to
designate persons to the Board of Directors of the Company other than at a
meeting of the stockholders of the Company. The Information Statement is
herein incorporated by reference.
INDEMNIFICATION AGREEMENTS
The Company has previously entered into indemnification agreements, or
employment agreements containing indemnification provisions (collectively, the
"Indemnification Provisions"), with each person who as of June 27, 1997 was
either a an executive officer or director of the Company. The Indemnification
Provisions generally provide (i) for indemnification against all costs and
expenses (including attorney's fees) actually and reasonably incurred in
connection with the investigation, defense or appeal of any threatened,
pending or completed action, suit or proceeding related to the fact that such
indemnitee is or was serving the Company as a director, agent or fiduciary, or
by reason of anything done or not done by such indemnitee in any such capacity
and any and all judgments, fines, penalties and amounts paid in settlement of
any claim, unless it is determined that such indemnification is not permitted
under applicable law or as a result of certain culpable action by such
indemnitee and (ii) for the prompt advancement of expenses to an indemnitee as
well as the reimbursement by such indemnitee of any such advances to the
Company if it is determined that the indemnitee is not entitled to such
indemnification. Indemnitees' rights under the indemnification agreements are
not exclusive of any other rights they may have under Delaware law, the
Company's bylaws or otherwise. The employment agreements containing the
indemnification provisions have been filed as Exhibits (c)(3)-(c)(6) hereto
and the form of indemnification agreement has been filed as Exhibit (c)(10) to
this Schedule 14D-9 and is incorporated by reference in its entirety.
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EMPLOYMENT AGREEMENTS
In connection with the execution of the Merger Agreement, the Company and
each of the executive officers entered into new employment agreements (the
"Employment Agreements"), which are substantially similar to their prior
agreements with the Company. See "Certain Relationships and Related
Transactions--Employment Agreements" in the Information Statement which is
incorporated herein by reference.
(b)(2) Merger Agreement. The Merger Agreement provides, among other things,
for the making of the Offer by Purchaser and further provides that, following
the Offer and subject to the satisfaction or waiver of certain conditions,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger as a wholly-owned subsidiary of Parent (the
"Surviving Corporation"). As a result of the Merger, each Share (including the
Associated Rights) issued and outstanding immediately prior to the Effective
Time (as defined in the Merger Agreement) (other than Shares then owned by the
Company, Parent, the Purchaser, any other subsidiary of Parent or by
stockholders of the Company, if any, who dissent from the Merger and comply
with all of the provisions of the Delaware General Corporation Law concerning
the right, if applicable, of holders of Shares to seek appraisal of their
Shares ("Dissenting Stockholders")) will be converted at the effective time of
the Merger (the "Effective Time") into the right to receive $11.75 in cash,
without interest (the "Merger Consideration").
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which
is incorporated herein by reference and a copy of which has been filed with
the Commission as an Exhibit to this Schedule 14D-9.
THE MERGER AGREEMENT
The Merger Agreement provides that following the satisfaction of the
conditions described below under "Conditions to the Merger," the Purchaser
will be merged with and into the Company, and each then outstanding Share
(other than Shares then owned by the Company, Parent, the Purchaser or any
other direct or indirect wholly owned subsidiary of Parent or by Dissenting
Stockholders) will be converted into the right to receive the price per Share
in the Offer.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and certain other conditions (the "Conditions to the Offer") that are
described in Section 14 of the Offer to Purchase which is incorporated herein
by reference. The Merger Agreement provides that the Purchaser may extend the
Offer, without the consent of the Company, only (1) if at the Expiration Date
any of the conditions to the Purchaser's obligations to accept Shares for
payment are not satisfied or waived, until such time as such conditions are
satisfied or waived, (2) for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable
to the Offer, (3) for a period of up to ten business days to permit the
Purchaser to decide whether to modify the Offer in the event of certain
competing proposals and (4) on one or more occasions, for any reason, for an
aggregate period of not more than ten business days beyond the latest
expiration date that would otherwise be permitted under the terms of the
Merger Agreement as described in this sentence. In addition, the Purchaser has
agreed in the Merger Agreement that it will not, without the express written
consent of the Company, (1) reduce the number of Shares subject to the Offer,
(2) reduce the Offer Price, (3) add to or modify the conditions set forth in
Section 14 of the Offer to Purchase, including the Minimum Condition, (4)
except as provided above, extend the Offer if all of the conditions set forth
in Section 14 of the Offer to Purchase are satisfied or waived, (5) change the
form of the consideration payable in the Offer or (6) amend or alter any term
of the Offer in any manner materially adverse to the Company's stockholders;
provided, however, that nothing contained in the Merger Agreement will
prohibit the Purchaser, in its sole discretion without the consent of the
Company, from waiving satisfaction of any condition of the Offer other than
the Minimum Condition.
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The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, the Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of the
Purchaser will cease and the Company will be the surviving corporation (the
"Surviving Corporation"). As a result of the Merger, each then outstanding
Share (other than Shares then owned by the Company, Parent, the Purchaser or
any other direct or indirect wholly owned subsidiary of Parent or by
Dissenting Stockholders) will be converted into the right to receive the
Merger Consideration.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of
the terms of the Merger Agreement by the stockholders of the Company, (1) by
mutual written consent of the Company and Parent, (2) by either the Company or
Parent if (a)(i) as a result of any of the conditions to the Offer not being
satisfied, the Offer shall have been terminated or expired in accordance with
its terms without the Purchaser having accepted for payment any Shares
pursuant to the Offer (including the Minimum Condition) or (ii) the Purchaser
shall not have accepted for payment any Shares pursuant to and subject to the
conditions set forth in Section 14 of the Offer to Purchase by September 30,
1997; provided, however, that if as of such date any of the conditions set
forth in either paragraph (a) or paragraph (b) of Section 14 of the Offer to
Purchase are not satisfied, Parent and the Purchaser may in their sole
discretion extend such date until December 31, 1997; provided, further, that
the right to terminate the Merger Agreement pursuant to clause (2)(a) will not
be available to any party whose failure to perform any of its obligations
under the Merger Agreement results in the failure of any such condition or if
the failure of such condition results from facts or circumstances that
constitute a breach of any representation or warranty under the Merger
Agreement by such party or (b) if any Federal, state or local government or
any court, tribunal, administrative agency or commission or other regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity"), shall have issued any order, decree or ruling or taken any action
permanently enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger and
such order, decree or ruling or other action has become final and
nonappealable, (3) by Parent or the Purchaser prior to the Purchaser's
obligation to accept Shares for payment pursuant to the Offer, in the event of
a breach by the Company of any representation, warranty, covenant or other
agreement contained in the Merger Agreement which would or reasonably would be
expected to give rise to the failure of a condition set forth in Section 14 of
the Offer to Purchase, (4) by Parent or the Company if, prior to the
obligation of the Purchaser to accept Shares for payment pursuant to the
Offer, (a) the Board determines that a Third Party Proposal (as hereinafter
defined) for an Alternative Transaction (as hereinafter defined) constitutes a
Superior Proposal (as hereinafter defined), (b) the Company promptly notifies
Parent of its determination in writing (unless, following receipt of written
advice of outside counsel, the Board's fiduciary duties under applicable law
would be violated thereby), 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, (c) ten days have elapsed following receipt by
Parent of such written notice, (d) during such ten-day period, the Company
cooperates with Parent with the intent of enabling, but not obligating, Parent
to agree to a modification of the terms and conditions of the Merger Agreement
so that the transactions contemplated thereby may be effected, and (e) at the
end of the ten-day period, the Board continues to believe that the Third Party
Proposal constitutes a Superior Proposal and the Company pays to Parent the
Termination Fee (as hereinafter defined) and Expenses (as hereinafter
defined); provided, that in the event of the determination of the Board that
such Third Party Proposal constitutes a Superior Proposal is made less than
ten days prior to the scheduled expiration of the Offer, Parent and the
Purchaser will either (i) reduce the ten-day period or (ii) extend the Offer,
in either case, such that the ten-day period described above will end prior to
the expiration of the Offer, and (5) by the Company if Parent or the Purchaser
shall have (a) failed to commence the Offer within five business days of the
date of the Merger Agreement, (b) failed to pay for Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement or (c) breached in
any material respect any of their respective representations, warranties,
covenants or other agreements contained in the Merger Agreement, which failure
to perform in respect of clause (c) is incapable of being cured or has not
been cured within 30 days after the giving of written notice to Parent or the
Purchaser, as applicable, except in any case under clause (c), such breaches
and failures which would not prevent the consummation of the Offer or the
Merger subject to the terms and conditions of the Merger Agreement.
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Alternative Transactions. The Merger Agreement provides that the Company and
its subsidiaries shall not, and shall not authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it to, directly or
indirectly, (1) 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 constitutes, or may reasonably be expected to lead
to, any Alternative Transaction or (2) participate in any discussions or
negotiations regarding any Alternative Transaction; provided, however, that
if, at any time prior to the acceptance for payment of Shares pursuant to and
subject to the conditions (including the Minimum Condition) of the Offer, the
Board determines in good faith, based on advice of outside counsel, that
action is required by reason of the Board's fiduciary duties to the Company's
stockholders under applicable law, the Company may (subject to compliance with
the notification provisions discussed below), in response to an unsolicited
Third Party Proposal, (a) furnish information with respect to the Company to
any person making such Third Party Proposal pursuant to a confidentiality
agreement that is at least as protective of the Company's interest as is the
Confidentiality Agreement and (b) participate in negotiations regarding such
Alternative Transaction.
The Merger Agreement defines "Third Party Proposal" as a bona fide proposal
from a third party, which proposal did not result from a breach of the
restrictions set forth above relating to a Third Party Proposal and which
third party the Board determines in good faith and upon the advice of a
financial advisor of nationally recognized reputation has the capacity and is
reasonably likely to consummate a Superior Proposal. The Merger Agreement
defines "Alternative Transaction" as any direct or indirect acquisition or
purchase of assets of the Company or any subsidiary outside the ordinary
course of business or any outstanding equity securities of the Company or any
subsidiary, any tender offer or exchange offer that if consummated would
result in any person beneficially owning equity securities of the Company or
any merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any subsidiary, other than the transactions
contemplated by the Merger Agreement and other than the acquisition of Shares
pursuant to the exercise of Company Stock Options or Warrants which are issued
and outstanding as of the date of the Merger Agreement.
The Merger Agreement provides further that unless the Board shall have
terminated the Merger Agreement as described below, neither the Board nor any
committee thereof will (1) withdraw or modify, or propose to withdraw or
modify, the approval or recommendation by such Board or such committee of the
Offer, the Merger Agreement or the Merger, (2) approve or recommend, or
propose to approve or recommend, any Alternative Transaction or (3) cause the
Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other agreement (an "Acquisition Agreement") with
respect to any Alternative Transaction, unless the Board shall have previously
terminated the Merger Agreement in connection with a Superior Proposal (as set
forth above in clause (4) of the section entitled "--Termination of the Merger
Agreement").
The Merger Agreement defines a "Superior Proposal" to be any Third Party
Proposal to acquire, directly or indirectly, all of the Shares or all or
substantially all of the assets of the Company; provided that (a) the Board
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) that such Third Party Proposal is
on terms that are more favorable to the Company's stockholders than the Offer
and the Merger (taking into account all relevant factors, including the amount
and form of consideration to be received in respect of the Shares, the
relative value of any non-cash consideration and the timing and certainty of
closing), (b) the Board 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
under applicable law and (c) if required, the financing necessary to
consummate a transaction pursuant to such Third Party Proposal is then
committed.
In addition to the obligations of the Company set forth in the preceding
paragraphs, the Merger Agreement provides that the Company shall immediately
advise Parent 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 any such request, proposal or inquiry. The Company is
further required under the terms of the Merger Agreement, to the extent
reasonably practicable
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and not in violation of the Board's fiduciary duties under applicable law,
following receipt of written advice from outside counsel, to keep Parent fully
informed of the status and details (including amendments or proposed
amendments) of any such request, proposal or inquiry. The Merger Agreement
provides that nothing contained therein shall prohibit the Company from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders with respect to any Third Party Proposal if (1) in the
good faith judgment of the Board, following receipt of written advice from
outside counsel, such disclosure is required by reason of the Board's
fiduciary duties under applicable law and (2) the Company shall have provided
Parent and the Purchaser with as much advance notice of its position and
proposed disclosure as is possible under the circumstances; provided, however,
that neither the Company nor its Board nor any committee thereof is permitted,
except as permitted by the Merger Agreement, to withdraw or modify, or propose
to withdraw or modify, its position with respect to the Offer, the Merger or
the Merger Agreement or approve or recommend, or propose to approve or
recommend, an Alternative Transaction.
Fees and Expenses. The Merger Agreement provides that in the event that the
Merger Agreement is terminated (1) by Parent or Purchaser pursuant to clause
(3) under the section above entitled "--Termination of the Merger Agreement,"
(2) by Parent pursuant to and in accordance with clause (2)(a) under the
section above entitled "--Termination of the Merger Agreement" in connection
with any breach by the Company of any covenant or agreement or any
representation or warranty made by the Company in the Merger Agreement or (3)
pursuant to clause (4) under the section above entitled "--Termination of the
Merger Agreement," the Company shall promptly pay to Parent the Termination
Fee plus all Expenses. The Merger Agreement provides that notwithstanding the
above (but subject to the payment of the Termination Fee pursuant to the
consummation of an Alternative Transaction or the execution of an Acquisition
Agreement as set forth below), no Termination Fee shall be payable if any
termination by Parent or the Purchaser is solely (1) pursuant to clause 2(a)
under the section above entitled "--Termination of the Merger Agreement" that
is caused solely by a breach of one or more representations or warranties of
the Company that is or are true and correct as of the date of the Merger
Agreement but that becomes untrue thereafter other than any such breach after
the date of the Merger Agreement that results from or arises out of any act or
failure to act by the Company, its subsidiaries or any of their respective
officers, directors, employees or agents, (2) pursuant to clause (2)(b) under
the section above entitled "--Termination of the Merger Agreement" or (3)
pursuant to the failure of the conditions set forth in either paragraph (c) or
paragraph (h) of Section 14 of the Offer to Purchase which is incorporated
herein by reference to be satisfied other than any such failure which results
from or arises out of any act or failure to act by the Company, its
subsidiaries or any of their respective officers, directors, employees or
agents.
The Merger Agreement provides that if the Merger Agreement is terminated by
the Company other than in connection with (1) a failure by the Purchaser or
Parent to commence the Offer, (2) a failure by Parent or the Purchaser to pay
for Shares to the extent required by the Merger Agreement or (3) a breach by
the Purchaser or Parent in any material respect of its representations,
warranties, other covenants or agreements contained in the Merger Agreement
(subject to a 30-day cure period), which breach in the case of this clause (3)
would prevent the consummation of the Offer or the Merger subject to the terms
and conditions contained in the Merger Agreement, then the Company will pay
all Expenses to Parent on the date of such termination and, if, prior to the
one-year anniversary of such termination, an Alternative Transaction shall be
consummated or the Company shall enter into an Acquisition Agreement providing
for an Alternative Transaction, then the Company shall pay the Termination
Fee, such payment to be made on the earlier of the date of consummation of
such Alternative Transaction or the one-year anniversary of the date of
termination of the Merger Agreement.
The Merger Agreement defines "Termination Fee" as a fee equal to 4% of the
sum of (a) the outstanding consolidated indebtedness of the Company and its
subsidiaries at the time of termination, determined in accordance with
generally accepted accounting principles consistently applied, plus (b) the
product of (x) the total number of Shares outstanding at the time of such
termination on a fully diluted basis and (y) the Offer Price. The Merger
Agreement defines "Expenses" as all out of out-of-pocket expenses incurred by
the Purchaser
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and Parent in connection with the Merger Agreement, the Stockholder Agreement
and the transactions contemplated thereby, not to exceed $1,750,000.
Conduct of Business by the Company. The Merger Agreement provides that
during the term of the Merger Agreement, the Company shall, and shall cause
each of its subsidiaries to, carry on its business in the ordinary course and
use all reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, licensors,
licensees and others having business dealings with it. The Merger Agreement
further provides that, except as otherwise expressly contemplated by the
Merger Agreement, the Company shall not and shall cause its subsidiaries not
to (1) (a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock or (c) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities; (2) issue,
deliver, sell, pledge or otherwise encumber any shares of its capital stock,
any other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities (other than the issuance of Shares upon the exercise of
Company Stock Options or warrants to purchase Shares outstanding on the date
of the Merger Agreement in accordance with their present terms); (3) amend its
certificate of incorporation or by-laws; (4) acquire or agree to acquire (A)
by merging or consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof or (B) except pursuant to certain planned equipment
purchases, any assets except for the purchase of assets for an amount which
does not exceed, individually or in the aggregate, $75,000; (5) except
pursuant to certain planned equipment purchases, sell, lease, license,
mortgage or otherwise encumber or subject to any lien or otherwise dispose of
any of its properties or assets, except sales of inventory or sales of
immaterial assets; (6) (A) except pursuant to certain planned equipment
purchases, and except for certain short-term indebtedness incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing or (B) make any loans,
advances or capital contributions to, or investments in, any other person; (7)
except pursuant to certain planned equipment purchases, make or agree to make
any capital expenditure or expenditures with respect to property, plant or
equipment which, individually, is in excess of $50,000 or, in the aggregate,
are in excess of $250,000; (8) make any tax election or settle or compromise
any income tax liability; (9) except pursuant to certain planned equipment
purchases, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, the most recent
consolidated financial statements (or the notes thereto) of the Company
included in any report of the Company filed with the Commission and publicly
available prior to the date of the Merger Agreement or incurred thereafter in
the ordinary course of business consistent with past practice, or waive the
benefits of, or agree to modify in any material respect, any confidentiality,
standstill or similar agreement to which the Company or any subsidiary is a
party, (10) except in the ordinary course of business, modify, amend or
terminate any material contract, agreement, arrangement or other instrument
(including any amendments thereto) to which the Company or any of its
subsidiaries is a party or waive, release or assign any rights or claims; (11)
enter into any contracts, agreements, arrangements or instruments (including
any amendments thereto) relating to the distribution, sale or marketing by
third parties of the Company's or its subsidiaries' services; (12) except as
required to comply with applicable law and subject to exceptions for the
Employment Agreements and certain employment agreements to be continued, (A)
adopt, enter into, terminate or amend any benefit plan or other arrangement
for the benefit or welfare of any director, officer or current or former
employee, (B) increase in any manner the compensation or fringe benefits of,
or pay any bonus to, any director, officer or employee (except for normal
increases or bonuses, in the ordinary course of business consistent with past
practice), (C) pay any benefit not provided for under any benefit plan, (D)
except as
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permitted in clause (B), grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or benefit plan
(including the grant of stock options, stock appreciation rights, stock based
or stock related awards, performance units or restricted stock, or the removal
of existing restrictions in any benefit plans or agreement or awards made
thereunder) or (E) take any action other than in the ordinary course of
business to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or
benefit plan; or (13) authorize any of, or commit or agree to take any of, the
foregoing actions.
Pursuant to the Merger Agreement, the Company shall not take any action or
omit to take any action, the taking or omission of which could reasonably be
expected to result in (1) any of its representations and warranties set forth
in the Merger Agreement becoming untrue or (2) any of the conditions to the
Offer or to the Merger not being satisfied (subject to exceptions specifically
permitted by the Merger Agreement).
Director Warrants. Pursuant to the Merger Agreement, the Company agreed that
immediately after consummation of the Offer, each outstanding Warrant (as
defined below) or other right to purchase Common Stock of the Company issued
under the Company's 1995 Director Warrant Plan held by a director of the
Company (a "Director Warrant") shall be purchased by the Purchaser in exchange
for an amount in cash, payable at the time of such purchase, equal to the
product of (1) the number of shares subject to such Director Warrant and (2)
the excess of the price paid in the Offer over the per share exercise price of
such Director Warrant.
Rollover. The Purchaser intends to give certain employees of the Company an
opportunity to invest in the equity of Parent either by rolling over currently
outstanding Company Common Stock held by such employees or by purchasing
equity securities of Parent for cash. Parent intends to make available loans
to such employees to finance, in part, such cash investments.
Stock Options. The Merger Agreement provides that as soon as practicable
following the date of the Merger Agreement but in no event later than the
consummation of the Offer, the Company (or, if appropriate, the Board or any
committee administering the Stock Option Plans) shall (including by adopting
resolutions or taking any other actions) take action so as to allow that each
outstanding option to purchase Shares (a "Company Stock Option") granted under
any stock option, stock appreciation rights or stock purchase plan, or other
right, program or arrangement of the Company (collectively, the "Stock Option
Plans") (other than those Company Stock Options that have been granted to
officers and employees of the Company who are parties to an agreement to
exchange or roll their Company Stock Options in the Company for or into equity
of Parent or the Surviving Corporation) and each outstanding warrant to
purchase Shares (a "Warrant") in each case outstanding immediately prior to
the consummation of the Offer (except the Director Warrants), whether or not
then exercisable, shall either (1) be cancelled immediately after consummation
of the Offer in exchange for an amount in cash, payable at the time of such
cancellation, equal to the product of (x) the number of Shares subject to such
Company Stock Option or Warrant immediately prior to the Effective Time and
(y) the excess of the price per Share to be paid in the Offer over the per
Share exercise price of such Company Stock Option or Warrant (the "Net
Amount") or (z) be converted immediately prior to the Effective Time into the
right solely to receive the Net Amount; provided, however, that no such cash
payment has been made. The Company shall not make, or agree to make, any
payment of any kind to any holder of a Company Stock Option or a Warrant
(except for the payment described above) without the consent of Parent (which
consent will not be unreasonably withheld).
The Merger Agreement provides further that subject to the provisions set
forth above, all Stock Option Plans shall terminate as of the Effective Time
and the provisions in any other benefit plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in
respect of any capital stock of the Company shall be terminated as of the
Effective Time. The Merger Agreement provides that the Company shall ensure
that following the Effective Time, no holder of a Company Stock Option or
Warrant or any participant in any Stock Option Plan (other than pursuant to
the Parent Option Plan and those holders who are parties to an agreement to
exchange or roll their equity interests in the Company for or into equity of
Parent or the Surviving Corporation) shall have any right thereunder to
acquire any capital stock of the Company, Parent or the Surviving
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Corporation, and that the Company shall use its reasonable best efforts to
ensure that following the Effective Time, no holder of any remaining Company
Stock Option or Warrant or any participant in any Stock Option Plan (other
than pursuant to the Parent Option Plan and those holders who are parties to
an agreement to exchange or roll their equity interests in the Company for or
into equity of Parent or the Surviving Corporation) shall have any right
thereunder to acquire any capital stock of the Company, Parent or the
Surviving Corporation. The Merger Agreement also provides that the Surviving
Corporation shall continue to be obligated to pay the Net Amount to holders of
any Company Stock Options or Warrants converted in accordance with clause (y)
of the immediately preceding paragraph.
Parent Option Plan. The Merger Agreement provides that as soon as
practicable, but in no event more than 15 days after the Effective Time,
Parent will adopt an employee option plan (the "Parent Option Plan"), pursuant
to which Parent will grant to certain officers and employees of the Company
options to purchase in the aggregate up to 10% of the outstanding common stock
of Parent (without giving effect to any options) at any time within ten years
of the Effective Time, at a per share price equal to the per share price paid
by the Apollo Entities for the common stock of Parent. Subject to certain
exceptions, the options will vest over four years, with one half of such
options vesting based solely on continued employment with the Company and the
other half of such options vesting based on continued employment with the
Company and the achievement by the Company of certain target equity values.
Pursuant to the Merger Agreement, Parent agreed that, pursuant to the Parent
Option Plan, options to purchase approximately 4.6% of the outstanding common
stock of Parent, in the aggregate, will be granted to Mr. Bergman and Mr.
Dickman. The terms and conditions of the Parent Option Plan are set forth in a
Schedule to the Merger Agreement, which is filed as an Exhibit to the
Purchaser's Schedule 14D-1 (as defined in Section 17 of the Offer to Purchase
which is incorporated herein by reference), and the foregoing summary is
qualified in its entirety by reference to such Exhibit.
Indemnification, Exculpation and Insurance. Parent has agreed in the Merger
Agreement that all rights to indemnification and exculpation (including the
advancement of expenses) from liabilities for acts or omissions occurring at
or prior to the Effective Time (including with respect to the transactions
contemplated by the Merger Agreement) existing now or at the Effective Time in
favor of the current or former directors or officers of the Company as
provided in its certificate of incorporation, its by-laws and certain
indemnification agreements shall be assumed by the Surviving Corporation in
the Merger, without further action, as of the Effective Time and shall survive
the Merger and shall continue in full force and effect without amendment,
modification or repeal in accordance with their terms for a period of not less
than six years after the Effective Time; provided however, that if any claims
are asserted or made within such six-year period, all rights to
indemnification (and to advancement of expenses) hereunder in respect of any
such claims shall continue, without diminution, until disposition of any and
all such claims.
The Merger Agreement provides that for a period of six years from the
Effective Time, Parent shall cause the Company to use commercially reasonable
efforts to maintain the Company's existing officers' and directors' liability
insurance covering persons who are currently covered by the Company's
officers' and directors' liability insurance on terms no less favorable than
those of such policy in effect on the date of the Merger Agreement; provided,
however, that in satisfying such obligation Parent may substitute therefor
policies providing at least comparable coverage containing terms and
conditions no less favorable than those in effect on the date of the Merger
Agreement.
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction or waiver of certain conditions, including the
following: (1) if required by applicable law, the Merger Agreement having been
approved and adopted by the affirmative vote of the Company's stockholders by
the requisite vote in accordance with applicable law and the Company's
certificate of incorporation and (2) no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other governmental entity or other legal restraint or prohibition preventing
the consummation of the Merger being in effect; provided, however, that each
of the Company, the Purchaser and Parent has used reasonable efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered.
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Reasonable Efforts. The Merger Agreement provides that, on the terms and
subject to the conditions of the Merger Agreement, each of the parties will
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer and the
Merger and the other transactions contemplated by the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
STOCKHOLDER AGREEMENT
The Stockholder Agreement provides that each Selling Stockholder will sell,
and the Purchaser will purchase, all Shares beneficially owned by such Selling
Stockholder (the "Subject Shares"), at a price per Share equal to the Offer
Price. Such obligations to sell and to purchase the Subject Shares are subject
to the prior satisfaction or waiver of (1) the Purchaser having accepted
Shares for payment under the terms of the Offer, (2) the Minimum Condition
having been satisfied, (3) all waiting periods under the HSR Act applicable to
the exercise of the purchase shall have expired or terminated, (4) all
regulatory approvals required by any applicable law, rule or regulation shall
have been obtained and shall be final, and (5) there shall exist no
preliminary or permanent injunction, or any other order by any court of
competent jurisdiction, restricting, preventing or prohibiting either the
purchase or the delivery of Subject Shares. The Stockholder Agreement also
provides that each Selling Stockholder may, and at the request of the
Purchaser shall, tender its Subject Shares in the Offer. Any Subject Shares of
any Selling Stockholder not purchased in the Offer will be purchased
immediately after payment is made under the Offer.
Each of the Selling Stockholders has agreed, until the Merger Agreement has
terminated, among other things, not to: (1) sell, transfer, give, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement with respect to the sale, transfer, pledge, assignment or other
disposition of, the Subject Shares owned by such Selling Stockholder other
than pursuant to the terms of the Offer or the Merger or (2) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection with, directly or indirectly, any Takeover Proposal. Each of the
Selling Stockholders has further agreed that he will not, and will not permit
any investment banker, financial advisor, attorney, accountant or other
representative retained by him to (3) directly or indirectly solicit, initiate
or encourage any proposal that may lead to an Alternative Transaction or (4)
directly or indirectly participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Alternative
Transaction.
Each of the Selling Stockholders has also agreed until the Stockholder
Agreement has terminated (and the Stockholder Agreement includes an
irrevocable proxy provision for the benefit of the Purchaser with respect to
the Shares subject to the Stockholder Agreement owned by each Selling
Stockholder), (1) to vote the Subject Shares at any meeting of stockholders of
the Company called to vote upon the Merger and the Merger Agreement 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 Merger
and the Merger Agreement is sought, in favor of the Merger, the adoption by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement; and (2)
to vote such Shares at any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which a Selling
Stockholder's vote, consent or other approval is sought, against (x) any
Alternative Transaction, (y) any amendment of the Company's certificate of
incorporation or by-laws or other proposal or transaction involving the
Company, which amendment or other proposal or transaction would be reasonably
likely to impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement or change in any manner the voting rights of each class of the
Company's common stock or (z) any action that would cause the Company to
breach any representation, warranty or covenant contained in the Merger
Agreement.
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Pursuant to the Stockholder Agreement, if (i) immediately prior to the
expiration of the Offer, the Purchaser determines that the exercise of
options, warrants or other instruments held by the Stockholders and the sale
or tender into the Offer of the Subject Shares acquired thereby either would
cause the Minimum Condition to be satisfied or would cause the Purchaser to
own more than 90% of the outstanding Shares and (ii) the Purchaser exercises
its right to extend the Offer in accordance with the terms and conditions set
forth in the Merger Agreement, then upon the request of Parent or the
Purchaser and the Exercise Loan (as defined below), each Stockholder shall
promptly exercise all options, warrants and other instruments held by such
Stockholder and sell the Subject Shares acquired thereby to the Purchaser or
tender such Subject Shares into the Offer (at such Stockholder's discretion,
unless the Purchaser directs that such Stockholder tender such Subject
Shares). Upon delivery of such request, Parent shall lend to each Stockholder
the amount necessary for such Stockholder to pay the aggregate exercise price
in respect of all options, warrants and other instruments (each, an "Exercise
Loan"). Each Exercise Loan shall be evidenced by a promissory note, shall bear
interest at the applicable Federal rate (as defined in Section 7872 of the
Code) and shall be repaid together with accrued but unpaid interest upon the
earlier of (i) the payment of the purchase price for the Subject Shares
(whether pursuant to the Offer or otherwise) and (ii) the termination of the
Stockholder Agreement.
The Stockholder Agreement provides that in the event that the Merger Agreement
shall have been terminated under circumstances where Parent is or may become
entitled to receive the Termination Fee, each Stockholder shall pay to Parent on
demand an amount equal to the difference between the consideration received by
such Stockholder from the consummation of any transaction which gives rise to
the Company's obligation to pay the Termination Fee pursuant to the Merger
Agreement and the consideration such Stockholder would have received had he or
it tendered his Shares pursuant to the Offer (without taking into account any
modifications to the Offer as in effect on the date hereof), as determined in
accordance with the Stockholder Agreement.
In addition, in the event that (1) prior to the Effective Time, an
Alternative Transaction shall have been proposed and (2) the Effective Time
shall have occurred and Parent for any reason shall have increased the amount
of Merger Consideration payable over that set forth in the Merger Agreement in
effect on the date thereof (the "Original Merger Consideration"), each Selling
Stockholder agrees in the Stockholder Agreement to pay to Parent on demand an
amount in cash equal to the product of (A) the number of Subject Shares and
(B) 100% of the excess, if any, of (i) the per Share cash consideration or the
per Share fair market value of any noncash consideration, as the case may be,
received by such Selling Stockholder as a result of the Merger, as amended,
determined as of the Effective Time, over (ii) the amount of the Original
Merger Consideration determined as of the time of the first increase in the
amount of the Original Merger Consideration.
CONFIDENTIALITY AGREEMENT
Pursuant to an agreement dated as of April 2, 1997 (the "Confidentiality
Agreement") between the Company and Apollo Management, L.P. ("Apollo") an
affiliate of Parent and Purchaser, the Company has supplied Apollo with
certain non-public, confidential and proprietary information about the
Company. Apollo has agreed in the Confidentiality Agreement that it, together
with its directors, officers, employees, agents and representatives, will keep
confidential all such information supplied by the Company and that it will
not, without the prior written consent of the Board of Directors of the
Company, until April 1, 1998, acquire or offer to acquire any securities or
assets of the Company or enter into or propose to enter into any business
combination involving the Company. In the Merger Agreement, the Company has
represented and warranted that the making of any offer and proposal and the
taking of any other action by Parent or Purchaser. in connection with the
Merger Agreement and the Stockholders Agreements and the transactions
contemplated thereby have been consented to by the Board of Directors of the
Company in accordance with the terms and provisions of the Confidentiality
Agreement.
RIGHTS AGREEMENT
The Company has amended the Rights Agreement so that neither Parent nor
Purchaser will become an "Acquiring Person," the execution, delivery and
performance of the Merger Agreement and the Stockholder
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Agreement do not, and the commencement or consummation of the Offer, the
Merger and the other transactions contemplated under the Merger Agreement and
the Stockholder Agreement (including pursuant to any amendment thereto) will
not, result in the grant of any rights to any person under the Rights
Agreement or enable or require any outstanding rights to be exercised,
distributed or triggered, and the Rights will expire without any further force
or effect as of the Effective Time. The Company has not exempted (or taken any
other action tantamount to exempting) any person or entity from the potential
application of the Rights Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
At a meeting held on June 23, 1997, the Board of Directors of the Company,
by the unanimous vote of the independent directors as well as the unanimous
vote of the full board of directors, determined that the Offer and the Merger
are fair to, and in the best interests of, the Company and its stockholders.
The Board of Directors recommends that the stockholders of the Company accept
the Offer and tender their Shares and associated Rights pursuant to the Offer
and approve and adopt the Merger and the Merger Agreement (if required).
As set forth in the Offer to Purchase, the Merger Agreement and the Letter
of Transmittal (the "Offer Documents"), the Purchaser will purchase shares
tendered prior to the close of the Offer if the Conditions to the Offer have
been satisfied (or waived). Stockholders considering not tendering their
shares in order to wait for the Merger should note that if the Minimum
Condition is not satisfied or any of the other conditions to the Offer are not
satisfied, Purchaser is not obligated to purchase any Shares, and can
terminate the Offer and the Merger Agreement and not proceed with the Merger.
Under Delaware law, the approval of the Board and the affirmative vote of the
holders of a majority of the outstanding shares are required to approve the
Merger. Accordingly, if the Conditions to the Offer are satisfied, the
Purchaser will have sufficient voting power to cause the approval of the
Merger without the affirmative vote of any other stockholder.
(b) Background to the Offer; Reasons for Recommendation
BACKGROUND TO THE OFFER
The healthcare industry has been in a period of consolidation and, as a
result, during the past several years the Board of Directors of the Company
has reviewed and considered various strategic alternatives with a view toward
increasing stockholder value. During the period from May 1995 to February
1997, the Company received several unsolicited offers for the Company. In an
effort to appropriately evaluate such proposals in addition to other options
available to the Company, the Board decided that it should engage the services
of a financial advisor and met with several firms. In February 1997, the
Company retained Smith Barney Inc. ("Smith Barney") to provide the Company
with financial advice and assistance with respect to analyzing various
financial and strategic alternatives, identifying potential acquirors and
evaluating the financial terms and conditions of any proposals received. In
this regard, the Company directed Smith Barney, in consultation with Company
management, to identify companies in the healthcare industry as well as
financial companies that could be potential partners with or acquirors of the
Company and to contact a number of these candidates on a discrete basis to
determine their level of interest.
From late February 1997 through late March 1997, approximately 27
prospective buyers were contacted, which included public and private
diagnostic imaging companies, hospitals and financial buyers. Sixteen parties
expressed interest and were furnished with public information packages
regarding the Company. Twelve of those parties subsequently executed
confidentiality agreements and, as a result, received a confidential
information package. Substantially all of the confidentiality agreements
provided that for a period of one year neither the party nor any of its
affiliates would (1) acquire or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities of the Company, (2) make, or in
any way participate in, directly or indirectly, any "solicitation" of
"proxies" (as such terms are used in the rules of the Commission) to vote, or
seek to advance or influence any person or entity with respect to the voting
of any voting securities of the Company, or
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(3) make any public announcement with respect to, or submit a proposal for, or
offer of (with or without conditions) any extraordinary transaction involving
the Company or its securities or assets.
From early to mid-April 1997, five parties submitted preliminary indications
of interest at a range between $10.00 and $13.00 per Share, including a
written preliminary indication of interest to purchase the Company submitted
by Apollo on April 16, 1997 at a purchase price of between $11.00 and $13.00
per share. Such indication of interest indicated that affiliates of Apollo
were considering pursuing a recapitalization of the Company in which the
Company's stockholders would receive part of the consideration for their
Shares in cash and part in the form of equity. On April 18, 1997, executive
officers of the Company and representatives of Smith Barney met with Apollo
management to discuss Apollo's written preliminary indication of interest.
In late April and early May 1997, four of these five parties conducted due
diligence and met with management at the Company. This included a meeting, on
May 5, 1997, at which Apollo and its advisors met with representatives of the
Company and Smith Barney and conducted a preliminary review of certain non-
public information. The remaining party conducted telephonic due diligence but
did not visit the Company. On May 7-8, 1997, all five parties submitted formal
indications of interest, four of which were written and one of which was oral
at a range from $8.50 per Share to $11.50 per Share. This included a written
offer submitted by Apollo on May 8, 1997 to acquire the Company at a price of
$11.50 per Share, subject to certain conditions, but not subject to a
financing condition. Such offer expressed Apollo's desire to consider
providing $0.25 per Share consideration in the form of equity.
The Company evaluated the bids submitted and decided to continue to
negotiate with the two highest bids, one of which was a stock transaction
proposed by a strategic buyer, and the other of which was the cash bid from
Apollo. Through May 18, 1997, Apollo, Apollo's advisors, the Company's senior
management and the Company's advisors engaged in various telephonic
discussions regarding the business, strategies and prospects of the Company
and the possible terms of a potential transaction, the continued employment of
certain members of senior management, including cash compensation and equity
plans.
During this period, the Company and its advisors also held discussions with
the strategic buyer regarding a potential transaction, including visiting the
headquarters of such buyer.
During the course of negotiations with Apollo, it indicated its willingness
to negotiate the terms of a potential transaction (including the compensation
arrangements for senior management) and continue to devote substantial
resources to evaluating the Company, but indicated its desire that the Company
negotiate exclusively with Apollo in respect of a transaction. In order to
continue negotiations with Apollo, and since the stock bid of the strategic
buyer was at a lower valuation than Apollo's cash bid, the Company, on May 27,
1997, executed a letter agreement requested by Apollo (the "Exclusivity
Agreement") granting Apollo exclusive rights to negotiate a transaction
involving the Company and access to the Company's agents books and records and
advisors and agents for an exclusive period until June 30, 1997. On the same
day, Apollo verbally communicated to representatives of the Company a proposal
to acquire the Company for $11.75 per Share in cash.
Thereafter, Apollo and its representatives continued their review of and
discussions with the Company. On June 6, 1997, during the exclusivity period,
the Company received an unsolicited revised indication of interest from a
strategic buyer other than the strategic buyer considered at the time the
Exclusivity Agreement with Apollo was executed. After consultation with
members of the Company's Board and the Company's advisors, the Company
concluded that the pursuit of a possible transaction with such strategic
buyer, as set forth in its indication of interest, was not in the best
interests of the stockholders given, among other factors, the all cash offer
by Apollo and the fact that the pursuit of such unsolicited indication of
interest would have required the Company to breach the Exclusivity Agreement
with Apollo. On June 10, 1997, and in accordance with the Exclusivity
Agreement, the Company notified such bidder that it could not comment on its
offer at that time.
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During the week of June 16, 1997, Apollo and its advisors and the Company
and its advisors commenced negotiations of a definitive merger agreement,
which provided for, among other things, the Offer at a price of $11.75 per
Share in cash to the Company's stockholders. The negotiations also included
the negotiation of the terms of the Stockholder Agreement and the terms for
continued employment of Messrs. Bergman, Dickman, Spindler and Zynn.
On Sunday, June 22, 1997, a special meeting at the Company of the Board was
held to consider the terms of the Apollo transaction. At this meeting,
Buchanan Ingersoll, special counsel to the Company, provided the legal
background and information regarding the proposed transaction, including a
review of the material terms and conditions of the transaction and the Board's
fiduciary duties in evaluating the transactions and Smith Barney reviewed with
the Board the financial analyses performed by Smith Barney in connection with
its evaluation of the Offer. After discussion, the Board directed management
to pursue the transaction subject to continued negotiation of the remaining
material terms. On June 23, 1997, various telephone calls were held among
representatives of the Company and Apollo and their respective advisors
regarding the resolution of the remaining terms of the proposed transaction.
In the evening of June 23, 1997, a telephonic meeting of the Board of the
Company was held at which the events of the day were discussed. The Board then
received the opinion of Smith Barney referred to in "Reason for Board's
Recommendation" below. A vote of the full Board unanimously approved the
Offer, the Merger Agreement and the transactions contemplated thereby. The
Merger Agreement and related documents were executed as of June 24, 1997.
REASONS FOR BOARD'S RECOMMENDATION
In arriving at its decision to approve the transactions contemplated by the
Merger Agreement and the Stockholder Agreements and to recommend acceptance of
the Offer, the Board of Directors considered, among other things, (i) the
terms and conditions of the Offer and the Merger Agreement, including the
amount and form of the consideration being offered to the Company's
stockholders; (ii) the recent and historical market prices and trading volume
of the Shares, and the Company's historical and projected earnings; (iii) the
Board of Directors' knowledge of the business, operations, prospects,
properties, assets and earnings of the Company; (iv) the absence of any
financing condition or any other term or condition which in the Board's view
was unduly onerous or could materially impair the consummation of the Offer or
the Merger; (v) the financial condition and business reputation of Apollo and
the ability of Apollo to complete the Offer and the Merger in a timely manner;
(vi) possible alternatives, which the Board concluded were not reasonably
likely to result in a more favorable combination of price, form of
consideration and likelihood of consummation than the Offer and the Merger;
(vii) the number of potential bidders contacted and the bidding process
undertaken on behalf of the Company to solicit third party indications of
interest in a transaction with the Company, (viii) management's view that,
without a strategic partner, the Company would have difficulty competing
effectively in an industry in which, through consolidation, the Company's
competitors were growing in size and in financial resources, (ix) the fact
that, under the terms of the Merger Agreement, the Board retained the right to
review (subject to certain restrictions), and if appropriate in the exercise
of its fiduciary duties to the stockholders of the Company accept, an
unsolicited proposal that the Board determines was financially superior to the
Offer and (x) the oral opinion of Smith Barney rendered to the Board of
Directors of the Company on June 23, 1997 at a meeting of the Board held to
evaluate the Offer and the transactions contemplated thereby (which opinion
was subsequently confirmed by delivery of an opinion dated June 24, 1997, the
date of execution of the Merger Agreement) to the effect that, as of the date
of such opinion and based upon and subject to certain matters stated therein,
the $11.75 per Share cash consideration to be received by holders of Shares
(other than Parent and its affiliates) in the Offer and the Merger was fair,
from a financial point of view, to such holders. The full text of Smith
Barney's written opinion dated June 24, 1997, which sets forth the assumptions
made, matters considered and limitations on the review undertaken by Smith
Barney, is attached hereto as Exhibit (a)(9) and is incorporated herein by
reference. Smith Barney's opinion is directed only to the fairness, from a
financial point of view, of the cash consideration to be received in the Offer
and the Merger by holders of Shares (other than Parent and its affiliates) and
is not intended to constitute, and does not constitute, a recommendation as to
whether any stockholder should tender Shares pursuant to the Offer. HOLDERS OF
SHARES ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS ENTIRETY.
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The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board
viewed its position and recommendation as being based on the totality of the
information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Smith Barney as its financial advisor in connection
with the Offer and the Merger. Pursuant to the terms of Smith Barney's
engagement, the Company has agreed to pay Smith Barney for its services an
aggregate financial advisory fee based on a percentage of the total
consideration (including liabilities assumed) payable in connection with the
Offer and the Merger. The fee payable to Smith Barney is currently estimated
to be approximately $1.2 million. The Company also has agreed to reimburse
Smith Barney for reasonable travel and other out-of-pocket expenses, including
reasonable legal fees and expenses, and to indemnify Smith Barney and certain
related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of Smith Barney's engagement. Smith
Barney has in the past provided investment banking services to Apollo
unrelated to the Offer and the Merger, for which services Smith Barney has
received compensation. In the ordinary course of business, Smith Barney and
its affiliates may actively trade or hold the securities of SMT for their own
account or for the account of customers and, accordingly, may at any time hold
a long or short position in such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for the transactions contemplated by the Offer and the
Stockholder Agreement, and except with respect to the exercise by Mr. David W.
Spindler of stock options for 19,323 Shares and the sale of such Shares in an
open market transaction on May 5, 1997, no transactions in the Shares have
been effected during the past 60 days by the Company or, to the best knowledge
of the Company, by any executive officer, director or affiliate of the
Company.
(b) To the best of the Company's knowledge, all of the Company's executive
officers, directors and affiliates presently intend to tender all Shares which
are held of record or beneficially owned by such persons pursuant to the
Offer, other than Shares, if any, held by any such person which, if tendered,
could cause such person to incur liability therefore pursuant to the short-
swing profit recapture provisions of Section 16(b) of the Exchange Act of
1934. Each executive officer is subject to the terms and conditions of the
Stockholder Agreement to which it is a party, which Stockholder Agreement is
described above in Item 3(b)(2). See Item 3(b)(2) for a discussion of Director
Warrants and Stock Options.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described in Items 3(b) and 4(b) above and subject to
restrictions contained in the Merger Agreement, no negotiation is being
undertaken or is underway by the Company in response to the Offer that relates
to or would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any of its subsidiaries, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
its subsidiaries, (iii) a tender offer for or acquisition of securities by or
of the Company or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, Board resolution,
agreement in principle or signed contract in response to the Offer that relate
to or would result in one or more of the events referred to in Item 7(a)
above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Annex A hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors of the
Company other than at a meeting of the Company's stockholders.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NAME
------- ----
<C> <S>
(a)(1) Offer to Purchase*
(a)(2) Letter of Transmittal*
(a)(3) Notice of Guaranteed Delivery*
Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
(a)(4) Other Nominees*
Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies
(a)(5) and Other Nominees*
(a)(6) Guidelines of the Internal Revenue Service for Certification of Tax-
payer Identification Number on Substitute Form W-9*
(a)(7) Form of Summary Advertisement
Text of Press Release dated June 24, 1997, issued by the Company and
(a)(8) Parent
(a)(9) Opinion of Smith Barney Inc. dated June 24, 1997 (filed as Annex B)*
(a)(10) Letter to Stockholders dated June 30, 1997 from Jeff D. Bergman,
Chairman, Chief Executive Officer and President of the Company*
(c)(1) Agreement and Plan of Merger dated as of June 24, 1997, among the Pur-
chaser, Parent and the Company (including the Parent Option Plan
Terms Sheet)
(c)(2) Stockholder Agreement dated as of June 24, 1997, among Parent, the
Purchaser, Jeff D. Bergman, Daniel Dickman, David Spindler, and David
Zynn
(c)(3) Employment Agreement dated as of June 24, 1997, among the Purchaser,
Parent, the Company and Jeff D. Bergman
(c)(4) Employment Agreement dated as of June 24, 1997, among the Purchaser,
Parent, the Company and Daniel Dickman
(c)(5) Employment Agreement dated as of June 24, 1997, among the Purchaser,
Parent, the Company and David W. Spindler
(c)(6) Employment Agreement dated as of June 24, 1997, among the Purchaser,
Parent, the Company and David A. Zynn
(c)(7) Certificate of Incorporation, as amended, of the Company
(c)(8) By-Laws of the Company**
(c)(9) Information Statement Form 14f-1 (filed as Annex A)
(c)(10) Form of Company Director Indemnification Agreement
(c)(11) Amendment to Rights Agreement dated as of June 23, 1997
</TABLE>
- --------
* Copies provided to stockholders.
** Incorporated herein by reference to Exhibit 3.2 to the Company's Form S-1
(SEC File No. 33-44329).
15
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
Dated: June 30, 1997
SMT Health Services Inc.
/s/ Jeff D. Bergman
By:_______________________________________
Name: Jeff D. Bergman
Title: Chairman, Chief Executive
Officer and President
16
<PAGE>
ANNEX A
SMT HEALTH SERVICES INC.
10521 PERRY HIGHWAY
WEXFORD, PENNSYLVANIA 15090
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about June 30, 1997 as a
part of SMT Health Services Inc.'s (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
shares of Common Stock, par value $.01 per share, of the Company (the
"Shares") at the close of business on or about June 27, 1997. You are
receiving this Information Statement in connection with the possible election
of persons designated by the Purchaser (as defined below) to a majority of the
seats on the Board of Directors of the Company.
On June 24, 1997, the Company, Three Rivers Holdings Corp., a Delaware
corporation ("Parent") and Three Rivers Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Parent (the "Purchaser") entered
into an Agreement and Plan of Merger (the "Merger Agreement") in accordance
with the terms and subject to the conditions pursuant to which (i) Parent
agreed to cause the Purchaser to commence a tender offer (the "Offer") for all
outstanding Shares at a price of $11.75 net per Share to the seller in cash
and without interest thereon, and (ii) the Purchaser will be merged with and
into the Company (the "Merger"). As a result of the Offer and the Merger, the
Company will become a wholly owned subsidiary of Parent.
The Merger Agreement requires the Company to use all reasonable efforts to
cause the directors designated by Parent to be elected to the Board of
Directors under the circumstances described therein. See "Board of Directors
and Executive Officers."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You
are not, however, required to take any action. Capitalized terms used herein
and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on June
30, 1997. The Offer is scheduled to expire at 12:00 midnight, New York City
time, on July 28, 1997, unless the Offer is extended.
The following information contained in this Information Statement concerning
the Purchaser has been furnished to the Company by the Purchaser, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of June 27, 1997, there were
5,746,324 Shares outstanding. The Board of Directors currently consists of one
class with five members. At each annual meeting of stockholders, all five
directors are elected for one-year terms. The officers serve at the discretion
of the Board.
A-1
<PAGE>
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of such number of Shares which satisfies the Minimum Condition (as
defined in the Merger Agreement) and from time to time thereafter, Parent
shall be entitled to designate a majority of the members of the Company's
Board of Directors (the "Parent Designees"). The Merger Agreement requires
that the Company will, upon request by and at the option of Parent, either
increase the size of the Board of Directors and/or secure the resignations of
current directors to enable the Parent Designees to be elected or appointed to
the Board of Directors and to constitute a majority of the Company's Board of
Directors.
Parent has informed the Company that it will choose five of the Parent
Designees from the Parent directors and executive officers listed on Schedule
I of the Offer to Purchase. Parent has informed the Company that each of the
Parent Designees has consented to act as a director, if so designated.
Biographical information concerning each of the Parent Designees is presented
on Schedule I to the Offer to Purchase. Jeff D. Bergman and Daniel Dickman
will remain Directors of the Company.
None of the Parent Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any of the
directors or executive officers of the Company or (iii) to the best of
Parent's knowledge, beneficially owns any securities (or rights to acquire any
securities) of the Company. The Company has been advised by Parent that, to
the best of Parent's knowledge, none of the Parent Designees has been involved
in any transaction with the Company or any of its directors, executive
officers or affiliates which are required to be disclosed pursuant to the
rules and regulations of the Commission, except as may be disclosed herein or
in the Schedule 14D-9.
Biographical information concerning each of the Company's current directors
and executive officers as of June 29, 1997 is presented on the following
pages.
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
- ---- -------------- --- -------------------------------------------
DIRECTORS
<S> <C> <C> <C>
Jeff D. Bergman (1)..... 1992 42 Chairman of the Board, Chief Executive Officer
and President
Daniel Dickman (1)...... 1992 50 Chief Operating Officer, Executive Vice President,
Secretary and Director
Gerald L. Cohn.......... 1992 68 Director
Alan Novich (2)(3)...... 1992 51 Director
David J. Malone 1993 42 Director
(1)(2)(3)..............
<CAPTION>
NAME AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
- ---- --- -------------------------------------------
EXECUTIVE OFFICERS
<S> <C> <C> <C>
David W. Spindler...................... 45 Senior Vice President, Operations/Marketing
David A. Zynn.......................... 33 Chief Financial Officer and Treasurer
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Executive Plan Committee
Jeff D. Bergman has been Chief Executive Officer, President, and a Director
of the Company since its formation in 1991 and held the same positions with
the Company's predecessors Shared Medical Technologies, Inc. since 1987 and
Shared MRI-4, Inc. since its inception in 1990. From 1979 to 1982, he was
employed by BOC-AIRCO as a Marketing Representative for the Corporate Steel
Division. In 1983, Mr. Bergman joined Mobile Diagnostech, Inc. ("MDI"), a
provider of mobile CAT scanners and MRI equipment, as a developer and manager
of fixed-site oncology centers. In 1987, Mr. Bergman left MDI and formed the
Company. Mr. Bergman is also an official in the National Football League.
A-2
<PAGE>
Daniel Dickman has been Executive Vice President and Chief Operating Officer
of the Company since 1991 and held the same positions with the Company's
predecessors, Shared Medical Technologies, Inc. since 1987 and Shared MRI-4,
Inc. since its inception in 1990. From 1985 to 1987, Mr. Dickman was employed
by Mobile Diagnostech, Inc. ("MDI") and was responsible for its management and
day-to-day operations of its MRI equipment and CAT scanners. In 1987, Mr.
Dickman joined the Company to manage the Company's equipment routes and fixed-
site modalities. He has over 12 years of experience in healthcare management
consulting and systems design, and was formerly employed by Blue Cross of
Western Pennsylvania as Manager of Hospital Consulting.
Gerald L. Cohn is a private investor. Since 1986, Mr. Cohn has served as a
Director of and consultant to DVI, Inc., a publicly held medical equipment
leasing company, a subsidiary of which, DVI Financial Services Inc. ("DVI"),
was a principal stockholder of, and is a lessor of medical equipment to, the
Company. See "Certain Relationships and Related Transactions." Mr. Cohn is a
director of Diametrics Medical, Inc. and Niagara Steel Corp.
Alan Novich is a private attorney. From June 1992 to October 1993, Mr.
Novich had been a consultant to Stratton Oakmont Inc., the underwriter of the
Company's initial public offering. From January 1991 to May 1992, Mr. Novich
was a Vice President and the Counsel for Corporate Finance of Stratton Oakmont
Inc. From June 1988 through December 1990, Mr. Novich was engaged in the
private practice of law and dentistry. From 1985 to June 1988, Mr. Novich
attended law school and was engaged in the private practice of dentistry. Mr.
Novich is Chairman of the Board of Directors of Futurebiotics, Inc.
David J. Malone, CLU, ChFC, has served as President, CFO and Director of
Gateway Financial Group, a financial planning organization, since 1982. Mr.
Malone is a licensed broker-dealer who has served as President of DJM
Financial Advisory Services, Inc. since 1985. Mr. Malone has also served as
general partner of various real estate transactions, including hotel,
commercial office and retail properties.
David W. Spindler has been Vice President of Clinical Operations and
Marketing for the Company since 1991 and held the same positions with the
Company's predecessor since 1988. From 1979 to 1984, Mr. Spindler was a Sales
Representative with BOC-AIRCO (a major supplier of cryogens for MRI systems).
In 1984, he joined M.G. Industries where he was an Account Representative. In
1986, Mr. Spindler joined Helium Technologies where he was a Division Manager.
Mr. Spindler received his B.S.B.A. from Slippery Rock University and his
M.B.A. from Robert Morris College. Mr. Spindler is also a Captain in the
United States Army Reserves.
David A. Zynn has been Chief Financial Officer, Treasurer and Assistant
Secretary since September 1991. From January 1986 to December 1989 and August
1990 to August 1991, Mr. Zynn was employed by KPMG Peat Marwick LLP in several
capacities, first as a staff accountant and finally as an audit manager and a
national instructor of auditing and accounting. From January 1990 to August
1990, Mr. Zynn was employed by Black Box Incorporated as the Manager of
Financial Reporting. Mr. Zynn is a certified public accountant and a member of
the Healthcare Financial Management Association and American Management
Association. Mr. Zynn received his B.S.B.A. from Indiana University of
Pennsylvania.
There are no family relationships among executive officers or directors of
the Company.
BOARD OF DIRECTORS, BOARD COMPENSATION AND COMMITTEES
The Company's Board of Directors held three (3) meetings during the year
ended December 31, 1996 and five (5) meetings during 1997. Each director
attended at least 75% of the aggregate of the number of meetings of the Board
of Directors and any committee of which he is a member.
Directors who are not also employees of the Company receive $18,000
annually, $1,000 per meeting and reimbursement of expenses related to their
services as Directors of the Company. Also, each director receives options to
buy 2,100 shares (2,247 after adjustment to reflect the 7% Common Stock
dividend paid to shareholders on January 15, 1997) of Common Stock on December
31 of each year. See "Stock Option Plans."
A-3
<PAGE>
Directors who also are employees of the Company receive no annual compensation
for service on the Board of Directors or any committee thereof.
On August 9, 1995, the Company adopted the 1995 Director Warrant Plan (the
"Warrant Plan") pursuant to which eligible directors automatically receive
unregistered warrants to purchase 100,000 shares of Common Stock. The Warrant
Plan allows for a total issuance of warrants to purchase up to 700,000 shares
of Common Stock.
On August 9, 1995, warrants to purchase up to 500,000 shares of Common Stock
at an initial exercise price of $3.875, the closing price of the Company's
stock on the date of issue, were issued to the five eligible directors.
Separately, unregistered warrants to purchase 114,500 shares of Common Stock
at an initial exercise price of $4.01 were also issued to an individual who
was an outside director and consultant to the Company, who was ineligible to
participate in the Warrant Plan.
During May 1996, the outside director who was also a consultant of the
Company exercised the 114,500 Warrants and sold 114,500 shares of Common
Stock. The Company received cash proceeds of approximately $459,000 related to
the exercise of such Warrants.
During January 1997, the Company's three outside directors each exercised
25,000 Director Warrants and sold 26,750 shares of Common Stock (after
adjustment for the January 1997 7% Common Stock dividend). The Company
received cash proceeds of approximately $291,000 as a result of the exercise
of the 75,000 Director Warrants.
Pursuant to the 1995 Director Warrant Plan, the Director Warrants have been
recapitalized to reflect the January 1997 7% Common Stock dividend.
Accordingly, the outstanding Director Warrants' exercise price of $3.875 now
entitles the holder to purchase 1.07 shares of Common Stock of the Company. As
of January 31, 1997, 425,000 Director Warrants to purchase 454,750 shares of
Common Stock of the Company were outstanding.
AUDIT COMMITTEE
The Board has an Audit Committee currently consisting of Messrs. Malone and
Novich. The Audit Committee's duties include monitoring performance of the
Company's business plan, reviewing the Company's internal accounting methods
and procedures and reviewing certain business strategies. The Audit Committee
met once in 1996.
COMPENSATION COMMITTEE
The Board has a Compensation Committee currently consisting of Messrs.
Bergman, Dickman and Malone. The Compensation Committee is responsible for
determining the compensation of the Company's employees, other than Messrs.
Bergman and Dickman. The Compensation Committee met twice in 1996.
EXECUTIVE PLAN COMMITTEE
The Board has an Executive Plan Committee, consisting of Messrs. Novich and
Malone, which administers the Company's 1991 Employee Stock Option Plan, as it
applies to persons who are subject to the reporting requirements of Section 16
("Reporting Persons") of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Executive Plan Committee met twice in 1996.
PLAN COMMITTEE
The Board has a Plan Committee, consisting of Messrs. Novich, Malone and
Bergman, which administers the 1991 Employee Stock Option Plan as it applies
to persons who are not subject to the reporting requirements of Section 16 of
the Exchange Act. The Plan Committee met twice in 1996.
NOMINATING COMMITTEE; NOMINATION PROCEDURES
The Company does not have a standing nominating committee. The Board of
Directors, however, is responsible for the evaluation and recommendation of
qualified nominees, as well as other matters pertaining to
A-4
<PAGE>
Board composition and size. The Board will give appropriate consideration to
qualified persons recommended by stockholders for nomination as director in
accordance with the Company's By-Laws as described below.
The Company's By-Laws describe in full the procedures to be followed by a
stockholder in recommending nominees for director. In general, such
recommendations can only be made by a stockholder entitled to notice of and to
vote at a meeting at which directors are to be elected, must be in writing and
must be received by the Chairman of the Board of the Company no later than (i)
with respect to the election of directors at an annual meeting, sixty (60)
days prior to the anniversary date of the prior year's annual meeting, or (ii)
with respect to the election of directors at a special meeting, the close of
business on the fifteenth (15th) day following the date on which notice of
such meeting is given to stockholders or publicly disseminated. Furthermore,
the recommendation must include the following information to the extent known
to the notifying stockholder: (a) the name and address of each proposed
nominee and of the notifying stockholder; (b) the principal occupation of each
proposed nominee; (c) a representation that the notifying stockholder intends
to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (d) the total number of shares of the Company
that will be voted for each proposed nominee; (e) the total number of shares
of the Company owned by the notifying stockholder; (f) a description of all
arrangements or understandings between the notifying stockholder and each
nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
notifying stockholder; (g) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed with the Securities and Exchange Commission; and (h) the
consent of each nominee to serve as a director of the Company if so elected.
A-5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth all cash compensation paid by the Company and
its subsidiaries, as well as other compensation paid or accrued, to each of
its executive officers whose annual salary and bonus exceeded $100,000 (the
"Named Executive Officers"), for services rendered in all capacities during
the year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPEN-
ANNUAL COMPENSATION SATION
--------------------- ------------
SECURITIES ALL OTHER
UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(/1/) OPTIONS(/2/) SATION(/3/)
- --------------------------- ---- --------- ----------- ------------ -----------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Jeff D. Bergman--President,
Chief Executive
Officer and Chairman of
the Board................. 1996 209,000 134,000 14,500 9,534
1995 180,000 73,700 224,000 4,500
1994 161,000 19,000 50,000 4,500
Daniel Dickman--Executive
Vice President,
Chief Operating Officer
and Director.............. 1996 209,000 134,000 14,500 12,633
1995 180,000 73,700 224,000 6,500
1994 161,000 19,000 50,000 6,500
David W. Spindler--Senior
Vice
President--Operations and
Marketing................. 1996 110,000 41,000 5,000 1,000
1995 95,500 21,000 59,250 500
1994 86,000 6,000 25,000 500
David A. Zynn--Chief
Financial
Officer and Treasurer..... 1996 108,000 45,000 5,000 1,000
1995 83,200 27,400 49,000 500
1994 76,000 7,000 25,000 500
</TABLE>
- --------
(1) Amounts shown are for payments made pursuant to the Company's Profit
Sharing Plan. Employment agreements with Messrs. Bergman, Dickman,
Spindler and Zynn require the Company to maintain a profit sharing plan.
See "Certain Relationships and Related Transactions--Employment
Arrangements."
(2) Not adjusted for the January 1997 7% stock dividend.
(3) Amounts shown for fiscal 1996 include disability insurance premiums
totaling $7,814 and $10,443 and split-dollar life insurance premiums
totaling $720 and $1,190 for Messrs. Bergman and Dickman, respectively.
Amounts shown for fiscal 1996 also include, for each of the Named
Executive Officers, the Company's 401(k) contribution of $1,000.
STOCK OPTION PLANS
The Board of Directors and stockholders of the Company have adopted the
Company's 1991 Employee Stock Option Plan, as amended (the "1991 Employee
Plan"), and have authorized the issuance of options covering up to 842,625
shares of Common Stock under such plan (subject to appropriate adjustments in
the event of stock splits, stock dividends and similar dilutive events).
Options may be granted under the Employee Plan to officers and key employees
(including those who may also be directors) of, and consultants and advisors
to, the Company and its subsidiaries.
The Board of Directors of the Company in October 1996 adopted the Company's
1996 Employee Stock Option Plan ("1996 Employee Plan") and have authorized the
issuance of options covering 267,500 shares of Common Stock under such plan
(subject to appropriate adjustments in the event of stock splits, stock
dividends, or similar dilutive events). Options may be granted under the 1996
Employee Plan to officers and key employees (including those who may also be
directors) of, and consultants or advisors to, the Company and its
subsidiaries. Grants to the Named Executive Officers and directors are limited
to an aggregate of 26,750 shares of Common Stock.
A-6
<PAGE>
The Board of Directors and stockholders have also adopted the Company's 1991
Directors Stock Option Plan for Nonemployee Directors (the "Directors Plan")
and have authorized the issuance of options covering up to 112,350 shares of
Common Stock under such plan (subject to appropriate adjustments in the event
of stock splits, stock dividends and similar dilutive events). Under the
Directors Plan, each eligible director automatically receives options to
purchase 2,247 shares of Common Stock (also subject to appropriate adjustments
in the event of stock splits, stock dividends and similar dilutive events) on
December 31st of each year at an exercise price equal to the fair market value
of the Common Stock on that date.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the stock options and
warrants granted to each of the Company's Named Executive Officers for
services rendered in 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(/1/)
-------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED (#) YEAR ($/SHARE) DATE
- ---- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Jeff D. Bergman..................... 7,000 18% $4.50 4/11/06
7,500 3% $6.875 10/1/06
Daniel Dickman...................... 7,000 18% $4.50 4/11/06
7,500 3% $6.875 10/1/06
David Spindler...................... 5,000 2% $6.875 10/1/06
David A. Zynn....................... 5,000 2% $6.875 10/1/06
</TABLE>
- --------
(1) Not adjusted for the January 1997 7% stock dividend. All such options were
exercisable in full on the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to each of the
Company's Named Executive Officers concerning the exercise of options during
1996 and unexercised options held as of December 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS OPTIONS
ACQUIRED ON VALUE AT FISCAL AT FISCAL
EXERCISE(/1/) REALIZED YEAR END(/1/) YEAR END
------------- ---------- ---------------- ----------------
NAME (#) ($) (# EXERCISABLE/ ($ EXERCISABLE/
- ---- # UNEXERCISABLE) $ UNEXERCISABLE)
<S> <C> <C> <C> <C>
Jeff D. Bergman......... 136,500 $ 996,000 186,000/-- 391,000/--
Daniel Dickman.......... 136,500 $1,021,000 186,000/-- 391,000/--
David Spindler.......... 26,250 $ 154,000 80,000/-- 417,000/--
David A. Zynn........... 73,500 $ 480,000 22,500/-- 90,000/--
</TABLE>
- --------
(1) Not adjusted for the January 1997 7% stock dividend.
A-7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mark A. DeSimone, who was a director of the Company until March 27, 1996 and
who the Company believes beneficially owned in excess of five percent of the
outstanding Common Stock, was a consultant to the Company. In 1991, the
Company entered into a five-year consulting agreement with him pursuant to
which he received a consulting fee of $75,000 per annum. Mr. DeSimone provided
services relating to special projects and other business affairs of the
Company. The Company believes that the terms of this consulting agreement were
as favorable, in all material respects, as might have been obtained from an
unaffiliated third party. On March 27, 1996, the Company prepaid the remaining
$50,000 due under the agreement and terminated the consulting relationship.
Mr. DeSimone also was a partner in the law firm that provided services to the
Company in 1993. That law firm did not provide legal services to the Company
during 1994, 1995 or 1996 nor is it expected to perform legal services in the
future. The Company believes Mr. DeSimone no longer owns any outstanding
Common Stock, options or warrants.
Gerald L. Cohn, a director of the Company, is a director of, consultant to
and stockholder of DVI. The Company has entered into numerous leasing
transactions with DVI in the past, and DVI may serve as one of many financing
sources for the Company in the future.
During 1992 and 1993, the Company entered into numerous leasing transactions
with DVI pertaining to both continuing and discontinued operations involving
total financing of approximately $15.6 million. During 1994, the Company did
not enter into any new leases with DVI and refinanced with third parties $3.2
million of leases held by DVI. During the first quarter of 1995, the Company
refinanced its then-remaining leases with DVI, totaling approximately $6.5
million, with third-party lease companies. Interest rates under financing
agreements with DVI ranged from 11% to 14%. During 1996, the Company financed
the acquisition of a new MRI unit with DVI. In connection with such
transaction, the Company and DVI entered into a 60-month capital lease
financing approximately $1.5 million at an interest rate of 9.5%. Total
payments to DVI during 1994, 1995 and 1996 with respect to capital lease
obligations were approximately $3.9 million, $440,000 and $100,000,
respectively, including $1.4 million, $87,000 and $36,000, respectively, of
interest expense associated with such capital leases.
EMPLOYMENT ARRANGEMENTS
The Company entered into a three-year employment agreement commencing on
July 1, 1996 with each of Jeff D. Bergman and Daniel Dickman and a two-year
employment agreement commencing on October 1, 1996 with each of David W.
Spindler and David A. Zynn pursuant to which Mr. Bergman agreed to serve as
the Chairman of the Board, President and Chief Executive Officer of the
Company, Mr. Dickman as the Executive Vice President and Chief Operating
Officer, Mr. Spindler as Senior Vice President of Operations and Marketing and
Mr. Zynn as Treasurer, Assistant Secretary and Chief Financial Officer, at an
annual base salary of not less than $240,000, $240,000, $140,000 and $125,000
respectively.
Each of the employment agreements automatically extends for an additional
three months on each quarterly anniversary. The employment agreements provide
that if the employee is terminated other than for "cause" or if such employee
terminates for "good reason," the employee shall be entitled to a continuation
of full salary and bonus compensation for a period equal to the remainder of
the term. If the employee is terminated for "cause" or if the employee
terminates "without good reason," the employee shall only be entitled to
accrued salary and other accrued benefits prior to the date of termination.
Mr. Bergman's and Mr. Dickman's agreements each provide that if such
employee is terminated after a change in control of the Company, such employee
can elect to receive a lump sum payment of three times salary, bonus and
certain other amounts and continuation of certain benefits in lieu of
continued compensation for the remainder of the term. Mr. Spindler's and Mr.
Zynn's agreements each provide that if such employee is terminated after a
change in control of the Company, such employee shall receive a lump sum
payment of two times salary and continuation of certain benefits. Each of the
agreements contains a noncompete provision which
A-8
<PAGE>
generally restricts the employee from competing with the Company in the same
geographic proximity for a two-year period.
Each of the agreements provide for annual profit sharing with other
executive level employees of a bonus pool consisting of 15% of the Company's
consolidated income before taxes, determined in accordance with generally
accepted accounting principles for financial reporting purposes. Mr. Bergman,
Mr. Dickman, Mr. Spindler and Mr. Zynn received approximately $134,000,
$134,000, $41,000 and $45,000, respectively, pursuant to the bonus pool for
services rendered in 1996.
In connection with the execution of the Merger Agreement, the Company and
each of the Named Executive Officers entered into new employment agreements,
dated as of June 24, 1997, which are substantially similar to the prior
agreements (the "Employment Agreements") and pursuant to which each person
will continue to serve in their current positions with the Company after
consummation of the Offer. The Employment Agreements supersede the prior
agreements unless the Offer is not consummated. Each of the Employment
Agreements provides for a three-year term, with an additional quarter to be
added at the end of the fifth quarter of the term and each quarter thereafter.
Under the Employment Agreements, Mr. Bergman and Mr. Dickman will each
receive a base salary of $240,000 per annum, Mr. Spindler will receive a base
salary of $140,000 per annum and Mr. Zynn will receive a base salary of
$125,000 per annum. These amounts equal the base salary provided for in the
prior agreements. Each of the Employment Agreements contains customary terms
(including confidentiality and non-competition arrangements) and other
benefits and provisions which are generally comparable to the benefits and
provisions provided to such persons in their prior employment agreements with
the Company.
In addition, pursuant to the Employment Agreements, the Company has agreed
to make available a fixed annual bonus pool equal to 15% of the Company's pre-
tax income (excluding the effect of such bonus pool and adjusted for any non-
recurring gains or losses) for the 12 months ended June 30, 1997, but in no
event greater than $1,240,000. Payments of such bonuses are conditioned on the
Company achieving reasonable performance objectives established by the
Company's compensation committee. Each of Mr. Bergman and Dickman will be
eligible to receive up to one quarter of the annual bonus pool. Such bonus
amounts are consistent with amounts provided under the prior employment
agreements.
The Employment Agreements provide that if the employee is terminated other
than for "cause" or if such employee terminates for "good reason," the
employee shall be entitled to a continuation of full salary and bonus
compensation and benefits for a period equal to the remainder of the term. If
the employee is terminated for "cause" or if the employee terminates "without
good reason," the employee shall only be entitled to accrued salary and other
accrued benefits prior to the date of termination. Each of the Employment
Agreements provide that the employee must refrain from competing with the
Company, interfering with its customer relationships or recruiting its
employees is extended until the second anniversary of the date when the
severance benefits end.
Under the Employment Agreements, each of Mr. Bergman and Mr. Dickman has the
right to terminate his employment, as does the Company, upon at least 90 days'
notice, on the first anniversary of the Effective Time with such person
agreeing to provide consulting services to the Surviving Corporation for a
period of two years following such termination and to continue to receive
payment of his base salary during such two-year period. The consulting
arrangement would require Mr. Bergman or Mr. Dickman, as the case may be, to
be available no more than one day per week, via telephone, at the request of
management while taking into account such person's prior commitments and
scheduling constraints.
STOCKHOLDER AGREEMENT
The Stockholder Agreement provides that each Selling Stockholder will sell,
and the Purchaser will purchase, all Shares beneficially owned by such Selling
Stockholder (the "Subject Shares"), at a price per Share equal to the Offer
Price. Such obligations to sell and to purchase the Subject Shares are subject
to the prior
A-9
<PAGE>
satisfaction or waiver of (1) the Purchaser having accepted Shares for payment
under the terms of the Offer, (2) the Minimum Condition having been satisfied,
(3) all waiting periods under the HSR Act applicable to the exercise of the
purchase shall have expired or terminated, (4) all regulatory approvals
required by any applicable law, rule or regulation shall have been obtained
and shall be final, and there (5) shall exist no preliminary or permanent
injunction, or any other order by any court of competent jurisdiction,
restricting, preventing or prohibiting either the purchase or the delivery of
Subject Shares. The Stockholder Agreement also provides that each Selling
Stockholder may, and at the request of the Purchaser shall, tender its Subject
Shares in the Offer. Any Subject Shares of any Selling Stockholder not
purchased in the Offer will be purchased immediately after payment is made
under the Offer.
Each of the Selling Stockholders has agreed, until the Merger Agreement has
terminated, among other things, not to: (1) sell, transfer, give, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement with respect to the sale, transfer, pledge, assignment or other
disposition of, the Subject Shares owned by such Selling Stockholder other
than pursuant to the terms of the Offer or the Merger or (2) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection with, directly or indirectly, any Takeover Proposal. Each of the
Selling Stockholders has further agreed that he will not, and will not permit
any investment banker, financial advisor, attorney, accountant or other
representative retained by him to directly or indirectly solicit, initiate or
encourage any proposal that may lead to an Alternative Transaction or directly
or indirectly participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Alternative
Transaction.
Each of the Selling Stockholders has also agreed until the Stockholder
Agreement has terminated (and the Stockholder Agreement includes an
irrevocable proxy provision for the benefit of the Purchaser with respect to
the Shares subject to the Stockholder Agreement owned by each Selling
Stockholder), (1) to vote the Subject Shares at any meeting of stockholders of
the Company called to vote upon the Merger and the Merger Agreement 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 Merger
and the Merger Agreement is sought, in favor of the Merger, the adoption by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement; and (2)
to vote such Shares at any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which a Selling
Stockholder's vote, consent or other approval is sought, against (x) any
Alternative Transaction, (y) any amendment of the Company's certificate of
incorporation or by-laws or other proposal or transaction involving the
Company, which amendment or other proposal or transaction would be reasonably
likely to impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement or change in any manner the voting rights of each class of the
Company's common stock or (z) any action that would cause the Company to
breach any representation, warranty or covenant contained in the Merger
Agreement.
Pursuant to the Stockholder Agreement, if (i) immediately prior to the
expiration of the Offer, the Purchaser determines that the exercise of
options, warrants or other instruments held by the Stockholders and the sale
or tender into the Offer of the Subject Shares acquired thereby either would
cause the Minimum Condition to be satisfied or would cause the Purchaser to
own more than 90% of the outstanding Shares and (ii) the Purchaser exercises
its right to extend the Offer in accordance with the terms and conditions set
forth in the Merger Agreement, then upon the request of Parent or the
Purchaser and the Exercise Loan (as defined below), each Stockholder shall
promptly exercise all options, warrants and other instruments held by such
Stockholder and sell the Subject Shares acquired thereby to the Purchaser or
tender such Subject Shares into the Offer (at such Stockholder's discretion,
unless the Purchaser directs that such Stockholder tender such Subject
Shares). Upon delivery of such request, Parent shall lend to each Stockholder
the amount necessary for such Stockholder to pay the aggregate exercise price
in respect of all options, warrants and other instruments (each, an "Exercise
Loan"). Each Exercise Loan shall be evidenced by a promissory note, shall bear
interest at the applicable Federal rate (as defined in Section 7872 of the
Code) and shall be repaid together with accrued but unpaid interest upon the
A-10
<PAGE>
earlier of (i) the payment of the purchase price for the Subject Shares
(whether pursuant to the Offer or otherwise) and (ii) the termination of the
Stockholder Agreement.
The Stockholder Agreement provides that in the event that the Merger
Agreement shall have been terminated under circumstances where Parent is or
may become entitled to receive the Termination Fee, each Stockholder shall pay
to Parent on demand an amount equal to the difference between the
consideration received by such Stockholder from the consummation of any
transaction which gives rise to the Company's obligation to pay the
Termination Fee pursuant to the Merger Agreement and the consideration such
Stockholder would have received had he or it tendered his Shares pursuant to
the Offer (without taking into account any modifications to the Offer as in
effect on the date hereof), as determined in accordance with the Stockholder
Agreement.
In addition, in the event that (1) prior to the Effective Time, an
Alternative Transaction shall have been proposed and (2) the Effective Time
shall have occurred and Parent for any reason shall have increased the amount
of Merger Consideration payable over that set forth in the Merger Agreement in
effect on the date thereof (the "Original Merger Consideration"), each Selling
Stockholder agrees in the Stockholder Agreement to pay to Parent on demand an
amount in cash equal to the product of (A) the number of Subject Shares and
(B) 100% of the excess, if any, of (i) the per Share cash consideration or the
per Share fair market value of any noncash consideration, as the case may be,
received by such Selling Stockholder as a result of the Merger, as amended,
determined as of the Effective Time, over (ii) the amount of the Original
Merger Consideration determined as of the time of the first increase in the
amount of the Original Merger Consideration.
A-11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Unless otherwise indicated, the following table sets forth certain
information available to the Company as of March 21, 1997 regarding (a) the
ownership of the Company's Common Stock by (i) each of the Company's directors
and nominees; (ii) each of the Company's Named Executive Officers; and (iii)
all directors and executive officers of the Company as a group; and (b) the
ownership of the Company's Common Stock by all those known by the Company to
be beneficial owners of more than five percent of its outstanding Common
Stock. Unless otherwise indicated, the business address of each person named
below who beneficially owns in excess of five percent of the Common Stock is
10521 Perry Highway, Wexford, Pennsylvania 15090.
<TABLE>
<CAPTION>
PERCENT
AMOUNT(/1/) OF CLASS
----------- --------
<S> <C> <C>
Jeff D. Bergman....................................... 450,791(/2/) 7.7%
Daniel Dickman........................................ 501,689(/2/) 8.6%
Gerald L. Cohn........................................ 91,485(/3/) 1.6%
Alan Novich........................................... 82,497(/3/) 1.4%
David J. Malone....................................... 82,497(/3/) 1.4%
David W. Spindler..................................... 65,600(/4/) 1.1%
David A. Zynn......................................... 24,075(/4/) .4%
All directors and executive officers as a group (seven
persons)............................................. 1,268,445(/5/) 19.7%
Dorchester Partners, L.P.............................. 527,095 9.3%
Dorchester Advisors, Inc.
Michael J. Halpern
1999 Avenue of the Stars
Suite 1950
Los Angeles, CA 90067
Emerald Advisors, Inc................................. 321,281 5.7%
1857 William Penn Way
Lancaster, PA 17601
</TABLE>
- --------
(1) Unless otherwise indicated, each of the stockholders named in the table
has sole voting and investment power with respect to the shares
beneficially owned, subject to the information contained in the footnotes
to the table.
(2) Includes 199,020 shares and 199,020 shares of Common Stock which Jeff D.
Bergman and Daniel Dickman, respectively, are deemed to beneficially own
as a result of their ownership of warrants and Company stock options to
acquire such shares.
(3) Includes for Mr. Cohn 91,485 shares, and for each of Messrs. Malone and
Novich 82,497 shares, pursuant to warrants and Company stock options to
purchase such shares.
(4) Includes for Messrs. Spindler and Zynn 65,600 and 24,075 shares,
respectively, pursuant to Company stock options to acquire such shares.
(5) Includes 744,194 shares of Common Stock which the members of the group
have the right to acquire pursuant to warrants and Company stock options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who beneficially own
more than ten percent of a class of the Company's registered equity securities
to file with the Securities and Exchange Commission and deliver to the Company
initial reports of ownership and reports of changes in ownership of such
registered equity securities.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company's directors, executive officers and more
than ten percent stockholders filed all reports due under Section 16(a) for
the period from January 1, 1996, through December 31, 1996, except that Jeff
D. Bergman, Daniel Dickman, David W. Spindler and David A. Zynn each filed one
late report on Form 5 reporting two, two, one and one transactions,
respectively, regarding grant of stock options pursuant to the 1991 and 1996
employee stock plans that was not reported on a timely basis.
A-12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
Exhibit 1 Agreement and Plan of Merger, dated as of June 24, 1997, by and
among Three Rivers Holding Corp., Three Rivers Acquisition Corp.
and SMT Health Services Inc. (incorporated by reference to Exhibit
(c)(1) of the Schedule 14D-9)
Exhibit 2 Text of Press Release dated June 24, 1997 (incorporated by
reference to Exhibit (a)(8) of the Schedule
14D-9)
Exhibit 3 Letter to Stockholders of SMT Health Services Inc. dated June 30,
1997 (incorporated by reference to Exhibit (a)(10) of the Schedule
14D-9)
Exhibit 4 Opinion of Smith Barney Inc. dated June 24, 1997 (incorporated by
reference to Exhibit (a)(9) of the Schedule 14D-9)
</TABLE>
A-13
<PAGE>
ANNEX B
[SMITH BARNEY LETTERHEAD]
June 24, 1997
The Board of Directors
SMT Health Services Inc.
10521 Perry Highway
Wexford, Pennsylvania 15090
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of SMT Health Services Inc. ("SMT")
of the consideration to be received by such holders pursuant to the terms and
subject to the conditions set forth in the Agreement and Plan of Merger, dated
as of June 24, 1997 (the "Merger Agreement"), among Three Rivers Holding Corp.
("Three Rivers"), Three Rivers Acquisition Corp., a wholly owned subsidiary of
Three Rivers ("Sub"), and SMT. As more fully described in the Merger
Agreement, (i) Three Rivers will cause Sub to commence a tender offer to
purchase all outstanding shares of the common stock, par value $0.01 per
share, of SMT (the "SMT Common Stock") at a purchase price of $11.75 per
share, net to the seller in cash (the "Tender Offer") and (ii) subsequent to
the Tender Offer, Sub will be merged with and into SMT (the "Merger" and,
together with the Tender Offer, the "Transaction") and each outstanding share
of SMT Common Stock not previously tendered will be converted into the right
to receive $11.75 in cash.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of SMT and certain senior officers and other representatives of
Three Rivers concerning the business, operations and prospects of SMT. We
examined certain publicly available business and financial information
relating to SMT as well as certain financial forecasts and other information
and data for SMT which were provided to or otherwise discussed with us by the
management of SMT. We reviewed the financial terms of the Merger as set forth
in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of SMT Common Stock; the
historical and projected earnings and other operating data of SMT; and the
capitalization and financial condition of SMT. We considered, to the extent
publicly available, the financial terms of a similar transaction recently
effected which we considered relevant in evaluating the Merger and analyzed
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations we considered
relevant in evaluating those of SMT. In connection with our engagement, we
were requested to approach, and held discussions with, third parties to
solicit indications of interest in a possible acquisition of SMT. In addition
to the foregoing, we conducted such other analyses and examinations and
considered such other financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with
us, we have been advised by the management of SMT that such forecasts and
other information and data were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of SMT as
to the future financial performance of SMT. We have not made or been provided
with an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of SMT nor have we made any physical inspection of
the properties or assets of SMT. Our opinion is necessarily based upon
information available to us, and financial, stock market and other conditions
and circumstances existing and disclosed to us, as of the date hereof.
B-1
<PAGE>
Smith Barney has been engaged to render financial advisory services to SMT
in connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation
of the Transaction. We also will receive a fee upon the delivery of this
opinion. In the ordinary course of our business, we and our affiliates may
actively trade or hold the securities of SMT for our own account or for the
account of our customers and, accordingly, may at any time hold a long or
short position in such securities. We from time to time provide investment
banking services to affiliates of Three Rivers (including Apollo Management,
L.P.) unrelated to the proposed Transaction, for which services we have
received and will receive compensation. In addition, we and our affiliates
(including Travelers Group Inc. and its affiliates) may maintain relationships
with SMT and affiliates of Three Rivers.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of SMT in its evaluation of the proposed
Transaction, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to whether or not such stockholder should
tender shares of SMT Common Stock in the Tender Offer or how such stockholder
should vote on the proposed Merger. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Smith Barney
be made, without our prior written consent; provided that this opinion letter
may be included in its entirety in the Solicitation/Recommendation Statement
of SMT relating to the proposed Transaction.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the cash consideration to be
received by the holders of SMT Common Stock (other than Three Rivers and its
affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/Smith Barney Inc.
SMITH BARNEY INC.
B-2
<PAGE>
EXHIBIT (A)(1)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SMT HEALTH SERVICES INC.
AT
$11.75 NET PER SHARE IN CASH
BY
THREE RIVERS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THREE RIVERS HOLDING CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF SMT HEALTH SERVICES INC. HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR
TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF SMT HEALTH SERVICES INC.
AND RECOMMENDS THAT ALL OF THE STOCKHOLDERS OF SMT HEALTH SERVICES INC. ACCEPT
THE OFFER, TENDER THEIR SHARES (INCLUDING THE ASSOCIATED RIGHTS) AND APPROVE
THE MERGER AGREEMENT AND THE MERGER, IF REQUIRED BY LAW.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN ON OR PRIOR TO THE EXPIRATION DATE (X) THAT NUMBER
OF OUTSTANDING SHARES WHICH, TOGETHER WITH THE OUTSTANDING SHARES SUBJECT TO
THE STOCKHOLDER AGREEMENT THAT SHALL NOT HAVE BEEN SO TENDERED, WOULD
REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES (FOR PURPOSES OF THIS
CLAUSE (X) ONLY, "SHARES" SHALL BE DEEMED TO REFER ONLY TO SHARES OUTSTANDING
AS OF THE DATE OF THE MERGER AGREEMENT) AND (Y) THAT NUMBER OF SHARES WHICH,
TOGETHER WITH THE SHARES SUBJECT TO THE STOCKHOLDER AGREEMENT THAT SHALL NOT
HAVE BEEN SO TENDERED, WOULD REPRESENT AT LEAST A MAJORITY OF THE FULLY
DILUTED SHARES (DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK
OPTIONS, WARRANTS AND ANY OTHER RIGHTS TO ACQUIRE SHARES) AND (2) THE COMPANY
HAVING OBTAINED CERTAIN AMENDMENTS TO, AND CONSENTS WITH RESPECT TO, EXISTING
EQUIPMENT LEASE AND OTHER FINANCING ARRANGEMENTS. SEE SECTION 14. THE OFFER IS
NOT CONDITIONED ON OBTAINING FINANCING.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal or a
facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to the
Depositary and either mail or deliver certificates evidencing or representing
such Shares to the Depositary (with the Letter of Transmittal and any other
required documents) or tender such Shares pursuant to the procedure for book-
entry transfer set forth in Section 2 or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder having Shares registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such stockholder's broker, dealer, commercial bank, trust company
or other nominee if such stockholder desires to tender such Shares.
Any stockholder who desires to tender such stockholder's Shares and whose
certificates evidencing or representing such Shares are not immediately
available or who cannot comply with the procedures for book-entry transfer on
a timely basis may tender such Shares by following the procedures for
guaranteed delivery set forth in Section 2.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or
other related materials may be directed to the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth on the
back cover of this Offer to Purchase.
-----------------
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
June 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction.............................................................. 1
1. Terms of the Offer.................................................... 3
2. Procedures for Tendering Shares....................................... 5
3. Withdrawal Rights..................................................... 7
4. Acceptance for Payment and Payment of Purchase Price.................. 8
5. Certain Federal Income Tax Considerations............................. 9
6. Price Range of Shares; Dividends...................................... 9
7. Effect of the Offer on the Market for the Shares; Nasdaq Quotation;
Exchange Act Registration; Margin Regulations......................... 10
8. Certain Information Concerning the Company............................ 11
9. Certain Information Concerning Apollo, the Purchaser and Parent....... 13
10. Background of the Offer; Contacts with the Company.................... 14
11. Purpose of the Offer and the Merger; Plans for the Company; Appraisal
Rights; Exemption from Rights Agreement............................... 15
12. The Merger Agreement; Stockholder Agreement; Employment Agreements And
Other Agreements......................................................... 17
13. Source and Amount of Funds............................................ 26
14. Certain Conditions of the Offer....................................... 28
15. Certain Legal Matters................................................. 30
16. Fees and Expenses..................................................... 31
17. Miscellaneous......................................................... 31
Schedule I................................................................ S-1
</TABLE>
<PAGE>
TO ALL HOLDERS OF SHARES OF COMMON STOCK OF SMT HEALTH SERVICES INC.:
INTRODUCTION
Three Rivers Acquisition Corp., a Delaware corporation (the "Purchaser") and
a wholly owned subsidiary of Three Rivers Holding Corp., a Delaware
corporation ("Parent"), hereby offers to purchase all outstanding shares of
the Common Stock, $.01 par value (the "Shares"), of SMT Health Services Inc.,
a Delaware corporation (the "Company"), including the associated Rights (as
hereinafter defined), at a purchase price of $11.75 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and the related Letter of Transmittal (which together
constitute the "Offer"). Unless the context otherwise requires, all references
herein to Shares shall include the associated Rights (as defined in the Rights
Agreement between the Company and American Stock Transfer & Trust Company, as
Rights Agent, dated as of November 8, 1995, as amended June 23, 1997 (the
"Rights Agreement")).
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
The Purchaser will pay all charges and expenses of Donaldson, Lufkin &
Jenrette Securities Corporation (the "Dealer Manager"), American Stock
Transfer & Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the
"Information Agent").
Parent and the Purchaser are corporations formed by Apollo Investment Fund
III, L.P., a Delaware limited partnership ("AIF III"), Apollo Overseas
Partners III, L.P., a Delaware limited partnership ("Overseas Partners"), and
Apollo (U.K.) Partners III, L.P., a limited partnership organized under the
laws of England ("UK Partners" and, together with AIF III and Overseas
Partners, the "Apollo Entities"), in connection with the Offer and the
transactions contemplated hereby. For information concerning the Apollo
Entities, see Section 9.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR
TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS
THAT ALL OF THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER, TENDER THEIR
SHARES (INCLUDING THE ASSOCIATED RIGHTS) AND APPROVE THE MERGER AGREEMENT AND
THE MERGER, IF REQUIRED BY LAW. SMITH BARNEY INC. ("SMITH BARNEY"), THE
COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED TO THE BOARD A WRITTEN OPINION
DATED JUNE 24, 1997, TO THE EFFECT THAT, AS OF SUCH DATE AND BASED UPON AND
SUBJECT TO CERTAIN MATTERS STATED IN SUCH OPINION, THE $11.75 PER SHARE CASH
CONSIDERATION TO BE RECEIVED BY HOLDERS OF SHARES (OTHER THAN PARENT AND ITS
AFFILIATES) PURSUANT TO THE OFFER AND THE MERGER WAS FAIR, FROM A FINANCIAL
POINT OF VIEW, TO SUCH HOLDERS. A COPY OF THE OPINION OF SMITH BARNEY IS
INCLUDED AS AN ANNEX TO THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON
SCHEDULE 14D-9, WHICH IS BEING MAILED TO STOCKHOLDERS HEREWITH, AND SHOULD BE
READ CAREFULLY IN ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) (X) THAT NUMBER OF OUTSTANDING SHARES WHICH, TOGETHER WITH THE OUTSTANDING
SHARES SUBJECT TO THE STOCKHOLDER AGREEMENT (AS DEFINED BELOW) THAT SHALL NOT
HAVE BEEN SO TENDERED, WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING
SHARES (FOR PURPOSES OF THIS CLAUSE (X) ONLY, "SHARES" SHALL BE DEEMED TO
REFER ONLY TO SHARES OUTSTANDING AS OF THE DATE OF THE MERGER AGREEMENT) AND
(Y) THAT NUMBER OF SHARES WHICH, TOGETHER WITH THE SHARES SUBJECT TO THE
STOCKHOLDER AGREEMENT THAT SHALL NOT HAVE BEEN SO TENDERED, WOULD REPRESENT AT
LEAST A MAJORITY OF THE FULLY DILUTED SHARES (DETERMINED ON A FULLY DILUTED
BASIS FOR ALL OUTSTANDING STOCK OPTIONS, WARRANTS AND ANY OTHER RIGHTS TO
ACQUIRE SHARES) (THE CONDITIONS IN (X) AND (Y) COLLECTIVELY, THE "MINIMUM
CONDITION") AND (2) THE COMPANY HAVING OBTAINED CERTAIN AMENDMENTS TO, AND
CONSENTS WITH RESPECT TO, EXISTING EQUIPMENT LEASE AND OTHER FINANCING
ARRANGEMENTS (THE "LEASE AMENDMENT CONDITION"). THE PURCHASER RESERVES THE
RIGHT (SUBJECT TO OBTAINING THE EXPRESS WRITTEN CONSENT OF THE COMPANY AND THE
APPLICABLE
1
<PAGE>
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION")), WHICH IT PRESENTLY HAS NO INTENTION OF EXERCISING, TO WAIVE OR
REDUCE THE MINIMUM CONDITION. SEE SECTIONS 1 AND 14.
THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of June 24, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides that the Purchaser will be merged (the
"Merger") with and into the Company after the completion of the Offer and the
satisfaction of certain conditions. As a result of the Merger, each Share
(including the associated Rights) issued and outstanding immediately prior to
the Effective Time (as defined in the Merger Agreement) (other than Shares
then owned by the Company, Parent, the Purchaser, any other direct or indirect
subsidiary of Parent or by stockholders of the Company, if any, who dissent
from the Merger and comply with all of the provisions of the Delaware General
Corporation Law (the "DGCL") concerning the right, if applicable, of holders
of Shares to seek appraisal of their Shares) will be converted into the right
to receive the price paid in the Offer in cash, without interest (the "Merger
Consideration"). See Section 12 "--The Merger Agreement."
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required by law, the approval and adoption
of the Merger Agreement by the stockholders of the Company. If the Minimum
Condition is satisfied, the Purchaser will have sufficient voting power under
the DGCL to effect the Merger without the concurrence of any other stockholder
of the Company. If at least 90% of the outstanding Shares are purchased in the
Offer, the Purchaser will be able to effect a short-form merger under the DGCL
without a vote of stockholders.
In connection with the execution of the Merger Agreement, the Purchaser and
Parent entered into a Stockholder Agreement, dated as of June 24, 1997 (the
"Stockholder Agreement"), with Jeff D. Bergman, the President, Chief Executive
Officer and Chairman of the Board, Daniel Dickman, the Executive Vice
President, Chief Operating Officer, Secretary and a Director of the Company,
David W. Spindler, the Senior Vice President of Clinical Operations and
Marketing of the Company, and David A. Zynn, the Chief Financial Officer,
Treasurer and Assistant Secretary of the Company (collectively, the "Selling
Stockholders"), pursuant to which such Selling Stockholders have agreed to
sell to the Purchaser, and the Purchaser has agreed to purchase, all Shares
beneficially owned by them, representing approximately 15.1% of the Shares on
a fully diluted basis, including Shares subsequently acquired by a Selling
Stockholder through the exercise of options or otherwise, at a price per Share
equal to the price paid in the Offer, provided that such obligation to sell
and such obligation to purchase are subject to certain conditions, including
the Minimum Condition having been satisfied and the Purchaser having accepted
Shares for payment under the Offer. Pursuant to the Stockholder Agreement, the
Purchaser has the right (which it intends to exercise) to require the Selling
Stockholders to tender the Shares subject to the Stockholder Agreement into
the Offer. Pursuant to the Stockholder Agreement, each Selling Stockholder has
also executed and delivered a proxy for the benefit of the Purchaser with
respect to the Shares subject to the Stockholder Agreement owned by such
Selling Stockholder to vote such Shares against certain competing
transactions, as more fully described below in Section 12 "--The Stockholder
Agreement." Pursuant to the Stockholder Agreement, each Selling Stockholder
has also agreed that upon the request of Purchaser, subject to certain
conditions, he will exercise options owned by him to acquire Shares if
necessary to cause the Minimum Condition to be satisfied or to cause the
Purchaser to own in excess of 90% of the outstanding Shares. The Purchaser has
agreed that if it requests the Selling Stockholders to exercise their options,
it will lend the Selling Stockholders the funds necessary to pay the exercise
price for such Shares. See Section 12 "--Stockholder Agreement."
The Company has represented to Parent and the Purchaser that, as of June 24,
1997, there were 5,746,324 Shares issued and outstanding, and 1,028,268 Shares
reserved for issuance upon the exercise of outstanding options and warrants.
Based on the foregoing, the Purchaser believes that 3,387,297 Shares
constitute a majority of the fully diluted Shares. Accordingly, the Minimum
Condition will be satisfied if at least 2,363,795 Shares, other than the
1,023,502 Shares (assuming exercise of all Company Stock Options and Warrants
(each as hereinafter defined) subject to the Stockholder Agreement) currently
subject to the Stockholder Agreement, or approximately 34.9% of the Shares on
a fully diluted basis, are validly tendered and not withdrawn prior to the
Expiration Date.
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STOCKHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED LETTER
OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES
PURSUANT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of
any extension or amendment), the Purchaser will accept for payment (and
thereby purchase) all Shares that are validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 3. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Monday, July
28, 1997, unless and until the Purchaser, in its sole discretion, shall have
extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Purchaser, shall expire.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 14 hereof shall have
occurred or shall have been determined by the Purchaser to have occurred, (a)
to extend the period of time for which the Offer is open, and thereby delay
acceptance for payment of and the payment for any Shares, by giving oral or
written notice of such extension to the Depositary and (b) to amend the Offer
in any other respect by giving oral or written notice of such amendment to the
Depositary. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THE OFFER.
If the conditions of the Offer are not satisfied or waived prior to the
Expiration Date, the Purchaser reserves the right (but shall not be
obligated), subject to the terms and conditions contained in the Merger
Agreement and to the applicable rules and regulations of the Commission, (1)
to terminate the Offer and not accept for payment any Shares and return all
tendered Shares to tendering stockholders, (2) to waive all the unsatisfied
conditions (other than the Minimum Condition) and, subject to complying with
the terms of the Merger Agreement and the applicable rules and regulations of
the Commission, to waive the Minimum Condition, to accept for payment and pay
for all Shares validly tendered prior to the Expiration Date and not
theretofore withdrawn, (3) to extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, to retain the
Shares that have been tendered for the period or periods for which the Offer
is extended or (4) to amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer (other than as required by the Merger Agreement or applicable
law). Any extension, amendment or termination of the Offer, or any waiver of
any condition of the Offer, will be followed as promptly as practicable by a
public announcement. In the case of an extension, Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires
that the announcement be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(c) under
the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-
6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
Offer be promptly disseminated to stockholders in a manner reasonably designed
to inform stockholders of such change), and without limiting the manner in
which the Purchaser may choose to make any public announcement, the Purchaser
will not have any obligation to publish, advertise or otherwise communicate
any such public announcement other than by making a release to the Dow Jones
News Service. During any such extension, all Shares previously tendered and
not withdrawn will remain subject to the Offer and the right of a tendering
stockholder to withdraw such stockholder's Shares in accordance with the
procedures set forth in Section 3.
In the Merger Agreement, the Purchaser has agreed that it will not, without
the prior consent of the Company, extend the Offer, except that, without the
consent of the Company, the Purchaser may extend the Offer
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(1) if at the Expiration Date any of the conditions to the Purchaser's
obligation to accept Shares for payment are not satisfied or waived, until
such time as such conditions are satisfied or waived, (2) for any period
required by any rule, regulation, interpretation or position of the Commission
or the staff thereof, (3) for a period of up to ten business days to permit
the Purchaser to decide whether to modify the Offer in the event of certain
competing proposals and (4) on one or more occasions, for any reason, for an
aggregate period of not more than ten business days beyond the latest
expiration date that would otherwise be permitted under the terms of the
Merger Agreement as described in this sentence. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1 under the
Exchange Act.
In addition, the Purchaser has agreed in the Merger Agreement that it will
not, without the consent of the Company, (1) reduce the number of Shares
subject to the Offer, (2) reduce the Offer Price, (3) add to or modify the
conditions set forth in Section 14, including the Minimum Condition, (4)
except as provided above, extend the Offer, (5) change the form of the
consideration payable in the Offer or (6) amend or alter any term of the Offer
in a manner materially adverse to the Company's stockholders; provided,
however, that nothing contained in the Merger Agreement will prohibit the
Purchaser, in its sole discretion without the consent of the Company, from
waiving satisfaction of any condition of the Offer other than the Minimum
Condition.
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of or payment for Shares or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 3.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after
the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the Company's consent, the Minimum Condition), the Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
The minimum period during which an offer must remain open following material
changes in the terms of the Offer or information concerning the Offer, other
than a change in price or a change in the percentage of securities sought or
any dealer solicitation fee, will depend upon the facts and circumstances then
existing, including the relative materiality of the changed terms or
information. With respect to a change in price or a change in the percentage
of securities sought, a minimum period of ten business days is generally
required to allow for adequate dissemination to stockholders.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the Lease Amendment Condition, the expiration or termination of all
waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations thereunder (the "HSR Act") and the other
conditions set forth in Section 14. Subject to the terms and conditions
contained in the Merger Agreement, the Purchaser reserves the right (but shall
not be obligated) to waive any or all of such conditions.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and will be furnished by the Purchaser to brokers,
dealers, banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
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2. PROCEDURES FOR TENDERING SHARES
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (1) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees (or an
Agent's Message (as hereinafter defined) in connection with a book-entry
transfer of Shares) and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover page of this Offer to Purchase and either certificates
for tendered Shares must be received by the Depositary at one of such
addresses or such Shares must be delivered pursuant to the procedure for book-
entry transfer set forth below (and a Book-Entry Confirmation (as hereinafter
defined) received by the Depositary), in each case, on or prior to the
Expiration Date, or (2) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company and the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
in accordance with such Book-Entry Transfer Facility's procedures for such
transfer. However, although delivery of Shares may be effected through book-
entry transfer into the Depositary's account at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or an Agent's
Message in connection with a book-entry transfer) and any other required
documents, must, in any case, be transmitted to, and received by the
Depositary, at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date, or the tendering stockholder must
comply with the guaranteed delivery procedure described below. The
confirmation of a book-entry transfer of Shares into the Depositary's account
at a Book-Entry Transfer Facility as described above is referred to herein as
a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-
Entry Confirmation that such participant has received and agrees to be bound
by the terms of the Letter of Transmittal, and that the Purchaser may enforce
such agreement against such participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE
DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY. DELIVERY OF THE LETTER OF TRANSMITTAL AND ACCOMPANYING SHARES WILL
BE DEEMED EFFECTIVE, AND RISK OF LOSS WITH RESPECT TO SUCH LETTER OF
TRANSMITTAL AND ACCOMPANYING CERTIFICATE(S) WILL PASS, ONLY WHEN SUCH LETTER
OF TRANSMITTAL AND ACCOMPANYING CERTIFICATE(S) ARE OFFICIALLY RECEIVED BY THE
DEPOSITARY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (1) the Letter of Transmittal is signed by the registered
holder of Shares (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of the Shares) tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter
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of Transmittal or (2) such Shares are tendered for the account of a firm that
is a participant in the Securities Transfer Agents Medallion Program or the
New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program or by any other "eligible guarantor institution,"
as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instructions 1
and 5 to the Letter of Transmittal. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made or certificates for Shares not
tendered or not accepted for payment are to be issued to a person other than
the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter
of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, is received by the
Depositary, as provided below, on or prior to the Expiration Date; and
(3) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to such Shares), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Depositary
within three trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the Nasdaq
National Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (1) certificates for Shares (or a Book-Entry
Confirmation with respect to such Shares), (2) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and (3) any other documents required by the Letter of
Transmittal. Accordingly, tendering stockholders may be paid at different
times depending upon when certificates for Shares or Book-Entry Confirmations
are actually received by the Depositary. UNDER NO CIRCUMSTANCE WILL INTEREST
BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to any of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, the tendering stockholder will irrevocably appoint designees of the
Purchaser as such stockholder's attorneys-in-fact and proxies in the manner
set forth in the Letter of Transmittal, each with full power of substitution,
to the full extent of such stockholder's rights with respect to the Shares
tendered by such stockholder and accepted for payment by the Purchaser and
with respect to any and all other Shares or other securities or rights issued
or issuable in respect of such Shares on or after June 24, 1997. All such
proxies shall be considered coupled with an interest in the
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tendered Shares. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts for payment Shares tendered by such
stockholder as provided herein. Upon such acceptance for payment, all prior
powers of attorney and proxies given by such stockholder with respect to such
Shares or other securities or rights will, without further action, be revoked
and no subsequent powers of attorney and proxies may be given (and, if given,
will not be deemed effective). The designees of the Purchaser will thereby be
empowered to exercise all voting and other rights with respect to such Shares
or other securities or rights in respect of any annual, special or adjourned
meeting of the Company's stockholders, or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able
to exercise full voting and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of stockholders then
scheduled. Such powers of attorney and proxies will be irrevocable and will be
granted in consideration of the acceptance for payment of such Shares in
accordance with the terms of the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders determined by it not to be in proper form
or the acceptance for payment of or payment for Shares which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in any tender with
respect to any particular Shares, whether or not similar defects or
irregularities are waived in the case of other Shares. No tender of Shares
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived. None of the Purchaser, Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must (1) provide the Depositary with such stockholder's
correct taxpayer identification number ("TIN") on a Substitute Form W-9 and
(2) certify under penalty of perjury that such TIN is correct and that such
stockholder is not subject to backup withholding. Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. If a stockholder does not
provide its correct TIN or fails to provide the certifications described
above, the Internal Revenue Service ("IRS") may impose a penalty on such
stockholder and payment of cash to such stockholder pursuant to the Offer may
be subject to backup withholding of 31%. All stockholders surrendering Shares
pursuant to the Offer should complete and sign the Substitute Form W-9
included as part of the Letter or Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and
the Depositary). Noncorporate foreign stockholders should complete and sign a
Form W-8, Certificate of Foreign Status, a copy of which may be obtained from
the Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn on or at
any time prior to the Expiration Date and, unless theretofore accepted for
payment as provided herein, may also be withdrawn on or after August 28, 1997.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person who tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Shares. If certificates
for Shares have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such certificates, the serial numbers
shown on the particular certificates evidencing the Shares to be
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withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution, except in the case of Shares tendered by an Eligible
Institution, must also be furnished to the Depositary as aforesaid. If Shares
have been delivered pursuant to the procedure for book-entry transfer set
forth in Section 2, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures.
Any questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding on all parties.
None of the Purchaser, Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. Any Shares
withdrawn will be deemed to be not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by following one of the procedures
described in Section 2 at any time on or prior to the Expiration Date.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase by accepting for payment, and will
pay for, all Shares validly tendered on or prior to the Expiration Date and
not properly withdrawn (in accordance with the procedures set forth in Section
3), promptly after the Expiration Date. The Purchaser expressly reserves the
right to delay acceptance for payment of, or, subject to Rule 14e-l(e)
promulgated under the Exchange Act, payment for, Shares in order to comply in
whole or in part with any applicable law. See Sections 14 and 15. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (1) certificates for such Shares (or
a Book-Entry Confirmation) pursuant to the procedures set forth in Section 2,
(2) a Letter of Transmittal (or a facsimile copy thereof), properly completed
and duly executed, or an "Agent's Message," and (3) any other documents
required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered to the Purchaser on or
prior to the Expiration Date and not properly withdrawn if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms
and subject to the conditions of the Offer, payment for Shares purchased
pursuant to the Offer will be made by deposit of the purchase price with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Purchaser and transmitting payments to
tendering stockholders. Under no circumstances will interest on the purchase
price of the Shares be paid by the Purchaser by reason of any delay in making
such payment. If the Purchaser is delayed in its acceptance for payment or
payment for Shares or is unable to accept for payment or pay for Shares
tendered pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may, subject to Rule 14e-
1(e) promulgated under the Exchange Act, retain tendered Shares on behalf of
the Purchaser, and such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to withdrawal rights as set forth in
Section 3. The Purchaser will pay any transfer taxes incident to the transfer
to it of validly tendered Shares, except as otherwise provided in Instruction
6 to the Letter of Transmittal, as well as charges and expenses of the Dealer
Manager, the Depositary and the Information Agent.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted which represent more Shares than are
tendered, certificates for such Shares not purchased or tendered will be
returned (or, in the case of Shares delivered by book-entry transfer within a
Book-Entry Transfer Facility pursuant to the procedures set forth in Section
2, such Shares will be credited to an account maintained within such Book-
Entry Transfer Facility) without expense to the tendering stockholder, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. Certificates representing Shares cancelled in the Merger will not
be returned.
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If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to stockholders pursuant to the Offer, such increased
consideration shall be paid to all stockholders whose Shares are purchased
pursuant to the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, with the consent of the Company (which consent may not
be unreasonably withheld), its right to purchase Shares tendered pursuant to
the Offer, but any such transfer or assignment will not relieve the Purchaser
of its obligations under the Offer and will not prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States Federal income tax
consequences of the receipt of cash for Shares pursuant to the Offer or the
Merger. This discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), judicial and administrative decisions thereunder,
existing temporary and proposed regulations and Internal Revenue Service
rulings and other pronouncements.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND DOES NOT ADDRESS ALL
ASPECTS OF INCOME TAXATION THAT MAY BE RELEVANT TO STOCKHOLDERS. FOR EXAMPLE,
THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES UNDER ANY APPLICABLE
FOREIGN, STATE, LOCAL OR OTHER TAX LAWS. IN ADDITION, THIS DISCUSSION DOES NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT OF CASH FOR SHARES
PURSUANT TO THE OFFER OR THE MERGER TO PARTICULAR CATEGORIES OF TAXPAYERS
SUBJECT TO SPECIAL TREATMENT UNDER UNITED STATES FEDERAL INCOME TAX LAWS, SUCH
AS TRUSTS, FINANCIAL INSTITUTIONS, BROKER-DEALERS, PERSONS WHO ARE NOT
CITIZENS OR RESIDENTS OF THE UNITED STATES, TAX-EXEMPT ORGANIZATIONS, LIFE
INSURANCE COMPANIES, EMPLOYEES WHO ACQUIRED THEIR SHARES THROUGH THE EXERCISE
OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION AND PERSONS WHO
RECEIVED PAYMENTS IN RESPECT OF OPTIONS TO ACQUIRE SHARES. EACH STOCKHOLDER
SHOULD CONSULT WITH SUCH STOCKHOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE RECEIPT OF CASH FOR SHARES
PURSUANT TO THE OFFER OR THE MERGER, INCLUDING THE CONSEQUENCES UNDER FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for Federal income tax purposes. Generally, a stockholder
will recognize gain or loss in an amount equal to the difference between the
cash received and the stockholder's adjusted tax basis in the Shares. For
Federal income tax purposes, such gain or loss will be capital gain or loss if
the Shares are held as a capital asset by the stockholder, and long-term
capital gain or loss if the stockholder has held such Shares for more than one
year, measured as of the date the Purchaser accepts such Shares for payment
pursuant to the Offer or the Effective Time of the Merger, as the case may be.
Under current law, capital gains realized by individuals on capital assets
held for more than one year ("long-term capital gains") will be taxable at a
maximum rate of 28%. However, there are currently proposals within the United
States Congress that, if codified into law, would have the effect, among other
effects, of lowering the maximum capital gains rate. There is currently no way
of knowing if and when these proposals would become law, or what their
effective dates would be.
Capital losses are generally deductible only to the extent of capital gains
plus, in the case of noncorporate taxpayers, up to $3,000 of ordinary income.
Capital losses that do not offset capital gains or ordinary income as
described above may be carried forward to offset capital gains or up to $3,000
of ordinary income per year in future years.
6. PRICE RANGE OF SHARES; DIVIDENDS
Since November 3, 1995, the Shares have been traded in the over-the-counter
market and quoted on the Nasdaq National Market under the symbol "SHED." Prior
to November 3, 1995, the Shares were traded on the Nasdaq SmallCap Market. For
the period from January 1, 1995 through October 31, 1995, the table below sets
forth, the high and low closing prices per Share, as reported on the Nasdaq
SmallCap Market. For the period from and after November 1, 1995, the table
below sets forth the high and low sales prices of the Shares, as
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<PAGE>
reported on the Nasdaq National Market. The prices set forth below are as
reported in published financial sources and do not include retail markups,
markdowns or commissions.
<TABLE>
<CAPTION>
HIGH LOW
YEAR ENDED DECEMBER 31, 1995
<S> <C> <C>
First Quarter........................................ $ 3 1/16 $2
Second Quarter....................................... 3 7/8 2 5/8
Third Quarter........................................ 4 5/8 3 5/8
Fourth Quarter....................................... 4 7/8 3 7/8
YEAR ENDED DECEMBER 31, 1996
First Quarter........................................ 4 9/16 3 3/4
Second Quarter....................................... 10 3/4 4 1/16
Third Quarter........................................ 8 5/8 5 3/8
Fourth Quarter....................................... 8 5/8 6 5/8
YEAR ENDED DECEMBER 31, 1997
First Quarter........................................ 9 1/2 7 3/4
Second Quarter (through June 27, 1997)............... 11 3/4 7 7/8
</TABLE>
On June 23, 1997, the last full trading day prior to the date of the
announcement of the Offer, the closing sales price per Share as reported on
the Nasdaq National Market was $11 1/4. On June 27, 1997, the last trading day
prior to the date of this Offer to Purchase, the closing sales price per Share
as reported on the Nasdaq National Market was $11 1/2. Stockholders are urged
to obtain current market quotations for the Shares.
The Company has never paid any cash dividends on the Shares. The Merger
Agreement provides that, without the prior written consent of Parent, the
Company will not declare, set aside or pay any dividend on or make any other
distribution in respect of any of its capital stock. See Section 12.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ QUOTATION;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the National Association of
Securities Dealers, Inc. (the "NASD") for continued inclusion in the Nasdaq
National Market (the top tier market of The Nasdaq Stock Market), which
requires that an issuer have at least 200,000 publicly held shares, held by at
least 400 shareholders or 300 shareholders of round lots, with a market value
of $1,000,000, and have net tangible assets of at least either $1,000,000,
$2,000,000 (depending on profitability levels in two of the issuer's three
most recent fiscal years) or $4,000,000 (depending on profitability levels
during three of the issuer's four most recent fiscal years). If these
standards are not met, the Shares might nevertheless continue to be included
in The Nasdaq Stock Market with quotations published in the Nasdaq "additional
list" or in one of the "local lists," but if the number of holders of the
Shares were to fall below 300, or if the number of publicly held Shares were
to fall below 100,000 or there were not at least two registered and active
market makers for the Shares, the NASD's rules provide that the Shares would
no longer be "qualified" for Nasdaq reporting and Nasdaq would cease to
provide any quotations. Shares held directly or indirectly by directors,
officers or beneficial owners of more than 10% of the Shares are not
considered as being publicly held for this purpose. According to the Company,
as of June 27, 1997, there were approximately sixty holders of record of
Shares and 5,746,324 Shares were outstanding. If, as a result of the purchase
of Shares pursuant to the Offer, the Shares no longer meet the requirements of
the NASD for continued inclusion in the Nasdaq National Market or The Nasdaq
Stock Market, as the case may be, the market for Shares could be adversely
affected.
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<PAGE>
In the event that the Shares no longer meet the requirements of the NASD for
quotation through Nasdaq and the Shares are no longer included in The Nasdaq
Stock Market, it is possible that, prior to the Effective Time, the Shares
would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interests in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would, subject to Section
15(d) of the Exchange Act, substantially reduce the information required to be
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act no longer applicable to the
Company, such as the short-swing profit recovery provisions of Section 16(b)
of the Exchange Act, the requirement of furnishing a proxy or information
statement pursuant to Section 14(a) or (c) of the Exchange Act in connection
with stockholders' meetings and the related requirement of furnishing an
annual report to stockholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
or 144A promulgated under the Securities Act of 1933, as amended, may be
impaired or eliminated.
THE PURCHASER INTENDS TO SEEK TO CAUSE THE COMPANY TO APPLY FOR DELISTING OF
THE SHARES FROM THE NASDAQ NATIONAL MARKET AND TERMINATION OF REGISTRATION OF
THE SHARES UNDER THE EXCHANGE ACT AS SOON AFTER THE COMPLETION OF THE OFFER AS
THE REQUIREMENTS FOR SUCH DELISTING AND/OR TERMINATION ARE MET. IF
REGISTRATION OF THE SHARES IS NOT TERMINATED PRIOR TO THE MERGER, THEN THE
REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT WILL BE TERMINATED FOLLOWING
THE CONSUMMATION OF THE MERGER.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans
made by brokers. If registration of Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
located at 10521 Perry Highway, Wexford, Pennsylvania 15090. Except as
otherwise set forth herein, the information concerning the Company contained
in this Offer to Purchase, including financial information, has been furnished
by the Company or has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources.
Although neither Parent nor the Purchaser has any knowledge that would
indicate that statements contained herein based upon such documents are
untrue, none of the Purchaser, Parent, the Dealer Manager, the Depositary or
the Information Agent assumes any responsibility for the accuracy or
completeness of the information concerning the Company furnished by the
Company or contained in such documents and records or for the failure to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to the Purchaser and
Parent.
The Company and its subsidiaries are primarily engaged in the business of
operating mobile Magnetic Resonance Imaging units ("MRI Units"), which service
healthcare providers in the states of Pennsylvania, North Carolina, West
Virginia, Kentucky, Virginia, South Carolina and Ohio.
11
<PAGE>
Set forth below is certain selected consolidated financial information
excerpted from the information contained or incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (the "Company 10-K") and the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997 (the "Company 10-Q"). More comprehensive
financial information is included or incorporated by reference in the Company
10-K and the Company 10-Q, and the reports and other documents filed by the
Company with the Commission. The following summary is qualified in its
entirety by reference to such reports and other documents and all of the
financial information and notes contained therein. Such reports and other
documents may be examined at, and copies obtained from, the offices of the
Commission in the manner set forth below.
SMT HEALTH SERVICES INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEAR ENDED
----------------------------- ---------------------------
MARCH 31, 1997 MARCH 31, 1996 DEC. 31, 1996 DEC. 31, 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues................ $6,239,307 $ 4,128,035 $19,021,954 $15,020,428
Interest income......... 102,068 53,166 190,399 137,417
Income before
extraordinary items(1). 761,768 457,481 2,410,861 1,373,217
Income per share before
extraordinary items.... 0.16 0.13 0.61 0.46
Extraordinary loss on
early extinguishment of
debt(2)................ 181,000 -- -- --
Net income.............. 580,768 457,481 2,410,816 1,373,217
Net income per share(1). $ 0.12 $ 0.13 $ 0.61 $ 0.46
Weighted average shares
outstanding(1)......... 4,442,714 2,840,208 3,232,505 2,770,230
<CAPTION>
MARCH 31, 1997 DEC. 31, 1996 DEC. 31, 1995
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Total current assets................... $16,801,095 $ 7,825,096 $ 5,641,596
Total assets........................... 46,857,163 39,497,563 23,347,805
Total long term debt and capital lease
obligations........................... 16,060,557 20,859,964 12,709,905
Stockholders' equity(3)................ 24,129,628 11,399,543 5,401,653
</TABLE>
- ---------------------
(1) Weighted average Shares outstanding for all periods presented have been
calculated using the Modified Treasury Stock Method. Weighted average Shares
outstanding for all periods presented have been adjusted to reflect a 5%
Common Stock dividend paid in 1995 and a 7% Common Stock dividend paid in
January 1997.
(2) During March 1997 the Company paid off the remaining principal balance of
capital lease obligations totaling approximately $4.2 million. The total
amount paid to extinguish the capital leases approximated $4.5 million. The
difference between the amount paid to extinguish the capital leases and the
net carrying amount of the debt totaled $296,000, relating primarily to
prepayment penalties, and has been recorded as an extraordinary loss, net of
income taxes in accordance with Accounting Principles Board Opinion No. 26
Early Extinguishment of Debt (APB 26).
(3) During January through March 4, 1997 (the Company's publicly traded
warrants expired March 4, 1997), 1,677,000 warrants were exercised and the
Company issued 1,882,000 shares. The Company received net cash proceeds of
approximately $11.7 million as a result of the warrant exercises.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information relating to its business, financial condition and other matters
with the Commission. Certain information as of particular dates concerning the
Company's directors and officers, their compensation, Company Stock Options
(as defined below) granted to them, the principal holders of the Company's
securities and any material interest of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection by anyone
without charge at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained
from the Public Reference Section of the Commission upon payment of prescribed
fees. The Commission also maintains a World Wide Web site on the internet at
http://www.sec.gov that contains reports and certain other information
regarding registrants that file electronically with the Commission, including
the Company. Such information should also be on file at The Nasdaq National
Market, 1735 K Street, N.W., Washington, D.C. 20006.
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<PAGE>
9. CERTAIN INFORMATION CONCERNING APOLLO, THE PURCHASER AND PARENT
Each of the Apollo Entities is principally engaged in the business of
investment in securities. The principal office of each of the Apollo Entities
is c/o Apollo Advisors II, L.P., Two Manhattanville Road, Purchase, New York
10577.
Apollo Advisors II, L.P., a Delaware limited partnership ("Advisors"), is
the general partner of AIF III and the managing general partner of Overseas
Partners and UK Partners. Advisors is principally engaged in the business of
providing advice regarding investments by, and serving as the general partner
of the Apollo Entities.
Apollo Capital Management II, Inc., a Delaware corporation ("Apollo
Capital"), is the general partner of Advisors. Apollo Capital is principally
engaged in the business of serving as the general partner of Advisors.
Apollo Management, L.P., a Delaware limited partnership ("Apollo
Management"), serves as manager of the Apollo Entities and manages their day-
to-day operations.
AIF III Management, Inc., a Delaware corporation ("AIM"), is the general
partner of Apollo Management. AIM is principally engaged in the business of
serving as general partner of Apollo Management.
The respective addresses of the principal office of Advisors, Apollo
Capital, Apollo Management and AIM are c/o Apollo Advisors II, L.P., 2
Manhattanville Road, Purchase, New York 10577.
Apollo Fund Administration II LDC, a Cayman Islands LDS ("Administration"),
is the administrative general partner of Overseas Partners and UK Partners.
Administration is principally engaged in the business of serving as
administrative general partner of Overseas Partners and UK Partners. The
principal place of business of Administration is Apollo Fund Administration II
LDC, c/o CIBC Bank and Trust Company (Cayman) Limited, Edward Street,
Georgetown, Grand Cayman, Cayman Islands, British West Indies.
Apollo Management (UK) Ltd., an English corporation ("Management UK"), is
the resident general partner of UK Partners. Management UK is principally
engaged in the business of serving as resident general partner of UK Partners.
The address of the principal place of business of Management UK is Hill House,
1 Little New Street, London EC4A 3TR, England.
Each of Parent and the Purchaser is a Delaware corporation formed solely for
the purpose of consummating the Offer and the Merger and carrying out related
transactions. Parent owns all of the outstanding capital stock of the
Purchaser, and all of the outstanding capital stock of Parent is owned by Fund
III, Overseas Partners and UK Partners. It is not anticipated that the
Purchaser will have any significant assets or liabilities other than those
arising under the Merger Agreement or in connection with the Offer and the
Merger, or engage in any activities other than those incident to its formation
and capitalization, the Offer and the Merger and accordingly, no meaningful
financial information regarding the Purchaser is available. The address of the
principal place of business of the Purchaser and Parent is at c/o Apollo
Advisors II, L.P., 2 Manhattanville Road, Purchase, New York 10577.
Except as described in the discussion of the Merger Agreement and the
Stockholder Agreement in Section 12, none of the entities referred to above in
this Section 9 or any of their respective subsidiaries or, to the best of
their knowledge, any of the persons listed on Schedule I beneficially owns or
has the right to acquire any Shares, and none of such persons or entities has
effected any transactions in the Shares during the past 60 days. For certain
information concerning the Apollo Entities, Advisors, the Purchaser and
Parent, see Schedule I hereto.
Except as described in this Offer to Purchase, none of the entities referred
to above in this Section 9 or, to the best of their knowledge, any of the
persons listed on Schedule I, has any contract, arrangement, understanding or
relationship with any other person with respect to the securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
such securities, joint ventures, loan or option agreements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies. Except as described in this Offer to Purchase, none of the entities
referred
13
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to above in this Section 9 or, to the best of their knowledge, any of the
persons listed on Schedule I, has had, since January 1, 1993, any transactions
with the Company or any of its executive officers, directors or affiliates
that would require disclosure under the rules of the Commission. Except as
described in this Offer to Purchase, since such date, there have been no
contacts, negotiations or transactions between any of the entities referred to
in this Section 9 or, to the best of their knowledge, any of the persons
listed on Schedule I, and the Company or its affiliates concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets. None of the entities or persons referred to above in this
Section 9 or, to the best of their knowledge, any of the persons listed on
Schedule I, has had any relationship with the Company prior to the
commencement of discussions that led to the execution of the Merger Agreement.
Each of the entities referred to in this Section disclaims that it is an
"affiliate" of the Company within the meaning of Rule 13e-3 under the Exchange
Act.
For certain information concerning the directors and executive officers of
the Purchaser, Parent, Advisors and AIM, see Schedule I to this Offer to
Purchase.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
In March 1997, representatives of Smith Barney, the Company's financial
advisor, contacted Apollo Management to inquire as to the Apollo Entities'
interest in pursuing a transaction with the Company. Following this contact,
Apollo Management initiated a review of certain publicly available information
concerning the Company and contacted representatives of Smith Barney to advise
them that Apollo Management would be interested in reviewing non-public
information about the Company and meeting with members of the Company's senior
management.
On April 2, 1997, Apollo Management entered into a confidentiality and
standstill agreement with the Company (the "Confidentiality Agreement"),
pursuant to which Apollo Management agreed to treat confidentially information
provided by or on behalf of the Company and not to take certain actions as
described below in Section 12 "--Confidentiality Agreement."
On April 16, 1997, Apollo Management submitted a written preliminary
indication of interest to purchase the Company for a purchase price of between
$11.00 and $13.00 per Share. Such indication of interest indicated that
affiliates of Apollo Management were considering pursuing a recapitalization
of the Company in which the Company's stockholders would receive part of the
consideration for their Shares in cash and part in the form of equity.
On April 18, 1997, representatives of Apollo Management met with certain
members of the Company's senior management regarding the business, strategies
and prospects of the Company.
On May 5, 1997, Apollo Management and its advisors met with representatives
of the Company and Smith Barney and conducted a preliminary review of certain
non-public information. From May 5, 1997 through May 18, 1997, Apollo
Management, Apollo Management's advisors, the Company's senior management and
the Company's advisors engaged in various discussions regarding the business,
strategies and prospects of the Company, the possible terms of a potential
transaction and the continued employment of certain members of senior
management, including cash compensation and equity plans.
On May 8, 1997, Apollo Management submitted a written offer to acquire the
Company at a price of $11.50 per Share, subject to certain conditions, but not
subject to a financing condition. Such offer expressed Apollo Management's
desire to consider providing $0.25 of the per Share consideration in the form
of equity. Apollo Management indicated its willingness to negotiate the terms
of a potential transaction (including the compensation arrangements for senior
management) and to continue to devote substantial resources to evaluating the
Company, but indicated its desire that the Company negotiate exclusively with
Apollo Management in respect of a transaction. On May 27, 1997, the Company
executed a letter agreement granting Apollo Management exclusive rights to
negotiate a transaction involving the Company and access to the Company's
books and records and advisors and agents. On the same day, Apollo Management
verbally communicated to representatives of the Company a proposal to acquire
the Company for $11.75 per Share in cash.
14
<PAGE>
On June 3 and June 4, Apollo Management and its representatives continued
their review of the Company. During the week of June 16, Apollo Management and
its advisors and the Company and its advisors commenced negotiations of a
definitive merger agreement, which provided for, among other things, the Offer
at a price of $11.75 per Share in cash to the Company's stockholders. The
negotiations also included the negotiation of the terms of the Stockholder
Agreement and the terms of the continued employment of Mr. Jeff D. Bergman,
Mr. Daniel Dickman, Mr. David W. Spindler and Mr. David A. Zynn, the salary,
bonus and other benefits to be received by each of such persons, and the terms
of an option plan pursuant to which employees of the surviving corporation
would receive options to purchase shares of Parent following the effectiveness
of the Merger. See Section 12. As a result of the foregoing negotiations, the
Merger Agreement, the Stockholder Agreement and the Employment Agreements (as
defined below) were executed on Tuesday, June 24, 1997.
11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; APPRAISAL
RIGHTS; EXEMPTION FROM RIGHTS AGREEMENT
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. Following the Offer, the Purchaser and Parent intend
to acquire any remaining equity interest in the Company not acquired in the
Offer by consummating the Merger.
The DGCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Board and
generally by the holders of the Company's outstanding voting securities. The
Board has approved the Offer and the Merger; consequently, the only additional
action of the Company that may be necessary to effect the Merger is approval
by such stockholders if the "short-form" merger procedure described below is
not available. Under the DGCL, the affirmative vote of holders of a majority
of the outstanding Shares (including any Shares owned by the Purchaser) is
generally required to approve the Merger. If the Purchaser acquires, through
the Offer or otherwise, voting power with respect to at least a majority of
the outstanding Shares (which would be the case if the Minimum Condition were
satisfied and the Purchaser were to accept for payment Shares tendered
pursuant to the Offer, including the Shares subject to the Stockholder
Agreement sold pursuant to the Stockholder Agreement or tendered by the
Selling Stockholders pursuant to the Offer), it would have sufficient voting
power to effect the Merger without the vote of any other stockholder of the
Company. However, the DGCL also provides that if a parent company owns at
least 90% of each class of stock of a subsidiary, the parent company can
effect a short-form merger with that subsidiary without the action of the
other stockholders of the subsidiary. Accordingly, if, as a result of the
Offer or otherwise, the Purchaser acquires or controls the voting power of at
least 90% of the outstanding Shares, the Purchaser could, and intends to,
effect the Merger without prior notice to, or any action by, any other
stockholder of the Company.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business
and operations of the Company will be continued by the Surviving Corporation
(as defined below) substantially as they are currently being conducted. Parent
intends to operate the Company as a wholly owned subsidiary. Except as
indicated in this Offer to Purchase, the Parent does not have any present
plans or proposals which relate to or would result in any material change in
the Company's capitalization or dividend policy or the composition of the
Company's Board or management. The Apollo Entities and their affiliates
regularly consider, and engage in discussions concerning, potential
investments in businesses, including businesses that may be competitive with
or complementary to the business of the Company. There are currently no
agreements with respect to an investment in any such business. However, the
Apollo Entities may consider a merger, consolidation or other extraordinary
transaction involving the Company in connection with any such investment.
Parent will evaluate the business, operations, capitalization and management
of the Company during the pendency of the Offer and after consummation of the
Offer, and will take such actions as it deems appropriate under the
circumstances then existing with a view to optimizing the Company's financial
performance.
At or promptly after the Effective Time, the Surviving Corporation will pay
a transaction fee of $1,000,000 to Apollo Management as consideration for
structuring the transaction, arranging the financing for the Offer and
15
<PAGE>
the Merger and providing other services in connection with the Offer and the
Merger. In addition, Apollo Management currently intends to charge a
management fee of $250,000 per annum to the Company for management services
that Apollo Management will provide to the Company and its subsidiaries after
the Effective Time.
The Merger Agreement provides that promptly upon the acceptance for payment
of, and payment for, any Shares by the Purchaser pursuant to the Offer, the
Purchaser shall be entitled to designate such number of the directors on the
Board such that the Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, will control a majority of such directors, and the Company and
its Board shall, at such time, take all such action needed to cause the
Purchaser's designees to be appointed to the Company's Board. Subject to
applicable law, the Company has agreed to take all action requested by Parent
necessary to effect any such election, including mailing to its stockholders
the Information Statement containing the information required by Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder, which Information
Statement is attached as Annex A to the Schedule 14D-9. Parent's current
intentions are to designate five of the persons set forth in Schedule I to
serve on the Company's Board following consummation of the Offer. In addition,
following consummation of the Offer, one of the members of the Board (other
than Mr. Bergman or Mr. Dickman) will resign. Parent's current intentions are
that, immediately after the Effective Time, the members of the Board
immediately prior to the Effective Time will serve as directors of the
Surviving Corporation, and the initial officers of the Company will be the
current officers of the Company and such other persons as are designated by
Parent.
The Company has entered into the Employment Agreements, pursuant to which
Mr. Jeff D. Bergman, Mr. Daniel Dickman, Mr. David W. Spindler and Mr. David
A. Zynn will continue to serve in their current positions with the Company
after consummation of the Merger. See Section 12 "--Employment Agreements." In
addition, the Merger Agreement provides that as of the Effective Time, the
Company will adopt the Parent Option Plan (as defined below), pursuant to
which Parent will grant to certain officers of the Company options to purchase
up to 10% of the outstanding common stock of Parent at a per share price equal
to the per share price paid by the Apollo Entities for shares of Parent. See
Section 12 "--Parent Option Plan."
Appraisal Rights. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
will have certain rights pursuant to the provisions of Section 262 of the DGCL
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. If the statutory procedures were complied with, such
rights could lead to a judicial determination of the fair value required to be
paid in cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the Offer Price, the Merger Consideration or the
market value of the Shares, including asset values and the investment value of
the Shares. The value so determined could be more or less than the Offer Price
or the Merger Consideration.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his right to appraisal, as
provided in the DGCL, the Shares of such stockholder will be converted into
the Merger Consideration in accordance with the Merger Agreement. A
stockholder may withdraw his demand for appraisal by delivery to Parent of a
written withdrawal of his demand for appraisal and acceptance of the Merger.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Exemption of Offer and Merger from Effect of Rights Agreement. The Company
has represented in the Merger Agreement that it has taken all necessary
actions to ensure that, for the purposes of the Rights Agreement, neither
Parent nor the Purchaser will become an "Acquiring Person," the execution,
delivery and
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performance of the Merger Agreement and the Stockholder Agreement do not, and
the commencement or consummation of the Offer, the Merger and the other
transactions contemplated under the Merger Agreement and the Stockholder
Agreement (including pursuant to any amendment thereto) will not, result in
the grant of any rights to any person under the Rights Agreement or enable or
require any outstanding rights to be exercised, distributed or triggered, and
that the Rights will expire without any further force or effect as of the
Effective Time. The Company has also represented in the Merger Agreement that
other than Parent and the Purchaser (and their affiliates), the Company (or
its Board) has not exempted (or taken any other action tantamount to
exempting) any person or entity from the potential application of the Rights
Agreement.
12. THE MERGER AGREEMENT; STOCKHOLDER AGREEMENT; EMPLOYMENT AGREEMENTS AND
OTHER AGREEMENTS
THE MERGER AGREEMENT
The Merger Agreement provides that following the satisfaction of the
conditions described below under "Conditions to the Merger," the Purchaser
will be merged with and into the Company, and each then outstanding Share
(other than Shares then owned by the Company, Parent, the Purchaser or any
other direct or indirect wholly owned subsidiary of Parent or by stockholders,
if any, who dissent from the Merger and comply with all of the provisions of
the DGCL concerning the right, if applicable, of holders of Shares to seek
appraisal of their Shares) will be converted into the right to receive the
price per Share paid in the Offer.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and certain other conditions that are described in Section 14. The Merger
Agreement provides that the Purchaser may extend the Offer, without the
consent of the Company, only (1) if at the Expiration Date any of the
conditions to the Purchaser's obligations to accept Shares for payment are not
satisfied or waived, until such time as such conditions are satisfied or
waived, (2) for any period required by any rule, regulation, interpretation or
position of the Commission or the staff thereof applicable to the Offer, (3)
for a period of up to ten business days to permit the Purchaser to decide
whether to modify the Offer in the event of certain competing proposals and
(4) on one or more occasions, for any reason, for an aggregate period of not
more than ten business days beyond the latest expiration date that would
otherwise be permitted under the terms of the Merger Agreement as described in
this sentence. In addition, the Purchaser has agreed in the Merger Agreement
that it will not, without the express written consent of the Company, (1)
reduce the number of Shares subject to the Offer, (2) reduce the Offer Price,
(3) add to or modify the conditions set forth in Section 14, including the
Minimum Condition, (4) except as provided above, extend the Offer if all of
the conditions set forth in Section 14 are satisfied or waived, (5) change the
form of the consideration payable in the Offer or (6) amend or alter any term
of the Offer in any manner materially adverse to the Company's stockholders;
provided, however, that nothing contained in the Merger Agreement will
prohibit the Purchaser, in its sole discretion without the consent of the
Company, from waiving satisfaction of any condition of the Offer other than
the Minimum Condition.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, the Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of the
Purchaser will cease and the Company will be the surviving corporation (the
"Surviving Corporation"). As a result of the Merger, each Share (including the
associated Rights) issued and outstanding immediately prior to the Effective
Time (other than Shares then owned by the Company, Parent, the Purchaser or
any other direct or indirect wholly owned subsidiary of Parent, or by
stockholders of the Company, if any, who dissent from the Merger and comply
with all the provisions of the DGCL concerning the right, if applicable, of
holders of Shares to seek appraisal of their Shares) will be converted into
the right to receive the Merger Consideration.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of
the terms of the Merger Agreement by the stockholders of the Company, (1) by
mutual written consent of the Company and Parent, (2) by either the Company or
Parent if (a)(i) as a result of any of the conditions to the Offer not being
satisfied, the Offer shall have been terminated or expired in accordance with
its terms without the Purchaser having accepted for payment any Shares
pursuant to
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the Offer (including the Minimum Condition) or (ii) the Purchaser shall not
have accepted for payment any Shares pursuant to and subject to the conditions
set forth in Section 14 by September 30, 1997; provided, however, that if as
of such date any of the conditions set forth in either paragraph (a) or
paragraph (b) of Section 14 are not satisfied, Parent and the Purchaser may in
their sole discretion extend such date until December 31, 1997; provided,
further, that the right to terminate the Merger Agreement pursuant to clause
(2)(a) will not be available to any party whose failure to perform any of its
obligations under the Merger Agreement results in the failure of any such
condition or if the failure of such condition results from facts or
circumstances that constitute a breach of any representation or warranty under
the Merger Agreement by such party or (b) if any Federal, state or local
government or any court, tribunal, administrative agency or commission or
other regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity"), shall have issued any order, decree or ruling or taken
any action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger and such order, decree or ruling or other action has become final and
nonappealable, (3) by Parent or the Purchaser prior to the Purchaser's
obligation to accept Shares for payment pursuant to the Offer, in the event of
a breach by the Company of any representation, warranty, covenant or other
agreement contained in the Merger Agreement which would or reasonably would be
expected to give rise to the failure of a condition set forth in Section 14,
(4) by Parent or the Company if, prior to the obligation of the Purchaser to
accept Shares for payment pursuant to the Offer, (a) the Board determines that
a Third Party Proposal (as hereinafter defined) for an Alternative Transaction
(as hereinafter defined) constitutes a Superior Proposal (as hereinafter
defined), (b) the Company promptly notifies Parent of its determination in
writing (unless, following receipt of written advice of outside counsel, the
Board's fiduciary duties under applicable law would be violated thereby),
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, (c)
ten days have elapsed following receipt by Parent of such written notice, (d)
during such ten-day period, the Company cooperates with Parent with the intent
of enabling, but not obligating, Parent to agree to a modification of the
terms and conditions of the Merger Agreement so that the transactions
contemplated thereby may be effected, and (e) at the end of the ten-day
period, the Board continues to believe that the Third Party Proposal
constitutes a Superior Proposal and the Company pays to Parent the Termination
Fee (as hereinafter defined) and Expenses (as hereinafter defined); provided,
that in the event of the determination of the Board that such Third Party
Proposal constitutes a Superior Proposal is made less than ten days prior to
the scheduled expiration of the Offer, Parent and the Purchaser will either
(i) reduce the ten-day period or (ii) extend the Offer, in either case, such
that the ten-day period described above will end prior to the expiration of
the Offer, and (5) by the Company if Parent or the Purchaser shall have (a)
failed to commence the Offer within five business days of the date of the
Merger Agreement, (b) failed to pay for Shares pursuant to the Offer in
accordance with the terms of the Merger Agreement or (c) breached in any
material respect any of their respective representations, warranties,
covenants or other agreements contained in the Merger Agreement, which failure
to perform in respect of clause (c) is incapable of being cured or has not
been cured within 30 days after the giving of written notice to Parent or the
Purchaser, as applicable, except in any case under clause (c), such breaches
and failures which would not prevent the consummation of the Offer or the
Merger subject to the terms and conditions of the Merger Agreement.
Alternative Transactions. The Merger Agreement provides that the Company and
its subsidiaries shall not, and shall not authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it to, directly or
indirectly, (1) 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 constitutes, or may reasonably be expected to lead
to, any Alternative Transaction or (2) participate in any discussions or
negotiations regarding any Alternative Transaction; provided, however, that
if, at any time prior to the acceptance for payment of Shares pursuant to and
subject to the conditions (including the Minimum Condition) of the Offer, the
Board determines in good faith, based on advice of outside counsel, that
action is required by reason of the Board's fiduciary duties to the Company's
stockholders under applicable law, the Company may (subject to compliance with
the notification provisions discussed below), in response to an unsolicited
Third Party Proposal, (a) furnish information with respect to the Company to
any person making such Third Party Proposal pursuant to a confidentiality
agreement that is at least as protective of the Company's interest as is the
Confidentiality Agreement and (b) participate in negotiations regarding such
Alternative Transaction.
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The Merger Agreement defines "Third Party Proposal" as a bona fide proposal
from a third party, which proposal did not result from a breach of the
restrictions set forth above relating to a Third Party Proposal and which
third party the Board determines in good faith and upon the advice of a
financial advisor of nationally recognized reputation has the capacity and is
reasonably likely to consummate a Superior Proposal. The Merger Agreement
defines "Alternative Transaction" as any direct or indirect acquisition or
purchase of assets of the Company or any subsidiary outside the ordinary
course of business or any outstanding equity securities of the Company or any
subsidiary, any tender offer or exchange offer that if consummated would
result in any person beneficially owning equity securities of the Company or
any merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any subsidiary, other than the transactions
contemplated by the Merger Agreement and other than the acquisition of Shares
pursuant to the exercise of Company Stock Options or Warrants which are issued
and outstanding as of the date of the Merger Agreement.
The Merger Agreement provides further that unless the Board shall have
terminated the Merger Agreement as described below, neither the Board nor any
committee thereof will (1) withdraw or modify, or propose to withdraw or
modify, the approval or recommendation by such Board or such committee of the
Offer, the Merger Agreement or the Merger, (2) approve or recommend, or
propose to approve or recommend, any Alternative Transaction or (3) cause the
Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other agreement (an "Acquisition Agreement") with
respect to any Alternative Transaction, unless the Board shall have previously
terminated the Merger Agreement in connection with a Superior Proposal (as set
forth above in clause (4) of the section entitled "--Termination of the Merger
Agreement").
The Merger Agreement defines a "Superior Proposal" to be any Third Party
Proposal to acquire, directly or indirectly, all of the Shares or all or
substantially all of the assets of the Company; provided that (a) the Board
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) that such Third Party Proposal is
on terms that are more favorable to the Company's stockholders than the Offer
and the Merger (taking into account all relevant factors, including the amount
and form of consideration to be received in respect of the Shares, the
relative value of any non-cash consideration and the timing and certainty of
closing), (b) the Board 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
under applicable law and (c) if required, the financing necessary to
consummate a transaction pursuant to such Third Party Proposal is then
committed.
In addition to the obligations of the Company set forth in the preceding
paragraphs, the Merger Agreement provides that the Company shall immediately
advise Parent 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 any such request, proposal or inquiry. The Company is
further required under the terms of the Merger Agreement, to the extent
reasonably practicable and not in violation of the Board's fiduciary duties
under applicable law, following receipt of written advice from outside
counsel, to keep Parent fully informed of the status and details (including
amendments or proposed amendments) of any such request, proposal or inquiry.
The Merger Agreement provides that nothing contained therein shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to the Company's stockholders with respect to any Third
Party Proposal if (1) in the good faith judgment of the Board, following
receipt of written advice from outside counsel, such disclosure is required by
reason of the Board's fiduciary duties under applicable law and (2) the
Company shall have provided Parent and the Purchaser with as much advance
notice of its position and proposed disclosure as is possible under the
circumstances; provided, however, that neither the Company nor its Board nor
any committee thereof is permitted, except as permitted by the Merger
Agreement, to withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer, the Merger or the Merger Agreement or
approve or recommend, or propose to approve or recommend, an Alternative
Transaction.
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Fees and Expenses. The Merger Agreement provides that in the event that the
Merger Agreement is terminated (1) by Parent or Purchaser pursuant to clause
(3) under the section above entitled "--Termination of the Merger Agreement,"
(2) by Parent pursuant to and in accordance with clause (2)(a) under the
section above entitled "--Termination of the Merger Agreement" in connection
with any breach by the Company of any covenant or agreement or any
representation or warranty made by the Company in the Merger Agreement or (3)
pursuant to clause (4) under the section above entitled "--Termination of the
Merger Agreement," the Company shall promptly pay to Parent the Termination
Fee plus all Expenses. The Merger Agreement provides that notwithstanding the
above (but subject to the payment of the Termination Fee pursuant to the
consummation of an Alternative Transaction or the execution of an Acquisition
Agreement as set forth below), no Termination Fee shall be payable if any
termination by Parent or the Purchaser is solely (1) pursuant to clause 2(a)
under the section above entitled "--Termination of the Merger Agreement" that
is caused solely by a breach of one or more representations or warranties of
the Company that is or are true and correct as of the date of the Merger
Agreement but that becomes untrue thereafter other than any such breach after
the date of the Merger Agreement that results from or arises out of any act or
failure to act by the Company, its subsidiaries or any of their respective
officers, directors, employees or agents, (2) pursuant to clause (2)(b) under
the section above entitled "--Termination of the Merger Agreement" or (3)
pursuant to the failure of the conditions set forth in either paragraph (c) or
paragraph (h) of Section 14 to be satisfied other than any such failure which
results from or arises out of any act or failure to act by the Company, its
subsidiaries or any of their respective officers, directors, employees or
agents.
The Merger Agreement provides that if the Merger Agreement is terminated by
the Company other than in connection with (1) a failure by the Purchaser or
Parent to commence the Offer, (2) a failure by Parent or the Purchaser to pay
for Shares to the extent required by the Merger Agreement or (3) a breach by
the Purchaser or Parent in any material respect of its representations,
warranties, other covenants or agreements contained in the Merger Agreement
(subject to a 30-day cure period), which breach in the case of this clause (3)
would prevent the consummation of the Offer or the Merger subject to the terms
and conditions contained in the Merger Agreement, then the Company will pay
all Expenses to Parent on the date of such termination and, if, prior to the
one-year anniversary of such termination, an Alternative Transaction shall be
consummated or the Company shall enter into an Acquisition Agreement providing
for an Alternative Transaction, then the Company shall pay the Termination
Fee, such payment to be made on the earlier of the date of consummation of
such Alternative Transaction or the one-year anniversary of the date of
termination of the Merger Agreement.
The Merger Agreement defines "Termination Fee" as a fee equal to 4% of the
sum of (a) the outstanding consolidated indebtedness of the Company and its
subsidiaries at the time of termination, determined in accordance with
generally accepted accounting principles consistently applied, plus (b) the
product of (x) the total number of Shares outstanding at the time of such
termination on a fully diluted basis and (y) the Offer Price. The Merger
Agreement defines "Expenses" as all out-of-pocket expenses incurred by the
Purchaser and Parent in connection with the Merger Agreement, the Stockholder
Agreement and the transactions contemplated thereby, not to exceed $1,750,000.
Conduct of Business by the Company. The Merger Agreement provides that
during the term of the Merger Agreement, the Company shall, and shall cause
each of its subsidiaries to, carry on its business in the ordinary course and
use all reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, licensors,
licensees and others having business dealings with it. The Merger Agreement
further provides that, except as otherwise expressly contemplated by the
Merger Agreement, the Company shall not and shall cause its subsidiaries not
to (1) (a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock or (c) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities; (2) issue,
deliver, sell, pledge or otherwise encumber any shares of its capital stock,
any other voting securities or any securities convertible into,
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or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of Shares upon
the exercise of Company Stock Options or warrants to purchase Shares
outstanding on the date of the Merger Agreement in accordance with their
present terms); (3) amend its certificate of incorporation or by-laws; (4)
acquire or agree to acquire (A) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture, association or other
business organization or division thereof or (B) except pursuant to certain
planned equipment purchases, any assets except for the purchase of assets for
an amount which does not exceed, individually or in the aggregate, $75,000;
(5) except pursuant to certain planned equipment purchases, sell, lease,
license, mortgage or otherwise encumber or subject to any lien or otherwise
dispose of any of its properties or assets, except sales of inventory or sales
of immaterial assets; (6) (A) except pursuant to certain planned equipment
purchases, and except for certain short-term indebtedness incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing or (B) make any loans,
advances or capital contributions to, or investments in, any other person; (7)
except pursuant to certain planned equipment purchases, make or agree to make
any capital expenditure or expenditures with respect to property, plant or
equipment which, individually, is in excess of $50,000 or, in the aggregate,
are in excess of $250,000; (8) make any tax election or settle or compromise
any income tax liability; (9) except pursuant to certain planned equipment
purchases, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, the most recent
consolidated financial statements (or the notes thereto) of the Company
included in any report of the Company filed with the Commission and publicly
available prior to the date of the Merger Agreement or incurred thereafter in
the ordinary course of business consistent with past practice, or waive the
benefits of, or agree to modify in any material respect, any confidentiality,
standstill or similar agreement to which the Company or any subsidiary is a
party, (10) except in the ordinary course of business, modify, amend or
terminate any material contract, agreement, arrangement or other instrument
(including any amendments thereto) to which the Company or any of its
subsidiaries is a party or waive, release or assign any rights or claims; (11)
enter into any contracts, agreements, arrangements or instruments (including
any amendments thereto) relating to the distribution, sale or marketing by
third parties of the Company's or its subsidiaries' services; (12) except as
required to comply with applicable law and subject to exceptions for the
Employment Agreements and certain employment agreements to be continued, (A)
adopt, enter into, terminate or amend any benefit plan or other arrangement
for the benefit or welfare of any director, officer or current or former
employee, (B) increase in any manner the compensation or fringe benefits of,
or pay any bonus to, any director, officer or employee (except for normal
increases or bonuses, in the ordinary course of business consistent with past
practice), (C) pay any benefit not provided for under any benefit plan, (D)
except as permitted in clause (B), grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or benefit
plan (including the grant of stock options, stock appreciation rights, stock
based or stock related awards, performance units or restricted stock, or the
removal of existing restrictions in any benefit plans or agreement or awards
made thereunder) or (E) take any action other than in the ordinary course of
business to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or
benefit plan; or (13) authorize any of, or commit or agree to take any of, the
foregoing actions.
Pursuant to the Merger Agreement, the Company shall not take any action or
omit to take any action, the taking or omission of which could reasonably be
expected to result in (1) any of its representations and warranties set forth
in the Merger Agreement becoming untrue or (2) any of the conditions to the
Offer or to the Merger not being satisfied (subject to exceptions specifically
permitted by the Merger Agreement).
Director Warrants. Pursuant to the Merger Agreement, the Company agreed that
immediately after consummation of the Offer, each outstanding Warrant (as
defined below) or other right to purchase Common
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Stock of the Company issued under the Company's 1995 Director Warrant Plan
held by a director of the Company (a "Director Warrant") shall be purchased by
the Purchaser in exchange for an amount in cash, payable at the time of such
purchase, equal to the product of (1) the number of shares subject to such
Director Warrant and (2) the excess of the price paid in the Offer over the
per share exercise price of such Director Warrant.
Rollover. The Purchaser intends to give certain employees of the Company an
opportunity to invest in the equity of Parent either by rolling over currently
outstanding Company Stock Options held by such employees or by purchasing
equity securities of Parent for cash. Parent intends to make available loans
to such employees to finance, in part, such cash investments.
Stock Options. The Merger Agreement provides that as soon as practicable
following the date of the Merger Agreement but in no event later than the
consummation of the Offer, the Company (or, if appropriate, the Board or any
committee administering the Stock Option Plans) shall (including by adopting
resolutions or taking any other actions) take action so as to allow that each
outstanding option to purchase Shares (a "Company Stock Option") granted under
any stock option, stock appreciation rights or stock purchase plan, or other
right, program or arrangement of the Company (collectively, the "Stock Option
Plans") (other than those Company Stock Options that have been granted to
officers and employees of the Company who are parties to an agreement to
exchange or roll their Company Stock Options in the Company for or into equity
of Parent or the Surviving Corporation) and each outstanding warrant to
purchase Shares (a "Warrant") in each case outstanding immediately prior to
the consummation of the Offer (except the Director Warrants), whether or not
then exercisable, shall either (1) be cancelled immediately after consummation
of the Offer in exchange for an amount in cash, payable at the time of such
cancellation, equal to the product of (x) the number of Shares subject to such
Company Stock Option or Warrant immediately prior to the Effective Time and
(y) the excess of the price per Share to be paid in the Offer over the per
Share exercise price of such Company Stock Option or Warrant (the "Net
Amount") or (z) be converted immediately prior to the Effective Time into the
right solely to receive the Net Amount; provided, however, that no such cash
payment has been made. The Company shall not make, or agree to make, any
payment of any kind to any holder of a Company Stock Option or a Warrant
(except for the payment described above) without the consent of Parent (which
consent will not be unreasonably withheld).
The Merger Agreement provides further that subject to the provisions set
forth above, all Stock Option Plans shall terminate as of the Effective Time
and the provisions in any other benefit plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in
respect of any capital stock of the Company shall be terminated as of the
Effective Time. The Merger Agreement provides that the Company shall ensure
that following the Effective Time, no holder of a Company Stock Option or
Warrant or any participant in any Stock Option Plan (other than pursuant to
the Parent Option Plan and those holders who are parties to an agreement to
exchange or roll their equity interests in the Company for or into equity of
Parent or the Surviving Corporation) shall have any right thereunder to
acquire any capital stock of the Company, Parent or the Surviving Corporation,
and that the Company shall use its reasonable best efforts to ensure that
following the Effective Time, no holder of any remaining Company Stock Option
or Warrant or any participant in any Stock Option Plan (other than pursuant to
the Parent Option Plan and those holders who are parties to an agreement to
exchange or roll their equity interests in the Company for or into equity of
Parent or the Surviving Corporation) shall have any right thereunder to
acquire any capital stock of the Company, Parent or the Surviving Corporation.
The Merger Agreement also provides that the Surviving Corporation shall
continue to be obligated to pay the Net Amount to holders of any Company Stock
Options or Warrants converted in accordance with clause (y) of the immediately
preceding paragraph.
Parent Option Plan. The Merger Agreement provides that as soon as
practicable, but in no event more than 15 days after the Effective Time,
Parent will adopt an employee option plan (the "Parent Option Plan"), pursuant
to which Parent will grant to certain officers and employees of the Company
options to purchase in the aggregate up to 10% of the outstanding common stock
of Parent (without giving effect to any options) at any time within ten years
of the Effective Time, at a per share price equal to the per share price paid
by the Apollo Entities for the common stock of Parent. Subject to certain
exceptions, the options will vest over four years, with one half of such
options vesting based solely on continued employment with the Company and the
other half of
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such options vesting based on continued employment with the Company and the
achievement by the Company of certain target equity values. Pursuant to the
Merger Agreement, Parent agreed that, pursuant to the Parent Option Plan,
options to purchase approximately 4.6% of the outstanding common stock of
Parent, in the aggregate, will be granted to Mr. Bergman and Mr. Dickman. The
terms and conditions of the Parent Option Plan are set forth in a Schedule to
the Merger Agreement, which is filed as an Exhibit to the Purchaser's Schedule
14D-1 (as defined in Section 17), and the foregoing summary is qualified in
its entirety by reference to such Exhibit.
Indemnification, Exculpation and Insurance. Parent has agreed in the Merger
Agreement that all rights to indemnification and exculpation (including the
advancement of expenses) from liabilities for acts or omissions occurring at
or prior to the Effective Time (including with respect to the transactions
contemplated by the Merger Agreement) existing now or at the Effective Time in
favor of the current or former directors or officers of the Company as
provided in its certificate of incorporation, its by-laws and certain
indemnification agreements shall be assumed by the Surviving Corporation in
the Merger, without further action, as of the Effective Time and shall survive
the Merger and shall continue in full force and effect without amendment,
modification or repeal in accordance with their terms for a period of not less
than six years after the Effective Time; provided however, that if any claims
are asserted or made within such six-year period, all rights to
indemnification (and to advancement of expenses) hereunder in respect of any
such claims shall continue, without diminution, until disposition of any and
all such claims.
The Merger Agreement provides that for a period of six years from the
Effective Time, Parent shall cause the Company to use commercially reasonable
efforts to maintain the Company's existing officers' and directors' liability
insurance covering persons who are currently covered by the Company's
officers' and directors' liability insurance on terms no less favorable than
those of such policy in effect on the date of the Merger Agreement; provided,
however, that in satisfying such obligation Parent may substitute therefor
policies providing at least comparable coverage containing terms and
conditions no less favorable than those in effect on the date of the Merger
Agreement.
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction or waiver of certain conditions, including the
following: (1) if required by applicable law, the Merger Agreement having been
approved and adopted by the affirmative vote of the Company's stockholders by
the requisite vote in accordance with applicable law and the Company's
certificate of incorporation and (2) no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other governmental entity or other legal restraint or prohibition preventing
the consummation of the Merger being in effect; provided, however, that each
of the Company, the Purchaser and Parent has used reasonable efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered.
Reasonable Efforts. The Merger Agreement provides that, on the terms and
subject to the conditions of the Merger Agreement, each of the parties will
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer and the
Merger and the other transactions contemplated by the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
STOCKHOLDER AGREEMENT
The Stockholder Agreement provides that each Selling Stockholder will sell,
and the Purchaser will purchase, all Shares beneficially owned by such Selling
Stockholder (the "Subject Shares"), at a price per Share equal to the Offer
Price. Such obligations to sell and to purchase the Subject Shares are subject
to the prior satisfaction or waiver of (1) the Purchaser having accepted
Shares for payment under the terms of the Offer, (2) the Minimum Condition
having been satisfied, (3) all waiting periods under the HSR Act applicable to
the exercise of the purchase having expired or terminated, (4) all regulatory
approvals required by any applicable law, rule or regulation having been
obtained and being final, and (5) there shall exist no preliminary or
permanent
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injunction, or any other order by any court of competent jurisdiction,
restricting, preventing or prohibiting either the purchase or the delivery of
Subject Shares. The Stockholder Agreement also provides that each Selling
Stockholder may, and at the request of the Purchaser shall, tender its Subject
Shares in the Offer. Any Subject Shares of any Selling Stockholder not
purchased in the Offer will be purchased immediately after payment is made
under the Offer.
Each of the Selling Stockholders has agreed, until the Merger Agreement has
terminated, among other things, not to: (1) sell, transfer, give, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement with respect to the sale, transfer, pledge, assignment or other
disposition of, the Subject Shares owned by such Selling Stockholder other
than pursuant to the terms of the Offer or the Merger or (2) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection with, directly or indirectly, any Takeover Proposal. Each of the
Selling Stockholders has further agreed that he will not, and will not permit
any investment banker, financial advisor, attorney, accountant or other
representative retained by him to directly or indirectly solicit, initiate or
encourage any proposal that may lead to an Alternative Transaction or directly
or indirectly participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Alternative
Transaction.
Each of the Selling Stockholders has also agreed until the Stockholder
Agreement has terminated (and the Stockholder Agreement includes an
irrevocable proxy provision for the benefit of the Purchaser with respect to
the Shares subject to the Stockholder Agreement owned by each Selling
Stockholder), (1) to vote the Subject Shares at any meeting of stockholders of
the Company called to vote upon the Merger and the Merger Agreement 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 Merger
and the Merger Agreement is sought, in favor of the Merger, the adoption by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement; and (2)
to vote such Shares at any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which a Selling
Stockholder's vote, consent or other approval is sought, against (x) any
Alternative Transaction, (y) any amendment of the Company's certificate of
incorporation or by-laws or other proposal or transaction involving the
Company, which amendment or other proposal or transaction would be reasonably
likely to impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement or change in any manner the voting rights of each class of the
Company's common stock or (z) any action that would cause the Company to
breach any representation, warranty or covenant contained in the Merger
Agreement.
Pursuant to the Stockholder Agreement, if (i) immediately prior to the
expiration of the Offer, the Purchaser determines that the exercise of
options, warrants or other instruments held by the Stockholders and the sale
or tender into the Offer of the Subject Shares acquired thereby either would
cause the Minimum Condition to be satisfied or would cause the Purchaser to
own more than 90% of the outstanding Shares and (ii) the Purchaser exercises
its right to extend the Offer in accordance with the terms and conditions set
forth in the Merger Agreement, then upon the request of Parent or the
Purchaser and receipt of the Exercise Loan (as defined below), each
Stockholder shall promptly exercise all options, warrants and other
instruments held by such Stockholder and sell the Subject Shares acquired
thereby to the Purchaser or tender such Subject Shares into the Offer (at such
Stockholder's discretion, unless the Purchaser directs that such Stockholder
tender such Subject Shares). Upon delivery of such request, Parent shall lend
to each Stockholder the amount necessary for such Stockholder to pay the
aggregate exercise price in respect of all options, warrants and other
instruments (each, an "Exercise Loan"). Each Exercise Loan shall be evidenced
by a promissory note, shall bear interest at the applicable Federal rate (as
defined in Section 7872 of the Code) and shall be repaid together with accrued
but unpaid interest upon the earlier of (i) the payment of the purchase price
for the Subject Shares (whether pursuant to the Offer or otherwise) and (ii)
the termination of the Stockholder Agreement.
The Stockholder Agreement provides that in the event that the Merger
Agreement shall have been terminated under circumstances where Parent is or
may become entitled to receive the Termination Fee, each Stockholder shall pay
to Parent on demand an amount equal to the difference between the
consideration received
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by such Stockholder from the consummation of any transaction which gives rise
to the Company's obligation to pay the Termination Fee pursuant to the Merger
Agreement and the consideration such Stockholder would have received had he or
it tendered his Shares pursuant to the Offer (without taking into account any
modifications to the Offer as in effect on the date hereof), as determined in
accordance with the Stockholder Agreement.
In addition, in the event that (1) prior to the Effective Time, an
Alternative Transaction shall have been proposed and (2) the Effective Time
shall have occurred and Parent for any reason shall have increased the amount
of Merger Consideration payable over that set forth in the Merger Agreement in
effect on the date thereof (the "Original Merger Consideration"), each Selling
Stockholder agrees in the Stockholder Agreement to pay to Parent on demand an
amount in cash equal to the product of (A) the number of Subject Shares and
(B) 100% of the excess, if any, of (i) the per Share cash consideration or the
per Share fair market value of any noncash consideration, as the case may be,
received by such Selling Stockholder as a result of the Merger, as amended,
determined as of the Effective Time, over (ii) the amount of the Original
Merger Consideration determined as of the time of the first increase in the
amount of the Original Merger Consideration.
EMPLOYMENT AGREEMENTS
Parent, the Purchaser and the Company have entered into employment
agreements (the "Employment Agreements") dated as of June 24, 1997, with Jeff
D. Bergman, the President, Chief Executive Officer and Chairman of the Board,
Daniel Dickman, the Executive Vice President, Chief Operating Officer,
Secretary and a Director of the Company, David W. Spindler, the Senior Vice
President of Clinical Operations and Marketing of the Company, and David A.
Zynn, the Chief Financial Officer, Treasurer and Assistant Secretary of the
Company, which are substantially similar to employment agreements currently in
effect between the Company and such persons, pursuant to which such persons
will continue to serve in their current positions with the Company after
consummation of the Offer. Each of the Employment Agreements provides for a
three-year term, with an additional quarter of a year to be added to the term
at the end of the fifth quarter and each quarter thereafter.
Under the Employment Agreements, Mr. Bergman and Mr. Dickman will each
receive a base salary of $240,000 per annum, Mr. Spindler will receive a base
salary of $140,000 per annum and Mr. Zynn will receive a base salary of
$125,000 per annum. Each of the Employment Agreements contains customary terms
(including confidentiality and non-competition arrangements) and other
benefits and provisions which are generally comparable to the benefits and
provisions provided for in such persons' existing employment agreements with
the Company.
In addition, pursuant to the Employment Agreements, the Company has agreed
to make available an annual bonus pool equal to 15% of the Company's pre-tax
income (excluding the effect of such bonus pool and adjusted for any non-
recurring gains or losses) for the 12 months ended June 30, 1997, but in no
event greater than $1,240,000. Payments of such bonuses are conditioned on the
Company achieving reasonable performance objectives established by the
Company's compensation committee. Each of Mr. Bergman and Mr. Dickman will be
eligible to receive up to one quarter of the annual bonus pool.
Under the Employment Agreements, each of Mr. Bergman and Mr. Dickman has the
right to terminate his employment, as does the Company, upon at least 90 days'
notice, on the first anniversary of the Effective Time with such person
agreeing to provide consulting services to the Surviving Corporation for a
period of two years following such termination and to continue to receive
payment of his base salary during such two-year period. The consulting
arrangement would require Mr. Bergman or Mr. Dickman, as the case may be, to
be available no more than one day per week, via telephone, at the request of
management while taking into account such person's prior commitments and
scheduling constraints.
CONFIDENTIALITY AGREEMENT
Apollo Management and the Company have executed the Confidentiality
Agreement, pursuant to which Apollo Management agreed to treat as confidential
certain information provided to it by or on behalf of the Company and agreed
that for a period of one year neither it nor any of its affiliates would (1)
acquire or agree to
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acquire, directly or indirectly, by purchase or otherwise, any voting
securities of the Company, (2) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are used in the
rules of the Commission) to vote, or seek to advance or influence any person
or entity with respect to the voting of any voting securities of the Company,
(3) make any public announcement with respect to, or submit a proposal for, or
offer of (with or without conditions) any extraordinary transaction involving
the Company or its securities or assets.
Each of the Merger Agreement, the Stockholder Agreement, the Parent Option
Plan and the Employment Agreements contains other terms and conditions. The
foregoing description of certain terms and provisions of such agreements and
documents is qualified in its entirety by reference to the text of such
agreements, which are filed as exhibits to the Purchaser's Schedule 14D-1 and
are incorporated herein by reference.
13. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required to purchase all of the outstanding Shares
and to purchase and cancel all of the Company Stock Options and Warrants
pursuant to the Offer and the Merger and to pay related fees and expenses,
including the total amount of funds required by the Company to repurchase or
refinance certain of the Surviving Corporation's outstanding indebtedness, is
expected to be approximately $105 million. Consummation of the Offer is not
conditioned on the obtaining of financing.
The Purchaser expects to obtain debt and equity financing in an aggregate
amount of approximately $135 million to fund the Offer, the Merger and the
related fees and expenses, to refinance certain indebtedness and capitalized
leases of the Surviving Corporation and to provide for the working capital
requirements of the Surviving Corporation. The Purchaser will obtain
approximately $35 million of equity financing from Parent, which will obtain
such funds pursuant to equity financing from the Apollo Entities. In addition,
the Apollo Entities or their affiliates may provide an unsecured bridge loan
(the "Bridge Loan") to the Purchaser if the proceeds of the equity financing
and the Tender Loan (as defined below) are insufficient to fund the Offer and
pay fees and expenses in connection therewith, which loans will be required to
be repaid at the Effective Time and will bear interest at the same rate as is
applicable to loans made under the Term Loan Facility (as defined below).
Pursuant to a commitment letter dated June 24, 1997 (the "Commitment
Letter"), Bankers Trust Company has committed to lend up to $100 million
aggregate principal amount to the Purchaser and the Surviving Corporation,
consisting of a $50 million term loan facility (the "Term Loan Facility") and
a $50 million revolving credit facility (the "Revolving Credit Facility," and
together with the Term Loan Facility, the "Senior Bank Financing"). Bankers
Trust Company informed Parent that it intends to syndicate the Senior Bank
Financing to various lenders, but has committed, subject to the terms and
conditions set forth herein and in the Commitment Letter, to finance the
entire $100 million commitment amount.
Use of Proceeds. Borrowings under the Term Loan Facility may be used by the
Purchaser to finance the purchase of Shares pursuant to the Offer, to pay the
fees and expenses incurred in connection with the Offer and to establish an
interest escrow account if less than 90% of the Shares are validly tendered in
the Offer (loans used for the foregoing purposes, collectively, the "Tender
Loan"); provided that the amount of the Tender Loan will not exceed an amount
equal to 50% of the value of the Shares tendered, less an amount equal to the
amount in the interest escrow account. Borrowings under the Term Loan Facility
also may be used to finance the purchase of Shares pursuant to the Merger, to
the pay fees and expenses incurred in connection with the Merger, to refinance
the Bridge Loans, refinance outstanding equipment leases and loans and to pay
interest on the outstanding Tender Loan.
The Revolving Credit Facility may be used by the Company and the Surviving
Corporation for working capital requirements, to finance certain acquisitions
and for other general corporate purposes (including refinancing certain
existing indebtedness); provided, that no more than $25 million of the
Revolving Credit Facility will be available to finance certain future
permitted acquisitions by the Surviving Corporation. The amount available for
borrowings under the Revolving Credit Facility will be reduced by the amount
of the Company's outstanding indebtedness and equipment leases which are not
refinanced. Loans under the Term Loan Facility may not be reborrowed once
repaid. Loans under the Revolving Credit Facility may be borrowed, repaid
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and reborrowed after the Effective Time and, as equipment leases and loans are
refinanced, availability under the Revolving Credit Facility will increase.
Maturity; Commitment Reduction; Amortization. The Term Loan Facility will
mature as follows: (1) if at least 90% of the Shares are accepted for payment
pursuant to the Offer and the Merger has not occurred, on the twentieth day
after such acceptance, (2) if less than 90% of the Shares are accepted for
payment pursuant to the Offer and the Merger has not occurred, on the 120th
day after such acceptance, or (3) if at least 90% of the Shares are accepted
for payment pursuant to the Offer and the Merger has occurred within 20 days
following such acceptance or if less than 90% of the Shares are accepted for
payment pursuant to the Offer and the Merger has occurred within 120 days
following such acceptance, on the six year anniversary of the date of such
acceptance. The Revolving Credit Facility will mature on the fifth anniversary
of the date of acceptance of Shares pursuant to the Offer. The amount
available under the Revolving Credit Facility will be reduced by 50% on each
of the four and five year anniversaries of the date of acceptance of Shares
pursuant to the Offer. The Term Loan Facility will be repaid each year in an
amount equal to 1% of the initial aggregate principal amount borrowed
thereunder.
Interest. Prior to the Effective Time, the Purchaser or the Company or,
after the Effective Time, the Surviving Corporation, may elect that all or a
portion of the loans under the Senior Bank Financing bear interest at a rate
per annum equal to (1) the higher of (A) 1/2 of 1% in excess of the Federal
Reserve Board reported certificate of deposit rate and (B) the rate that
Bankers Trust Company announces from time to time as its prime lending rate,
as in effect from time to time and (2) the rate (grossed-up for reserve
requirements as described in the Commitment Letter) at which eurodollar
deposits for one, two, three or six months (as selected by the Purchaser, the
Company or the Surviving Corporation) are offered in the interbank eurodollar
market in the approximate amount of the relevant loan, in each case, plus a
margin which will vary between 1.75% and 3.25% per annum, which margin will be
subject to step-downs based on a ratio of debt to consolidated earnings before
interest, taxes, depreciation and amortization; provided that until the
earlier of (x) the 90th day following the date of acceptance of the Shares
pursuant to the Offer and (y) the date that Bankers Trust Company has
determined and notified the Purchaser or the Surviving Corporation (as
applicable) that the primary syndication of the Senior Bank Financing (and the
resultant addition of institutions as lenders) has been completed, reserve
adjusted eurodollar loans may only be incurred with three successive one-month
interest periods (with all such loans having the same interest period). If 90%
of the Shares are not validly tendered in the Offer, interest payable on the
loans made under the Term Loan Facility will be subject to a holdback at a
rate per annum which is 1% in excess of the rate per annum which would apply
to such loans on the date of consummation of the Offer.
Guaranties; Security. The obligations of the Purchaser will be secured by a
pledge of the Shares purchased pursuant to the Offer; provided that, prior to
the Effective Time, the Purchaser will not be obligated to pledge any such
Shares if it acquires more than 90% of the Shares pursuant to the Offer. Prior
to the Effective Time, Parent will unconditionally guarantee all amounts owing
in respect of the Senior Bank Financing, and the lenders will be entitled to a
first priority perfected security interest in all tangible and intangible
assets of Parent. After the Effective Time, Parent and each of Parent's direct
and indirect subsidiaries (other than the Surviving Corporation) will
unconditionally guarantee all amounts owing in respect of the Senior Bank
Financing, and the lenders will be entitled to a first priority perfected
security interest in all tangible and intangible assets of the Surviving
Corporation and each guarantor.
Repayments. Voluntary prepayment and commitment reductions may be made at
any time without premium or penalty, subject to minimum notice and minimum
prepayment or reduction requirements, as the case may be (subject to certain
exceptions in respect of reserve adjusted eurodollar loans). Mandatory
repayments of loans under the Term Loan Facility (and after repaid in full,
permanent reductions to the Revolving Credit Facility) will be required from
(1) 100% of the net cash proceeds from asset sales by Parent and its
subsidiaries (other than certain ordinary course of business sales and
dispositions), provided that, after the Effective Time, the Purchaser or the
Surviving Corporation (as the case may be) may, in the absence of a default or
event of default under the Senior Bank Financing, reinvest proceeds of certain
asset sales (including sales of equipment that is being upgraded or replaced)
during the 180-day period following the date of the respective asset sale, (2)
100% of the net cash proceeds from issuances of debt (other than permitted
debt) and preferred stock (other than
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qualified preferred stock (as defined below)) by Parent and its subsidiaries,
(3) 50% of the net proceeds from issuances of qualified preferred stock or
common equity or capital contributions to Parent and its subsidiaries (other
than the initial equity contributions relating to the Offer and the Merger),
with customary exceptions, including equity issued or equity used to finance
certain permitted acquisitions, (4) 75% (reduced to 50% if the ratio of
consolidated earnings before interest, taxes, depreciation and amortization is
less than 2.75 to 1) of annual excess cash flow to be applied on the earlier
90 days after the end of each fiscal year and the date of delivery of Parent's
audited financial statements for such year and (5) 100% of certain insurance
proceeds, provided that after the Effective Time, the Surviving Corporation
may, in the absence of a default or an event of default under the Senior Bank
Financing, reinvest certain proceeds during the 180-day period following the
date of receipt of such proceeds. Mandatory repayments will be applied pro
rata to reduce the then remaining scheduled installments of the Term Loan
Facility. Voluntary repayments under the Term Loan Facility will reduce the
then remaining scheduled installments of the Term Loan Facility in direct
order of maturity. Voluntary commitment reductions under the Revolving Credit
Facility will be applied in direct order of maturity to reduce the then
remaining scheduled commitment reductions under the Revolving Credit Facility.
Conditions; Representations and Warranties; Covenants; Events of
Default. The Commitment Letter contains certain customary conditions to the
Bankers Trust Company's obligation to provide the Tender Loan, including
conditions substantially similar to the conditions to the Offer and the Merger
set forth in the Merger Agreement. Conditions to borrowings under the Term
Loan Facility at the Effective Time will be limited to (1) the absence of an
event of default under the Senior Bank Financing, (2) the consummation of the
Merger in accordance with applicable law and the Merger Agreement and (3)
continued accuracy in all material respect of the representations and
warranties contained in the credit documentation; provided that
representations as to any material adverse change to the Company and its
subsidiaries from a specified date, the absence of material litigation and any
substantially similar representation shall not be required to be made in
connection with such borrowing. Borrowing under the Revolving Credit Facility
after the Effective Time will contain standard and customary conditions. The
Senior Bank Financing is also expected to contain customary representations,
warranties, covenants and events of default.
Indemnification; Expenses; Fees. In connection with the Commitment Letter,
the Purchaser and Parent have agreed to indemnify Bankers Trust Company, the
lenders and certain of their related persons against certain liabilities, and
to reimburse Bankers Trust Company and its affiliates for all of Bankers Trust
Company's reasonable fees and expenses arising in connection with the
financing documentation and due diligence. The Purchaser and Parent agreed to
pay to Bankers Trust Company financing, commitment and other fees customary
for commitments of the types described herein. The Purchaser and Parent have
also agreed to pay to Bankers Trust Company a termination fee payable under
certain circumstances if the Merger Agreement is terminated. All such fees are
non-refundable. Apollo Investment Fund III, L.P. has unconditionally
guaranteed the payment in full of all amounts due to Bankers Trust Company
under the Commitment Letter and the Fee Letter until the consummation of the
Offer.
The foregoing summary of the Commitment Letter is qualified in its entirety
by reference to the text of the Commitment Letter and Fee Letter, which have
been filed as an Exhibit to the Purchaser's Schedule 14D-1 and are
incorporated herein by reference.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer, the Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer unless (1) the Minimum Condition shall have
been satisfied and (2) any waiting period under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall have expired or been
terminated. Furthermore, notwithstanding any other term of the Offer, the
Purchaser shall not be required to accept for payment or, subject as
aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may terminate the Offer if, at any time on or after the date
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hereof and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exists (other than as a result of
any action or inaction of Parent or any of its subsidiaries that constitutes a
breach of the Merger Agreement):
(a) there shall be instituted or pending by any person or Governmental
Entity any suit, action or proceeding (i) challenging the acquisition by
Parent or the Purchaser of any Shares under the Offer or pursuant to the
Stockholder Agreement, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by the Merger Agreement or the Stockholder
Agreement (including the voting provision thereunder), or seeking to obtain
from the Company, Parent or the Purchaser any damages in connection with
the aforesaid transactions that are material in relation to the Company,
(ii) seeking to prohibit or materially limit the ownership or operation by
the Company, Parent or any of their respective subsidiaries of a material
portion of the business or assets of the Company or its subsidiaries, or
Parent and its subsidiaries, taken as a whole, or to compel the Company or
Parent to dispose of or hold separate any material portion of the business
or assets of the Company or Parent and its subsidiaries, taken as a whole,
as a result of the Offer or any of the other transactions contemplated by
the Merger Agreement or the Stockholder Agreement, (iii) seeking to impose
material limitations on the ability of Parent or the Purchaser to acquire
or hold, or exercise full rights of ownership of, any Shares to be accepted
for payment pursuant to the Offer or purchased under the Stockholder
Agreement, including, without limitation, the right to vote such Shares on
all matters properly presented to the stockholders of the Company, (iv)
seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of the assets,
properties, business or operations of the Company or its subsidiaries or
(v) which otherwise is reasonably likely to have an effect or condition
that, individually or in the aggregate with any other effect or condition,
is materially adverse to the assets, properties, business, financial
condition, results of operations or prospects of the Company and its
subsidiaries, taken as a whole;
(b) there shall be any statute, rule, regulation, judgment, order,
injunction or other restraint enacted, entered, enforced, promulgated or
deemed applicable to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity or court, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
provided, however, that each of Parent and the Purchaser shall have used
reasonable efforts to prevent the entry of any such injunction or other
court order and to appeal as promptly as possible any injunction or other
court order that may be entered;
(c) there shall have occurred any change or event that, individually or
in the aggregate with any other change or event, is materially adverse to
the assets, properties, business, financial condition, results of
operations or prospects of the Company and its subsidiaries, taken as a
whole;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or
the Nasdaq, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by
federal or state authorities on the extension of credit by lending
institutions, or a disruption of or material adverse change in either the
syndication market for credit facilities or the financial, banking or
capital markets, (iii) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly involving
the United States or (iv) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(e) any of the representations and warranties of the Company set forth in
the Merger Agreement (without giving effect to any materiality or similar
qualifications contained therein) shall not be true and correct in all
material respects at the date thereof and at the scheduled or extended
expiration of the Offer, except for changes specifically permitted by the
Merger Agreement;
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(f) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(g) the Merger Agreement shall have been terminated in accordance with
its terms;
(h) all leases, promissory notes and other loan or financing
documentation to which the Company or any subsidiary is a party or by which
the assets or properties of either the Company or any subsidiary are bound
(including those in respect of the MRI Units owned, leased or on order by
the Company or any subsidiary) shall have been amended or restated, as
necessary, so that (i) all MRI Units leased by the Company and/or any
subsidiary may be purchased by the applicable lessee at any time, and the
leases thereunder and all lending or other financing arrangements to which
the Company or any subsidiary is a party pertaining to the MRI Units owned,
leased or on order by the Company or any subsidiary may be terminated at
any time (other than leases or lending or other financing arrangements with
respect to such MRI Units that have an aggregate principal amount
outstanding of less than $6 million), in each case, without any payment
made or liability or obligation incurred by or on behalf of the Company or
any subsidiary, other than payments made or liabilities or obligations
incurred prior to the Effective Time which, in the aggregate, do not exceed
an amount reasonably acceptable to Parent and the Company and (ii) none of
the Merger, the Offer or any of the transactions contemplated by the Merger
Agreement shall constitute a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, acceleration or cancellation or right of
non-renewal or give rise to the loss of a material benefit) thereunder;
which, in the judgment of the Purchaser in any such case, and regardless of
the circumstances (including any action or omission by the Purchaser not
inconsistent with the terms of the Merger Agreement) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for payment.
The foregoing conditions in paragraphs (a) through (h) are for the sole
benefit of the Purchaser and Parent and, subject to the terms of the Merger
Agreement, may be waived by the Purchaser and Parent in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent
or the Purchaser at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to
time.
15. CERTAIN LEGAL MATTERS
State Takeover Laws. The Company conducts business in a number of states
throughout the United States, several of which have adopted laws and
regulations purporting, to various degrees, to apply to offers to acquire
securities of entities which are organized or have substantial assets,
securityholders, employees, a principal executive office and/or a principal
place of business therein. In Edgar v. MITE Corporation, the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Act, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. In CTS Corp. v.
Dynamics Corp. of America, however, the Supreme Court held that a state may,
as a matter of corporate law and, in particular, those laws concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without prior approval of the
remaining stockholders, provided that such laws were applicable only under
certain conditions, in particular, that the corporation has a substantial
number of stockholders in the state and is incorporated there.
Section 203 of the DGCL prohibits business combination transactions
involving a Delaware corporation and an "interested stockholder" (defined
generally as any person that directly or indirectly beneficially owns 15% or
more of the outstanding voting stock of the subject corporation) for three
years following the date such person became an "interested stockholder,"
unless certain exceptions apply, including that before such person became an
interested stockholder the board of directors of the subject corporation
approved the transaction in which such
30
<PAGE>
person became an interested stockholder or approved the business combination.
Since the Board, at the special meeting held on June 23, 1997, approved the
Merger Agreement and the transactions contemplated thereby, Section 203 is
inapplicable to Parent and the Purchaser in connection with the Offer and the
Merger.
It is a condition of the Offer that no statute, rule, regulation or order
impose any material limitation on the ability of Parent, the Purchaser or any
of their subsidiaries effectively to exercise full rights of ownership of the
Shares, including, without limitation, the right to vote the Shares. In the
event of the failure of such condition of the Offer, the Purchaser may
terminate or amend the Offer. See Section 14.
Antitrust. The Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
frequently scrutinize the legality under the antitrust laws of transactions
such as the Purchaser's proposed acquisition of the Company. At any time
before or after the Purchaser's purchase of Shares pursuant to the Offer, the
Antitrust Division or the FTC could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking
to enjoin the purchase of Shares pursuant to the Offer or the consummation of
the Merger or seeking the divestiture of Shares acquired by the Purchaser or
the divestiture of substantial assets of Parent or its subsidiaries, or the
Company or its subsidiaries. Private parties may also bring legal action under
the antitrust laws under certain circumstances. There can be no assurance that
a challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, of the results thereof.
Going-Private Rules. The Merger will have to comply with any applicable
Federal law operative at the time. Rule 13e-3 promulgated under the Exchange
Act is applicable to certain "going private" transactions. The Purchaser does
not believe that Rule 13e-3 will be applicable to the Merger if the Merger is
consummated within one year after the Expiration Date at the same per Share
price as paid in the Offer. Rule 13e-3 would require, if applicable, among
other things, that certain financial information concerning the Company, and
certain information relating to the fairness of the proposed transaction and
the consideration offered to minority stockholders in such transaction, be
filed with the Commission and disclosed to minority stockholders prior to the
consummation of the transaction.
Other Regulatory Approvals and Notices. The Purchaser is required to furnish
advance written notice of its purchase of the Shares to state health
regulatory agencies in certain of the states in which the Company does
business.
16. FEES AND EXPENSES
The Dealer Manager, the Information Agent and the Depositary have been
retained by the Purchaser in connection with the Offer. The Information Agent
may contact holders of Shares by mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers, banks, trust companies
and other nominees to forward the Offer material to beneficial owners. The
Dealer Manager, the Information Agent and the Depositary each will receive
reasonable and customary compensation for their services, will be reimbursed
for certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the Federal securities laws. Neither the Information Agent
nor the Depositary has been retained to make solicitations or recommendations
in connection with the Offer.
No fees or commissions will be paid by or on behalf of the Purchaser to any
broker or dealer or other person (other than the Dealer Manager) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks, trust companies and other nominees will be reimbursed by the
Purchaser for reasonable expenses incurred by them in forwarding material to
their customers.
17. MISCELLANEOUS
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the
31
<PAGE>
laws of such jurisdiction. Neither the Purchaser nor Parent is aware of any
jurisdiction in which the making of the Offer or the tender of the Shares in
connection therewith would not be in compliance with the laws of such
jurisdiction. If the Purchaser or Parent becomes aware of any valid state law
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto in such state, the Purchaser will make a good faith effort to comply
with any such state statute or seek to have such statute declared inapplicable
to the Offer. If after such good faith effort, the Purchaser cannot comply
with any state statute, the Offer will not be made to, nor will tenders be
accepted from or on behalf of, the holders of Shares in such state. If the
securities laws of any jurisdiction require that the Offer be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
the Purchaser by the Dealer Manager or one or more registered brokers or
dealers that are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE
PURSUANT TO THE OFFER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PARENT, THE PURCHASER OR THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE OF
THIS OFFER TO PURCHASE.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1 ("Purchaser's Schedule 14D-1") and exhibits thereto pursuant to
Rule 14d-3 under the Exchange Act, furnishing certain additional information
with respect to the Offer. In addition, the Company has filed with the
Commission a Solicitation/Recommendation Statement on Schedule 14D-9
(including exhibits) pursuant to Rule 14d-9 under the Exchange Act. Such
statements and any amendments thereto, including exhibits, may be examined at,
and copies may be obtained from, the offices of the Commission in the manner
set forth in Section 9 of this Offer to Purchase (except that copies are not
available at the regional offices of the Commission).
THREE RIVERS ACQUISITION CORP.
June 30, 1997
32
<PAGE>
SCHEDULE I
The Purchaser, Parent and Affiliates of the Apollo Entities. The following
sets forth the name, business address, present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years and citizenship of each of the directors and executive
officers of the Purchaser and Parent. Directors of the Purchaser are indicated
by an asterisk. Unless otherwise specified herein, the business address of the
following persons is c/o Apollo Management, L.P., 1301 Avenue of the Americas,
38th Floor, New York, New York 10019. Each person referred to herein is a
citizen of the United States.
*MICHAEL GROSS is the Chairman of the Board and President of the Purchaser
and Parent. Mr. Gross has served as an officer of certain affiliates of the
Apollo Entities since 1990. Mr. Gross is a director of Converse Inc.,
Florsheim Group Inc., Proffitt's Inc. and Urohealth, Inc.
*JOSHUA J. HARRIS is the Vice President, Treasurer and Assistant Secretary
of the Purchaser and Parent. Mr. Harris has served as an officer of certain
affiliates of the Apollo Entities, having been associated with them since
1990. Mr Harris is a director of Florsheim Group Inc.
MICHAEL D. WEINER is the Vice President of the Purchaser and Parent. Mr.
Weiner has been an officer of certain affiliates of the Apollo Entities since
1992. Prior to 1992, Mr. Weiner was a partner in the law firm of Morgan, Lewis
& Bockius LLP. Mr. Weiner is a director of Applause, Inc., Converse Inc.,
Capital Apartment Properties, Inc., Continental Graphics Holdings, Inc. and
Florsheim Group Inc.
SCOTT KLEINMAN is the Secretary of the Purchaser and Parent. Mr. Kleinman
has served as an Associate of certain affiliates of the Apollo Entities since
January 1996. Prior to January 1996, Mr. Kleinman was employed by Smith Barney
Inc.
Affiliates of the Apollo Entities.
The following sets forth information with respect to the general partners,
executive officers, directors and principal shareholders of the Apollo
Entities and certain related persons. Capitalized terms used herein without
definition have the meanings assigned thereto in the Offer to Purchase to
which this Schedule I relates. Except as otherwise indicated in this Schedule
I or in the Offer to Purchase to which this Schedule I relates, the principal
business address of each person or entity set forth below is c/o Apollo
Advisors II, L.P., Two Manhattanville Road, Purchase, New York 10577, and each
such person or entity is a citizen of the United States of America.
The principal occupation of each of Messrs. Leon D. Black and John J. Hannan
is to act as an executive officer and director of Apollo Capital and AIM.
Messrs. Black and Hannan are also limited partners of Advisors and Apollo
Management.
Messrs. Black and Hannan are also founding principals of Apollo Advisors,
L.P. ("Apollo Advisors"), Lion Advisors, L.P. ("Lion") and Apollo Real Estate
Advisors, L.P. ("AREA"). The principal business of Apollo Advisors and Lion is
to provide advice regarding investments in securities and the principal
business of AREA is to provide advice regarding investments in real estate and
real estate-related investments. The business address of each of Messrs. Black
and Hannan is c/o Apollo Management, L.P., 1301 Avenue of the Americas, New
York, New York 10019.
Peter Henry Larder, Michael Francis Benedict Gillooly, Ian Thomas Patrick
and Martin William Laidlaw, each of whom is a British citizen, serve as
directors of Administration. Each of the above four individuals is principally
employed by CIBC Bank and Trust Company (Cayman) Limited ("CIBC") in the
following positions: Mr. Larder, Managing Director; Mr. Gillooly, Deputy
Managing Director; Mr. Patrick, Manager-Accounting Services; and Mr. Laidlaw,
Senior Fund Accountant. CIBC is a Cayman Islands corporation which is
principally engaged in the provision of trust, banking and corporate
administration services, the principal
S-1
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or his or her broker, dealer, commercial bank, trust company or other
nominee to the depositary at one of its addresses set forth below.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<CAPTION>
By Hand: Overnight Courier: By Mail:
<S> <C> <C>
Reorganization Department Reorganization Department Reorganization Department
40 Wall Street, 46th Floor 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, N.Y. 10005 New York, N.Y. 10005 New York, N.Y. 10005
</TABLE>
Facsimile Transmission (for Eligible Institutions only):
(718) 234-5001
Confirm Receipt of Guaranteed Delivery by Telephone:
(718) 921-8200
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective addresses and telephone numbers set forth below. You may also
contact your local broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
2121 Avenue of the Stars, Suite 3000
Los Angeles, CA 90067
(310) 282-5597 (Collect)
<PAGE>
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SMT HEALTH SERVICES INC.
AT $11.75 NET PER SHARE IN CASH
PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 30, 1997
BY
THREE RIVERS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THREE RIVERS HOLDING CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<CAPTION>
By Hand: Overnight Courier: By Mail:
<S> <C> <C>
Reorganization Department Reorganization Department Reorganization Department
40 Wall Street, 46th Floor 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, N.Y. 10005 New York, N.Y. 10005 New York, N.Y. 10005
</TABLE>
Facsimile Transmission (for Eligible Institutions only):
(718) 234-5001
Confirm Receipt of Guaranteed Delivery by Telephone:
(718) 921-8200
---------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A DELIVERY TO THE
DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE
APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
HOLDER(S)
(PLEASE FILL
IN, IF BLANK,
EXACTLY AS
NAME(S)
APPEAR(S) ON SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- -------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
------------- --------------- ---------------
<S> <C> <C> <C>
------------- --------------- ---------------
------------- --------------- ---------------
------------- --------------- ---------------
TOTAL SHARES
TENDERED
</TABLE>
- -------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by certificates delivered to the Depositary are being
tendered. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be completed by stockholders of SMT Health
Services Inc. either if certificates for tendered Shares (as defined below)
are to be forwarded herewith or if delivery of Shares is to be made by book-
entry transfer to an account maintained by the Depositary at The Depository
Trust Company ("DTC") or Philadelphia Depository Trust Company ("PDTC" and,
together with DTC, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in Section 2 of the Offer to Purchase (as defined below).
Stockholders who deliver Shares by book-entry transfer are referred to herein
as "Book-Entry Stockholders" and other stockholders are referred to herein as
"Certificate Stockholders." If a stockholder desires to tender Shares pursuant
to the Offer (as defined below) and such stockholder's certificates for Shares
are not immediately available or the procedure for book-entry transfer cannot
be completed on a timely basis or time will not permit all required documents
to reach the Depositary prior to the Expiration Date (as defined in Section 1
of the Offer to Purchase), such stockholder's tender may nevertheless be
effected by complying with the guaranteed delivery procedure set forth in
Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Check Box of Book-Entry Transfer Facility:
[_]DTC
[_]PDTC
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution that Guaranteed Delivery _______________________________
If delivered by book-entry transfer check box of Book-Entry Transfer
Facility: __________________________________________________________________
[_]DTC
[_]PDTC
Account Number ________________________________________________________________
Transaction Code Number _______________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Three Rivers Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Three Rivers
Holding Corp., a Delaware corporation ("Parent"), the above-described shares
of Common Stock, $.01 par value (the "Shares"), of SMT Health Services Inc., a
Delaware corporation (the "Company"), including the associated Rights (as
hereinafter defined), pursuant to the Purchaser's offer to purchase all
outstanding Shares at a purchase price of $11.75 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated June 30, 1997 (the "Offer to Purchase"),
and this Letter of Transmittal (which together constitute the "Offer"),
receipt of which is hereby acknowledged. Unless the context otherwise
requires, all references herein to Shares shall include the associated Rights
(as defined in the Rights Agreement between the Company and American Stock
Transfer & Trust Company, as Rights Agent, dated as of November 8, 1995, as
amended June 23, 1997 (the "Rights Agreement")). All capitalized terms used
and not otherwise defined herein shall have the meanings ascribed to them in
the Offer to Purchase.
Upon the terms and subject to the conditions of the Offer, subject to, and
effective upon, acceptance for payment of the Shares tendered herewith by the
Purchaser, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and any and all other Shares or other
securities or rights issued or issuable in respect thereof on or after June
24, 1997), and irrevocably constitutes and appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any such other Shares or securities or rights), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), (i) to deliver certificates for such Shares (and
any such other Shares or securities or rights) or transfer ownership of such
Shares (and any such other Shares or securities or rights) on the account
books maintained by a Book-Entry Transfer Facility together, in each case,
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Purchaser, (ii) to present such Shares (and any such other
Shares or securities or rights) for transfer on the Company's books and (iii)
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any such other Shares or securities or rights),
all in accordance with the terms of the Offer. In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all such other Shares, securities or rights, accompanied by
appropriate documentation of transfer; and, pending such remittance or
appropriate assurance thereof, the Purchaser shall, subject to applicable law,
be entitled to all rights and privileges as owner of such other Shares,
securities or rights and may withhold the entire purchase price, or deduct
from the purchase price, the amount of value thereof as determined by the
Purchaser in its sole discretion.
The undersigned hereby represents and warrants that (i) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities or rights
issued or issuable in respect of such Shares on or after June 24, 1997) and
(ii) when such Shares (and any such other Shares or securities or rights) are
accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, claims and encumbrances and the same will not be subject to any
adverse claim. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby (and any and all such other Shares or securities or rights).
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned hereby irrevocably appoints designees of the Purchaser, and
each of them, as the undersigned's attorneys-in-fact and proxies in the manner
set forth herein, each with full power of substitution, to the full extent of
the undersigned's rights with respect to the Shares tendered by the
undersigned and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after June 24, 1997. All such proxies shall be
considered coupled with an interest in the tendered Shares. Such appointment
will
<PAGE>
be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by the undersigned as provided in the Offer to
Purchase. Upon such acceptance for payment, all prior powers of attorney and
proxies given by the undersigned with respect to such Shares or other
securities or rights will, without further action, be revoked and no
subsequent powers of attorney and proxies may be given (and, if given, will
not be deemed effective). The designees of the Purchaser will thereby be
empowered to exercise all voting and other rights with respect to such Shares
or other securities or rights in respect of any annual, special or adjourned
meeting of the Company's stockholders, or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able
to exercise full voting and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of stockholders then
scheduled. The powers of attorney and proxies granted hereby are irrevocable
and are granted in consideration of the acceptance for payment of such Shares
in accordance with the terms of the Offer.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that both Special Delivery
Instructions and Special Payment Instructions are completed, please issue the
check for the purchase price and/or return any certificates for Shares not
tendered or accepted for payment (and any accompanying documents, as
appropriate) in the name of, and deliver such check and/or return such
certificates (and any accompanying documents, as appropriate) to, the person
or persons so indicated. The undersigned recognizes that the Purchaser has no
obligation pursuant to Special Payment Instructions to transfer any Shares
from the name(s) of the registered holder(s) thereof if the Purchaser does not
accept for payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Shares not tendered or cates for Shares not tendered or
not accepted for payment and/or not accepted for payment and/or
the check for the purchase price the check for the purchase price
of Shares accepted for payment of Shares accepted for payment
are to be issued in the name of are to be sent to someone other
someone other than the under- than the undersigned or to the
signed. undersigned at an address other
than that above.
Issue [_] Check [_] Certificates
to:
Mail [_] Check [_] Certificates
to:
Name _____________________________ Name _____________________________
(PLEASE PRINT) (PLEASE PRINT)
Address __________________________ Address __________________________
__________________________________ __________________________________
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
__________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NO.)
(COMPLETE SUBSTITUTE FORM W-9
BELOW)
<PAGE>
STOCKHOLDER SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
.......................................................
.......................................................
(SIGNATURE(S) OF STOCKHOLDER(S))
(Must be signed by registered holder(s) as name(s)
appear(s) on the Share certificate(s) or on a security
position listing or by person(s) authorized to become
registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustee(s),
executor(s), administrator(s), guardian(s),
attorney(s)-in-fact, officer(s) of a corporation or
others acting in a fiduciary or representative
capacity, please provide the following information and
see Instruction 5.)
Date ..................................................
Name(s)................................................
.......................................................
(PLEASE PRINT)
Capacity (Full Title) .................................
Address................................................
.......................................................
(INCLUDE ZIP CODE)
Area Code and Tel. No. ................................
Taxpayer Identification or Social Security No. ........
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ..................................
Name ..................................................
(PLEASE PRINT)
Name of Firm ..........................................
Address ...............................................
.......................................................
(INCLUDE ZIP CODE)
Area Code and Tel. No. ................................
Date ............................................, 1997
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signature. No signature guarantee is required on this Letter
of Transmittal if (a) this Letter of Transmittal is signed by the registered
holder of Shares (which term, for purposes of this document, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of the Shares) tendered
herewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" above or (b) such Shares are tendered for the account of a firm
that is a participant in the Securities Transfer Agents Medallion Program or
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program or by any other "eligible guarantor institution,"
as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 to this Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of this Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
issued to a person other than the registered holder of the certificates
surrendered, the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names
of the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as aforesaid. See
Instruction 5 to this Letter of Transmittal.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or if
delivery of Shares is to be made pursuant to the procedures for book-entry
transfer set forth in Section 2 of the Offer to Purchase. For a stockholder
validly to tender Shares pursuant to the Offer, either (a) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees (or an Agent's Message in
connection with a book-entry transfer of Shares) and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth herein and either certificates for tendered
Shares must be received by the Depositary at one of such addresses or such
Shares must be delivered pursuant to the procedure for book-entry transfer set
forth in Section 2 of the Offer to Purchase (and a Book-Entry Confirmation (as
defined in the Offer to Purchase) received by the Depositary), in each case,
on or prior to the Expiration Date, or (b) the tendering stockholder must
comply with the guaranteed delivery procedure set forth in Section 2 of the
Offer to Purchase. Pursuant to such procedure, (a) such tender must be made by
or through an Eligible Institution, (b) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, must be received by the Depositary, as provided in Section 2 of the
Offer to Purchase, on or prior to the Expiration Date and (c) the certificates
for all tendered shares, in proper form for transfer (or a Book-Entry
Confirmation with respect to such Shares), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other documents required by this Letter
of Transmittal, must be received by the Depositary within three Nasdaq
National Market trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in Section 2 of the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE
DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY. DELIVERY OF THIS LETTER OF TRANSMITTAL AND ACCOMPANYING SHARES WILL
BE DEEMED EFFECTIVE, AND RISK OF LOSS WITH RESPECT TO SUCH LETTER OF
TRANSMITTAL AND ACCOMPANYING CERTIFICATE(S) WILL PASS, ONLY WHEN SUCH LETTER
OF TRANSMITTAL AND ACCOMPANYING CERTIFICATE(S) ARE ACTUALLY RECEIVED BY THE
DEPOSITARY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
<PAGE>
4. Partial Tenders (Applicable to Certificate Stockholders Only). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered." In any such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered holder, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the expiration
of the Offer. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
to, a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If the certificates for Shares are registered in the name of a person other
than the signer of this Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
issued to a person other than the registered holder of the certificates
surrendered, the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name or names
of the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as aforesaid. See
Instruction 1. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
certificate(s) for Shares not tendered or accepted for payment are to be
registered in the name(s) of, any person(s) other than the registered
owner(s), or if tendered certificate(s) are registered in the name(s) of any
person(s) other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered
holder(s) or such other person(s)) payable on account of the transfer to such
other person(s) will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER
OF TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name(s) of, and/or certificate(s) for Shares not tendered or not accepted
for payment are to be returned to, a person other than the signer of this
Letter of Transmittal or if a check is to be sent and/or such certificates are
to be returned to a person other than the signer of this Letter of Transmittal
or to an address other than that shown above, the appropriate boxes on this
Letter of Transmittal must be completed. Any stockholder(s) delivering Shares
by book-entry transfer may request that Shares not accepted for payment be
credited to such account maintained at a Book-Entry Transfer Facility as such
stockholder(s) may designate.
8. Waiver of Conditions. Subject to the terms of the Offer, the Purchaser
reserves the absolute right in its sole discretion to waive any of the
specified conditions of the Offer, in whole or in part, in the case of any
Shares tendered.
<PAGE>
9. Substitute Form W-9. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder
surrendering Shares in the Offer must (a) provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") on Substitute
Form W-9 below and (b) certify under penalty of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may
impose a penalty on such stockholder and any payment of cash to such
stockholder pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding. Noncorporate
foreign stockholders should complete and sign the main signature form and a
Form W-8, Certificate of Foreign Status, a copy of which may be obtained from
the Depositary, in order to avoid backup withholding.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the stockholder or other payee. Backup withholding
is not an additional income tax. Rather, the tax liability of persons subject
to backup withholding will be reduced by the amount of tax withheld, provided
that the required information is given to the IRS. If withholding results in
an overpayment of taxes, a refund may be obtained from the IRS.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN but has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 2 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN
is provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
10. Requests for Assistance or Additional Copies. Requests for additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 should be directed to the
Information Agent at its address as set forth below. Questions or requests for
assistance may be directed to the Information Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED
SHARES WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED
DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
<PAGE>
PART 1--PLEASE PROVIDE YOUR
SUBSTITUTE TIN IN THE BOX AT RIGHT AND ----------------------
FORM W-9 CERTIFY BY SIGNING AND Social Security
DATING BELOW. Number(s)
DEPARTMENT OF ----------------------------
THE TREASURY PART 2--TIN Applied for [_] OR
INTERNAL
REVENUE
SERVICE
----------------------
Employer Identification
Number
CERTIFICATIONS--Under the penalties of perjury, I
certify that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me),
PAYOR'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER ("TIN")
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding, and
(3) any other information provided on this form is
true and correct.
--------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are currently subject to backup withholding be-
cause of underreporting interest or dividends on your
tax returns. However, if after being notified by the
IRS that you are subject to backup withholding, you
received another notification from the IRS stating
that you are no longer subject to backup withholding,
do not cross out such item (2).
- -------------------------------------------------------------------------------
SIGNATURE:_______________________________ DATE:_____________________, 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under the penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld
until I provide this number.
Signature ________________________________________ Date __________________
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers as set forth below.
The Information Agent for the Offer is:
MACKENZIE
PARNTERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
2121 Avenue of the Stars, Suite 3000
Los Angeles, CA 90067
(310) 282-5597 (Collect)
<PAGE>
EXHIBIT (A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SMT HEALTH SERVICES INC.
TO
THREE RIVERS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THREE RIVERS HOLDING CORP.
AT
$11.75 NET PER SHARE IN CASH
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED.
As set forth in Section 2 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer
(as defined below) if certificates representing shares of Common Stock, $.01
par value (the "Shares"), of SMT Health Services Inc., a Delaware corporation
(the "Company"), are not immediately available or the procedures for book-
entry transfer cannot be completed on a timely basis or time will not permit
all required documents to reach the Depositary on or prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase). This form may be
delivered by hand to the Depositary or transmitted by telegram, facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution (as defined in Section 2 of the Offer to Purchase) in the
form set forth in this Notice of Guaranteed Delivery. See Section 2 of the
Offer to Purchase.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<CAPTION>
By Hand: Overnight Courier: By Mail:
<S> <C> <C>
Reorganization Department Reorganization Department Reorganization Department
40 Wall Street, 46th Floor 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor
New York, N.Y. 10005 New York, N.Y. 10005 New York, N.Y. 10005
</TABLE>
Facsimile Transmission (for Eligible Institutions only):
(718) 234-5001
Confirm Receipt of Guaranteed Delivery by Telephone:
(718) 921-8200
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A DELIVERY TO THE
DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
Pursuant to the guaranteed delivery procedures set forth in Section 2 of the
Offer to Purchase, the undersigned hereby tenders to Three Rivers Acquisition
Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary
of Three Rivers Holding Corp. ("Parent"), a Delaware corporation, the below-
described Shares of SMT Health Services Inc., a Delaware corporation (the
"Company"), including the associated Rights (as hereinafter defined), pursuant
to the Purchaser's offer to purchase all outstanding Shares at a purchase price
of $11.75 per share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Purchaser's Offer to Purchase dated June 30,
1997, and the related Letter of Transmittal, receipt of which is hereby
acknowledged. Unless the context otherwise requires, all references herein to
Shares shall include the associated Rights (as defined in the Rights Agreement
between the Company and American Stock Transfer & Trust Company, as Rights
Agent, dated as of November 23, 1995, as amended June 23, 1997).
Number of Shares: _____________________________________________________________
Name(s) of Record Holder(s): __________________________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please Type or Print)
Certificate Nos. (if available): ______________________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Address(es): __________________________________________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Zip Code
Area Code and Tel. No.: _______________________________________________________
(Check one box if Shares will be tendered by book-entry transfer):
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Signature(s): _________________________________________________________________
- -------------------------------------------------------------------------------
Account Number: _______________________________________________________________
Dated: ___________ ,_1997_______________________________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial
bank or trust company having an office or correspondent in the United
States that is a member in good standing of the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, or an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, hereby guarantees to deliver
to the Depositary either the certificates representing the Shares tendered
hereby, in proper form for transfer, or a Book-Entry Confirmation (as
defined in Section 2 of the Offer to Purchase) of a transfer of such
Shares, in any such case together with a properly completed and duly
executed Letter of Transmittal, or a manually signed facsimile thereof,
with any required signature guarantees, and any other documents required
by the Letter of Transmittal within three Nasdaq National Market trading
days after the date hereof.
Name of Firm: _____________________________________________________________
---------------------------------------------------------------------------
(Authorized Signature)
Address: __________________________________________________________________
Zip Code
Area Code and Tel. No.: ___________________________________________________
Name: _____________________________________________________________________
Title: ____________________________________________________________________
Date: ____________ , 1997
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT (A)(4)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SMT HEALTH SERVICES INC.
AT
$11.75 NET PER SHARE IN CASH
BY
THREE RIVERS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THREE RIVERS HOLDING CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED.
June 30, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Three Rivers Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Three Rivers
Holding Corp. ("Parent"), to act as Dealer Manager in connection with the
Purchaser's offer to purchase all outstanding shares of Common Stock, $.01 par
value (the "Shares"), of SMT Health Services Inc., a Delaware corporation (the
"Company"), including the associated Rights (as hereinafter defined), at a
purchase price of $11.75 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Purchaser's Offer to Purchase
dated June 30, 1997 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer") enclosed herewith. Unless
the context otherwise requires, all references herein to Shares shall include
the associated Rights (as defined in the Rights Agreement between the Company
and American Stock Transfer & Trust Company, as Rights Agent, dated as of
November 8, 1995, as amended June 23, 1997 (the "Rights Agreement")). The
Offer is being made pursuant to an Agreement and Plan of Merger dated as of
June 24, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. All capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. The Offer to Purchase dated June 30, 1997;
2. The Letter of Transmittal to be used by stockholders of the Company
accepting the Offer and tendering Shares pursuant thereto;
3. The Letter to Stockholders of the Company from the President, Chief
Executive Officer and Chairman of the Board of the Company, accompanied by
the Company's Solicitation/Recommendation Statement on Schedule 14D-9;
<PAGE>
4. A letter that may be sent to your clients for whose account you hold
Shares in your name or in the name of your nominee, with space provided for
obtaining such client's instructions with regard to the Offer;
5. The Notice of Guaranteed Delivery to be used to accept the Offer if
the certificates evidencing Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary on or
prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase);
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (X) THAT NUMBER OF
OUTSTANDING SHARES WHICH, TOGETHER WITH THE OUTSTANDING SHARES SUBJECT TO THE
STOCKHOLDER AGREEMENT THAT SHALL NOT HAVE BEEN SO TENDERED, WOULD REPRESENT AT
LEAST A MAJORITY OF ALL OUTSTANDING SHARES (FOR PURPOSES OF THIS CLAUSE (X)
ONLY, "SHARES" SHALL BE DEEMED TO REFER ONLY TO SHARES OUTSTANDING AS OF THE
DATE OF THE MERGER AGREEMENT) AND (Y) THAT NUMBER OF SHARES WHICH, TOGETHER
WITH THE SHARES SUBJECT TO THE STOCKHOLDER AGREEMENT THAT SHALL NOT HAVE BEEN
SO TENDERED, WOULD REPRESENT AT LEAST A MAJORITY OF THE FULLY DILUTED SHARES
(DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS,
WARRANTS AND ANY OTHER RIGHTS TO ACQUIRE SHARES) AND (2) THE COMPANY HAVING
OBTAINED CERTAIN AMENDMENTS TO, AND CONSENTS WITH RESPECT TO, EXISTING
EQUIPMENT LEASE AND OTHER FINANCING ARRANGEMENTS. THE OFFER IS NOT CONDITIONED
ON OBTAINING FINANCING.
THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE
OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1, 12, 14 AND 15 OF THE
OFFER TO PURCHASE.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and has determined that the Offer and the Merger are fair to and in
the best interests of the stockholders of the Company and recommends that all
of the stockholders of the Company accept the Offer, tender their Shares
(including the associated Rights) and approve the Merger Agreement and the
Merger, if required by law.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchaser will purchase, by accepting for payment,
and will pay for all Shares validly tendered on or prior to the Expiration
Date and not properly withdrawn (in accordance with the procedures set forth
in Section 3 of the Offer to Purchase), promptly after the Expiration Date.
Payment for Shares accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates for Shares (or
Book-Entry Confirmation) pursuant to the procedures set forth in Section 2 of
the Offer to Purchase, (ii) a Letter of Transmittal (or a facsimile copy
thereof), properly completed and duly executed, or an Agent's Message, and
(iii) any other documents required by the Letter of Transmittal.
PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED. WE
URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY.
2
<PAGE>
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager, the
Depositary and MacKenzie Partners, Inc., the Information Agent, as described
in the Offer to Purchase) for soliciting tenders of Shares pursuant to the
Offer. You will be reimbursed upon request for reasonable expenses incurred by
you in forwarding the enclosed offering materials to your customers.
The Purchaser will pay or cause to be paid any stock transfer taxes payable
on the transfer of Shares to it, except as otherwise provided in Instruction 6
of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed material may be obtained from, MacKenzie
Partners, Inc., the Information Agent, at 156 Fifth Avenue, New York, NY
10010, (800) 322-2885, or Donaldson, Lufkin & Jenrette Securities Corporation,
the Dealer Manager, at 2121 Avenue of the Stars, Los Angeles, CA 90067, (310)
282-5597 (Collect).
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEALER MANAGER, THE
DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR
ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
EXHIBIT (A)(5)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS)
OF
SMT HEALTH SERVICES INC.
AT
$11.75 NET PER SHARE IN CASH
BY
THREE RIVERS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THREE RIVERS HOLDING CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED.
June 30, 1997
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated June 30, 1997
(the "Offer to Purchase"), and a related Letter of Transmittal (which together
constitute the "Offer") relating to an offer by Three Rivers Acquisition
Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary
of Three Rivers Holding Corp., a Delaware corporation ("Parent"), to purchase
shares of Common Stock, $.01 par value (the "Shares"), of SMT Health Services
Inc., a Delaware corporation (the "Company"), including the associated Rights
(as hereinafter defined), at a purchase price of $11.75 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer. Also enclosed is the Letter to Stockholders of the Company from the
President, Chief Executive Officer and Chairman of the Board of the Company
accompanied by the Company's Solicitation/Recommendation Statement on Schedule
14D-9. Unless the context otherwise requires, all references herein to Shares
shall include the associated Rights (as defined in the Rights Agreement
between the Company and American Stock Transfer & Trust Company, as Rights
Agent, dated as of November 8, 1995, as amended June 23, 1997). All
capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Offer to Purchase.
THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF THE SHARES
HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER
OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN
BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS.
THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND
CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The tender price is $11.75 per Share, net to the seller in cash.
2. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND HAS DETERMINED THAT THE OFFER AND THE
1
<PAGE>
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY AND RECOMMENDS THAT ALL OF THE STOCKHOLDERS OF THE COMPANY ACCEPT
THE OFFER, TENDER THEIR SHARES (INCLUDING THE ASSOCIATED RIGHTS) AND
APPROVE THE MERGER AGREEMENT AND THE MERGER, IF REQUIRED BY LAW.
3. The Offer is being made for all outstanding Shares.
4. The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of June 24, 1997 (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that the Purchaser
will be merged (the "Merger") with and into the Company after the
completion of the Offer and the satisfaction of certain conditions. As a
result of the Merger, each Share (including the associated Rights) issued
and outstanding immediately prior to the Effective Time (as defined in the
Merger Agreement) (other than Shares then owned by the Company, Parent, the
Purchaser, any other direct or indirect subsidiary of Parent or by the
stockholders of the Company, if any, who dissent from the Merger and comply
with all of the provisions of the Delaware General Corporation Law
concerning the right, if applicable, of holders of Shares to seek appraisal
of their Shares) will be converted into the right to receive the price paid
in the Offer in cash, without interest.
5. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the Expiration Date (x) that
number of outstanding Shares which, together with the outstanding Shares
subject to the Stockholder Agreement that shall not have been so tendered,
would represent at least a majority of all outstanding Shares (for purposes
of this clause (x) only, "Shares" shall be deemed to refer only to Shares
outstanding as of the date of the Merger Agreement) and (y) that number of
Shares which, together with the Shares subject to the Stockholder Agreement
that shall not have been so tendered, would represent at least a majority
of the fully diluted Shares (determined on a fully diluted basis for all
outstanding stock options, warrants and any other rights to acquire Shares)
and (2) the Company having obtained certain amendments to, and consents
with respect to, existing equipment lease and other financing arrangements.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, July 28, 1997, unless the Offer is extended by
the Purchaser. In all cases, payment for Shares purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares (or a Book-Entry Confirmation) pursuant to the
procedures set forth in Section 2 of the Offer to Purchase, (b) a Letter of
Transmittal (or a facsimile copy thereof), properly completed and duly
executed, or an "Agent's Message" (as defined in Section 4 of the Offer to
Purchase) and (c) any other documents required by the Letter of
Transmittal.
7. The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any of or all your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form set forth below. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified below. YOUR INSTRUCTIONS TO US SHOULD BE
FORWARDED PROMPTLY TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal. The Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. If the securities laws of any jurisdiction require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of the Purchaser by Donaldson, Lufkin & Jenrette Securities
Corporation, the Dealer Manager, or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK OF
SMT HEALTH SERVICES INC.
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated June 30, 1997, of Three Rivers Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Three Rivers Holding Corp., a
Delaware corporation, and the related Letter of Transmittal, relating to
shares of Common Stock, $.01 par value (the "Shares"), of SMT Health Services
Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) held by you for the account of the
undersigned on the terms and conditions set forth in such Offer to Purchase
and the related Letter of Transmittal.
Number of Shares to be Tendered:*
........................ Shares
SIGN HERE
Signature(s)...............................................................
(Print Name(s))............................................................
(Print Address(es))........................................................
(Area Code and Telephone Number(s))........................................
(Taxpayer Identification or Social Security Number(s)).....................
- --------
*Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
3
<PAGE>
EXHIBIT (A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
The actual owner
of the account
or, if combined
funds, the first
individual on
2. Two or more individuals (joint account) the account
The actual owner
of the account
or, if joint
funds, either
3. Husband and wife (joint account) person(1)
4. Custodian account of a minor (Uniform Gift to Minors Act) The minor(2)
The adult or, if
the minor is the
only
contributor, the
5. Adult and minor (joint account) minor(1)
The ward, minor,
6. Account in the name of guardian or committee for a or incompetent
designated ward, minor, or incompetent person person(3)
7. a The usual revocable savings trust account (grantor is The grantor-
also trustee) trustee(1)
b So-called trust account that is not a legal or valid The actual
trust under State law owner(1)
8. Sole proprietorship account The owner(4)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------------
<S> <C>
9. A valid trust, estate, or pension trust The legal entity
(Do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational organization
account The organization
12. Partnership account held in the name of the business The partnership
13. Association, club, or other tax-exempt organization The organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of Agriculture in the name
of a public entity (such as a State or local government,
school district, or prison) that receives agricultural
program payments The public entity
</TABLE>
- -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (A)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated June 30,
1997, and the related Letter of Transmittal and is not being made to, and
tenders will not be accepted from or on behalf of, holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance
thereof would not be in compliance with the laws of such
jurisdiction. If the securities laws of any jurisdiction
require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on
behalf of Three Rivers Acquisition Corp. by
Donaldson, Lufkin & Jenrette Securities
Corporation or one or more registered
brokers or dealers licensed under
the laws of such jurisdiction.
Notice of Offer to Purchase
All Outstanding Shares of Common Stock
(Including the Associated Rights)
of
SMT Health Services Inc.
at
$11.75 Net Per Share in Cash
by
Three Rivers Acquisition Corp.
a Wholly Owned Subsidiary of
Three Rivers Holding Corp.
Three Rivers Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Three Rivers Holding Corp., a Delaware corporation
("Parent"), is offering to purchase all outstanding shares of Common Stock, $.01
par value (the "Shares"), of SMT Health Services Inc., a Delaware corporation
(the "Company"), including the associated Rights, at a purchase price of $11.75
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 30, 1997, and the
related Letter of Transmittal (which together constitute the "Offer"). Unless
the context otherwise requires, all references herein to Shares shall include
the associated Rights (as defined in the Rights Agreement between the Company
and American Stock Transfer & Trust Company, as Rights Agent, dated as of
November 8, 1995, as amended June 23, 1997 (the "Rights Agreement")). See the
Offer to Purchase for capitalized terms used but not defined herein.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON MONDAY, JULY 28, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn on or prior to the Expiration Date (as defined below)
(x) that number of outstanding Shares which, together with the outstanding
Shares subject to the Stockholder Agreement (as defined below) that shall not
have been so tendered, would represent at least a majority of all outstanding
Shares (for purposes of this clause (x) only, "Shares" shall be deemed to refer
only to Shares outstanding as of the date of the Merger Agreement (as defined
below)) and (y) that number of Shares which, together with the Shares subject to
the Stockholder Agreement that shall not have been so tendered, would represent
at least a majority of the fully diluted Shares (determined on a fully diluted
basis for all outstanding stock options, warrants and any other rights to
acquire Shares) (the conditions in (x) and (y) collectively, the "Minimum
Condition") and (2) the Company having obtained certain amendments to, and
consents with respect to, existing equipment lease and other financing
arrangements as set forth in Section 14 of the Offer to Purchase. The Purchaser
reserves the right (subject to obtaining the express written consent of the
Company and the applicable rules and regulations of the Securities and Exchange
Commission (the "Commission")), which it presently has no intention of
exercising, to waive or reduce the Minimum Condition.
The Offer is not conditioned on obtaining financing.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and has determined that the Offer and the Merger are fair to and in
the best interests of the stockholders of the Company and recommends that all of
the stockholders of the Company accept the Offer, tender their Shares and
approve the Merger Agreement and the Merger, if required by law.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as of
June 24, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides that the Purchaser will be merged (the
"Merger") with and into the Company after the completion of the Offer and the
satisfaction of certain conditions. As a result of the Merger, each Share issued
and outstanding immediately prior to the Effective Time (as defined in the
Merger Agreement) (other than Shares then owned by the Company, Parent, the
Purchaser, any other subsidiary of Parent or the Company or stockholders who
dissent from the Merger and comply with all of the provisions of the Delaware
General Corporation Law concerning the right, if applicable, of holders of
Shares to seek appraisal of their Shares) will be converted into the right to
receive the price paid in the Offer in cash, without interest.
In connection with the execution of the Merger Agreement, the Purchaser and
Parent entered into a Stockholder Agreement, dated as of June 24, 1997 (the
"Stockholder Agreement"), with Jeff D. Bergman, the President, Chief Executive
Officer and Chairman of the Board of the Company, Daniel Dickman, the Executive
Vice President, Chief Operating Officer, Secretary and a Director of the
Company, David W. Spindler, the Senior Vice President of Clinical Operations and
Marketing of the Company, and David A. Zynn, the Chief Financial Officer,
Treasurer and Assistant Secretary of the Company (collectively, the "Selling
Stockholders"), pursuant to which such Selling Stockholders have agreed to sell
to the Purchaser, and the Purchaser has agreed to purchase, all Shares
beneficially owned by them, representing approximately 15.1% of the Shares on a
fully diluted basis, including Shares subsequently acquired by a Selling
Stockholder through the exercise of options or otherwise, at a price per Share
equal to the price paid in the Offer, provided that such obligation to sell and
such obligation to purchase are subject to certain conditions, including the
Minimum Condition having been satisfied and the Purchaser having accepted Shares
for payment under the Offer. Pursuant to the Stockholder Agreement, the
Purchaser has the right (which it intends to exercise) to require the Selling
Stockholders to tender the Shares subject to the Stockholder Agreement into the
Offer. Pursuant to the Stockholder Agreement, each Selling Stockholder has also
executed and delivered a proxy for the benefit of the Purchaser with respect to
the Shares subject to the Stockholder Agreement owned by such Selling
Stockholder to vote such Shares against certain competing transactions, as set
forth in Section 12 of the Offer to Purchase.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered to the Purchaser on or
prior to the Expiration Date and not properly withdrawn if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares purchased pursuant to
the Offer will be made by deposit of the purchase price with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payments from the Purchaser and transmitting payments to tendering stockholders.
Under no circumstances will interest on the purchase price of the Shares be paid
by the Purchaser by reason of any delay in making such payment. In all cases,
payment for Shares purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of (a) certificates for such Shares (or a Book-
Entry Confirmation) pursuant to the procedures set forth in Section 2 of the
Offer to Purchase, (b) a Letter of Transmittal (or a facsimile copy thereof),
properly completed and duly executed, or an "Agent's Message" and (c) any other
documents required by the Letter of Transmittal.
The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday,
July 28, 1997, unless and until the Purchaser, in its sole discretion, shall
have extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Purchaser, shall expire.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 14 of the Offer to
Purchase shall have occurred or shall have been determined by the Purchaser to
have occurred, (a) to extend the period of time for which the Offer is open, and
thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (b) to
amend the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. The Purchaser shall not have any obligation to pay
interest on the purchase price for tendered Shares, whether or not the Purchaser
exercises its right to extend the Offer.
There can be no assurance that the Purchaser will exercise its right to extend
the Offer (other than as required by the Merger Agreement or applicable law).
Any extension, amendment or termination of the Offer, or the waiver of any
condition of the Offer, will be followed as promptly as practicable by a public
announcement.
If any tendered Shares are not purchased pursuant to the Offer for any reason,
or if certificates are submitted which represent more Shares than are tendered,
certificates for such Shares not purchased or tendered will be returned (or, in
the case of Shares delivered by book-entry transfer within a Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 2 of the Offer to
Purchase, such Shares will be credited to an account maintained within such
Book-Entry Transfer Facility) without expense to the tendering stockholder, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. Certificates representing Shares canceled in the Merger will not be
returned.
Except as otherwise provided below, tenders of Shares are irrevocable. Shares
tendered pursuant to the Offer may be withdrawn on, or at any time prior to, the
Expiration Date and, unless theretofore accepted for payment as provided in the
Offer to Purchase, may also be withdrawn on or after August 28, 1997.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase and
must specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Shares. If certificates for
Shares have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown on
the particular certificates evidencing the Shares to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution,
except in the case of Shares tendered by an Eligible Institution, must also be
furnished to the Depositary as aforesaid. If Shares have been delivered pursuant
to the procedure for book-entry transfer as set forth in Section 2 of the Offer
to Purchase, any notice of withdrawal must also specify the name and number of
the account at the appropriate Book-Entry Transfer Facility to be credited with
the withdrawn Shares and otherwise comply with such Book-Entry Transfer
Facility's procedures.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General
Rules and Regulations under the Exchange Act is contained in the Offer to
Purchase and is incorporated herein by reference.
Stockholders are urged to read the Offer to Purchase and the related Letter of
Transmittal carefully before deciding whether to tender their Shares pursuant to
the Offer.
Questions and requests for assistance or for copies of the Offer to Purchase,
the Letter of Transmittal, the Notice of Guaranteed Delivery or other related
materials may be directed to the Information Agent or the Dealer Manager at
their respective addresses and telephone numbers set forth below. Holders of
Shares may also contact brokers, dealers, commercial banks and trust companies
for additional copies of the Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery or other related materials.
The Information Agent for the Offer is:
[MacKenzie Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
Securities Corporation
2121 Avenue of the Stars, Suite 3000
Los Angeles, CA 90067
(310) 282-5597 (Collect)
June 30, 1997
<PAGE>
EXHIBIT (A)(8)
BUSINESS AND MEDICAL EDITORS:
SMT Health Services Inc. to be Acquired
By an Affiliate of Apollo Management, L.P.
PITTSBURGH, June 24 /PRNewswire/ -- SMT Health Services Inc. (Nasdaq-NNM:
SHED) today announced that it has entered into a definitive agreement with Three
Rivers Acquisition Corp., an affiliate of Apollo Management, L.P., whereby Three
Rivers will acquire all the outstanding shares of SMT common stock for $11.75
per share through a cash tender offer to commence within five business days to
be followed by a merger. The total transaction is valued at approximately $100
million including outstanding stock options and warrants and the assumption of
debt. The tender offer and merger are not subject to financing but will be
subject to customary conditions, including the tender of a majority of SMT's
fully diluted shares and the obtaining of any necessary regulatory and third
party approvals. The tender offer will be made pursuant to definitive documents
to be filed with the Securities and Exchange Commission.
Following the transaction, senior management of SMT, including Jeff D.
Bergman, Chairman, President and Chief Executive Officer, and Daniel Dickman,
Executive Vice President and Chief Operating Officer, will continue to manage
the operations of SMT in their current positions.
Under the terms of the agreement, which has been unanimously approved by the
Board of Directors of SMT, SMT shareholders will receive $11.75 per SMT common
share. In addition, management shareholders, owning in the aggregate
approximately 15% of SMT's full-diluted shares, have entered into a stockholder
agreement whereby they have agreed to sell their shares to Apollo in connection
with the transaction.
SMT provides diagnostic imaging services to health care providers. The
company operates a fleet of 19 mobile Magnetic Resonance Imaging ("MRI") units
and offers its services to customers in Pennsylvania, West Virginia, North
Carolina, South Carolina, Virginia, Ohio and Kentucky.
SMT's financial advisor in this transaction is Smith Barney, Inc. and its
legal counsel is Buchanan Ingersoll Professional Corporation.
SOURCE SMT Health Services
-0- 06/24/97
/CONTACT: James K. White, Managing Director, Kehoe, White, Savage &
Company, Inc., for SMT Health Services, 310-437-0655/
(SHED)
CO: SMT Health Services; Apollo Management, L.P.
ST: Kentucky, North Carolina, Ohio, Pennsylvania, South Carolina, Virginia,
West Virginia
IN: HEA MTC
SU: TNM
<PAGE>
EXHIBIT (A)(10)
SMT HEALTH SERVICES INC.
10521 PERRY HIGHWAY
PITTSBURGH, PA 15090
June 30, 1997
To our Stockholders:
I am pleased to inform you that, on June 24, 1997, SMT Health Services Inc.
("SMT") entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Three Rivers Holding Corp. ("Parent") and Three Rivers Acquisition Corp.,
a wholly owned subsidiary of Parent ("Purchaser"), affiliates of Apollo
Management, L.P., pursuant to which Purchaser has commenced a cash tender
offer (the "Offer") to purchase all of the outstanding shares of SMT Common
Stock (the "Shares") for $11.75 per share, net to the seller in cash. Under
the Merger Agreement, the Offer will be followed by a merger (the "Merger") in
which, among other things, any and all remaining Shares of SMT Common Stock
will be converted into the right to receive $11.75 per share in cash, without
interest.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTEREST OF THE STOCKHOLDERS OF SMT AND RECOMMENDS THAT ALL OF THE
STOCKHOLDERS OF SMT ACCEPT THE OFFER, TENDER THEIR SHARES AND APPROVE THE
MERGER AGREEMENT AND THE MERGER, IF REQUIRED BY LAW.
Enclosed is a copy of SMT's Solicitation/Recommendation Statement on
Schedule 14D-9 filed with the Securities and Exchange Commission, which
includes detailed information regarding the factors considered by your Board
of Directors in its deliberations, and certain information regarding the Offer
and the Merger. Included as Annex B to the Schedule 14D-9 is a copy of the
written opinion dated June 24, 1997 of Smith Barney Inc., SMT's financial
advisor, to the effect that, as of such date and based upon and subject to
certain matters stated therein, the cash consideration to be received by
holders of Shares (other than Parent and its affiliates) in the Offer and
Merger was fair to such holders from a financial point of view.
A more complete description of the Offer and the Merger is set forth in the
Offer to Purchase dated June 30, 1997, together with related materials,
including a Letter of Transmittal to be used for tendering your Shares. These
documents set forth the terms and conditions of the Offer, describe the terms
of the Merger and provide instructions as to how to tender your Shares. I urge
you to read the enclosed material carefully before making a decision with
respect to tendering your Shares in the Offer.
Sincerely,
Jeff D. Bergman
Chairman of the Board, Chief
Executive Officer and President
<PAGE>
EXHIBIT (C)(1)
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
THREE RIVERS HOLDING CORP.,
THREE RIVERS ACQUISITION CORP.
AND
SMT HEALTH SERVICES INC.
DATED AS OF JUNE 24, 1997
<PAGE>
Index of Defined Terms
----------------------
<TABLE>
<CAPTION>
<S> <C>
Affiliate........................................................................................1.2
Agreement....................................................................................Caption
Alternative Transaction.......................................................................6.2(a)
Acquisition Agreement.........................................................................6.2(b)
Benefit Plans................................................................................4.15(a)
By-laws.......................................................................................2.5(b)
Certificate of Incorporation..................................................................2.5(a)
Certificate of Merger............................................................................2.3
Certificates..................................................................................3.2(b)
CHAMPUS.........................................................................................4.26
Closing Date.....................................................................................2.2
Code.........................................................................................4.15(a)
Commitments.....................................................................................4.10
Commonly Controlled Entity...................................................................4.15(a)
Company......................................................................................Caption
Company Common Stock....................................................................... Preamble
Company Preferred Stock..........................................................................4.2
Company Stock Option..........................................................................7.4(a)
Company Stockholder Approval.....................................................................4.4
Confidentiality Agreement........................................................................7.2
DGCL.............................................................................................2.1
Director Warrant..............................................................................1.2(d)
Dissenting Shares.............................................................................3.1(d)
Dissenting Stockholder........................................................................3.1(d)
Effective Time...................................................................................2.3
Employment Agreements.......................................................................Preamble
Environmental Laws...........................................................................4.12(a)
ERISA........................................................................................4.15(a)
Exchange Act..................................................................................1.1(b)
Expenses......................................................................................7.7(b)
Filed SEC Documents..............................................................................4.8
Governmental Entity..............................................................................4.5
Hazardous Materials..........................................................................4.12(b)
HSR Act..........................................................................................4.5
indebtedness..................................................................................4.6(c)
Information Statement............................................................................4.7
Intellectual Property Rights....................................................................4.19
knowledge.......................................................................................10.3
Liens.........................................................................................4.3(a)
made available..................................................................................10.3
material adverse affect.........................................................................10.3
</TABLE>
<PAGE>
<TABLE>
<S> <C>
material adverse change.........................................................................10.3
Merger......................................................................................Preamble
Merger Consideration..........................................................................3.1(c)
Minimum Condition..........................................................................Exhibit A
MRI Unit......................................................................................4.6(c)
Net Amount....................................................................................7.4(a)
NOL Carryforwards...............................................................................4.16
Offer.......................................................................................Preamble
Offer Conditions..............................................................................1.1(a)
Offer Documents...............................................................................1.1(b)
Offer Price.................................................................................Preamble
Parachute Gross-Up Payment......................................................................4.17
Parent.......................................................................................Caption
Paying Agent..................................................................................3.2(a)
PCBs.........................................................................................4.12(b)
Pension Plans................................................................................4.15(a)
Permits.........................................................................................4.11
person..........................................................................................10.3
Plan.............................................................................................6.7
Post-Signing Returns.............................................................................6.3
Proxy Statement..................................................................................4.5
Release......................................................................................4.12(b)
Rights Agreement................................................................................4.23
Schedule 14D-1................................................................................1.1(b)
Schedule 14D-9................................................................................1.2(b)
SEC...........................................................................................1.1(a)
SEC Documents.................................................................................4.6(a)
Securities Act................................................................................4.6(a)
Shares......................................................................................Preamble
SRLY............................................................................................4.16
Stock Option Plans............................................................................7.4(a)
Stockholder Agreement.......................................................................Preamble
Stockholders Meeting..........................................................................7.1(a)
Sub..........................................................................................Caption
Subsidiaries..................................................................................4.3(a)
subsidiary......................................................................................10.3
Superior Proposal.............................................................................9.1(d)
Surviving Corporation............................................................................2.1
taxes...........................................................................................4.16
Termination Fee...............................................................................7.7(b)
Third Party Proposal..........................................................................6.2(a)
Warrant.......................................................................................7.4(a)
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER (this
"Agreement") dated as of June 24, 1997, among
----------
THREE RIVERS HOLDING CORP., a Delaware corporation
("Parent"), THREE RIVERS ACQUISITION CORP., a
------
Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and SMT HEALTH SERVICES INC., a
---
Delaware corporation (the "Company").
-------
WHEREAS the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Sub to make a tender offer to purchase all the outstanding shares of Common
Stock, par value $.01 per share, of the Company (the "Company Common Stock"; all
--------------------
the outstanding shares of Company Common Stock being hereinafter collectively
referred to as the "Shares") together with the associated Rights (as defined
------
herein) at a purchase price of $11.75 per Share (the "Offer Price"), net to the
-----------
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in this Agreement (as it may be amended from time to time
as permitted under this Agreement, the "Offer"); and the Board of Directors of
-----
the Company has adopted resolutions approving the Offer and the Merger (as
defined below), recommending that the Company's stockholders accept the Offer
and approving the acquisition of Shares and the associated Rights by Sub
pursuant to the Offer and the Stockholder Agreement (as defined herein);
WHEREAS the respective Boards of Directors of Parent, Sub and the
Company have each approved the merger of Sub into the Company (the "Merger"),
------
upon the terms and subject to the conditions set forth in this Agreement,
whereby each Share, other than Shares owned directly or indirectly by Parent or
the Company and Dissenting Shares (as defined in Section 3.1(d)), will be
converted into the right to receive the price per share paid in the Offer;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent, Sub and certain
stockholders of the Company are entering into a Stockholder Agreement (the
"Stockholder Agreement") pursuant to which such stockholders have, among other
- ----------------------
things, agreed to sell all of such stockholders' Shares to Sub at a cash price
per Share equal to the Offer Price, upon the terms and subject to the conditions
set forth in the Stockholder Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent and certain
stockholders of the Company who are employed by the Company are executing and
delivering the Employment Agreements, attached hereto as Exhibits B - E (the
"Employment Agreements") pursuant to which such stockholders have, among other
- ----------------------
things, agreed to certain non-competition and non- solicitation covenants; and
<PAGE>
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE OFFER
1.1. The Offer.
---------
(a) Subject to the terms and conditions set forth in this Agreement,
within five business days after the date of the public announcement, which shall
occur on the date hereof or the following day, by Parent and the Company of this
Agreement, Sub shall, and Parent shall cause Sub to, commence (within the
meaning of Rule 14d-2 under the Exchange Act (as hereinafter defined)) the
Offer. The obligation of Sub to, and of Parent to cause Sub to, commence the
Offer, conduct and consummate the Offer as soon as practicable after the date
hereof and accept for payment, and pay for, any Shares tendered and not
withdrawn pursuant to the Offer shall be subject only to the conditions set
forth in Exhibit A (the "Offer Conditions") (any of which may be waived in whole
----------------
or in part by Sub in its sole discretion, provided that, without the express
written consent of the Company, Sub may not waive the Minimum Condition (as
defined in Exhibit A)). Sub expressly reserves the right, subject to compliance
with the Exchange Act, to modify the terms of the Offer, except that, without
the express written consent of the Company, Sub shall not (i) reduce the number
of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) add to or
modify the Offer Conditions, including the Minimum Condition, (iv) except as
provided in the next sentence, extend the Offer, if all of the Offer Conditions
are satisfied or waived, (v) change the form of consideration payable in the
Offer or (vi) amend or alter any term of the Offer in any manner materially
adverse to the holders of the Shares, provided, however, that nothing contained
herein shall prohibit Sub, in its sole discretion without the consent of the
Company, from waiving satisfaction of any condition to the Offer other than the
Minimum Condition. Notwithstanding the foregoing, Sub may, without the consent
of the Company, (A) extend the Offer for a specified period, if at the then
scheduled or any extended expiration date of the Offer any of the Offer
Conditions shall not be satisfied or waived, until such time as such conditions
are satisfied or waived, (B) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer, (C) extend
---
the Offer pursuant to Section 9.1(d) and (D) extend the Offer for any reason on
one or more occasions for an aggregate period of not more than 10 business days
beyond the latest expiration date that would be permitted under clause (A), (B)
or (C) of this sentence. Subject to the terms and conditions of the Offer and
this Section 1.1(a), Sub shall, and Parent shall cause Sub to, accept for
payment, and pay for, all Shares validly tendered and not withdrawn pursuant to
the Offer
-2-
<PAGE>
that Sub becomes obligated to accept for payment, and pay for, pursuant to the
Offer as soon as practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer, which shall contain an offer to
--------------
purchase and a related letter of transmittal (such Schedule 14D-1 and the
documents included therein pursuant to which the Offer will be made, together
with any supplements or amendments thereto, the "Offer Documents"). Parent and
---------------
Sub agree that the Offer Documents shall comply as to form in all material
respects with the Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder (the "Exchange Act"), and the Offer
------------
Documents, on the date first published, sent or given to the Company's
stockholders, shall not 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
were made, not misleading, except that no representation or warranty is made by
Parent or Sub with respect to written information supplied by or on behalf of
the Company or any of its stockholders for inclusion or incorporation by
reference in the Offer Documents. Parent, Sub and the Company each agrees
promptly to correct any written information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and Parent and Sub further agree to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the
SEC and the other Offer Documents as so corrected to be disseminated to holders
of Shares, in each case as and to the extent required by applicable Federal
securities laws. The Company and its counsel shall be given reasonable
opportunity to review and comment upon the Offer Documents prior to their filing
with the SEC or dissemination to the stockholders of the Company. Parent and Sub
agree to provide the Company and its counsel any comments Parent, Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds sufficient to accept for payment, and pay for, any and all
Shares that Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer.
1.2. Company Actions.
---------------
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously adopted resolutions approving this Agreement and
the Stockholder Agreement, the Offer and the Merger, determining that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company and its stockholders and recommending that the Company's stockholders
accept the Offer, tender their Shares and the associated Rights pursuant to the
Offer and approve and adopt the Merger and this Agreement (if required). The
Company represents that its Board of Directors has received the opinion of Smith
Barney Inc. ("Smith Barney") dated the date of this Agreement to the effect
that, as of such date and based upon and subject to the matters set forth
therein, the cash consideration to be received by the holders of Shares (other
than Parent and its Affiliates) pursuant to the Offer and the Merger is fair
----------
from a financial point of view to such holders, and a complete and correct
signed copy of such opinion will be
-3-
<PAGE>
delivered by the Company to Parent after receipt thereof by the Company. The
Company has been authorized by Smith Barney to permit the inclusion of such
opinion (or a reference thereto) in the Schedule 14D-1, the Schedule 14D-9 (as
hereinafter defined) and the Proxy Statement (as hereinafter defined).
(b) On the date the Offer Documents are filed with the SEC, or
promptly thereafter, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9")
--------------
containing the recommendation described in paragraph (a) and shall mail the
Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9 shall
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
stockholders, shall not 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
were made, not misleading, except that no representation or warranty is made by
the Company with respect to written information supplied by or on behalf of
Parent or Sub for inclusion in the Schedule 14D-9. Each of the Company, Parent
and Sub agrees promptly to correct any written information provided by it for
use in the Schedule 14D-9 if and to the extent that such information shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be filed with the
SEC and disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. Parent and its counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 prior to its filing with the SEC or dissemination to stockholders of the
Company. The Company agrees to provide Parent and its counsel any comments the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Sub such information and
assistance (including updated lists of stockholders, security position listings
and computer files) as Parent may reasonably request in communicating the Offer
to the Company's stockholders. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Merger, Parent and Sub and
their agents shall hold in confidence the information contained in any such
labels, listings and files, will use such information only in connection with
the Offer and the Merger and, if this Agreement shall be terminated, will, upon
request, promptly deliver, and will use their best efforts to cause their agents
promptly to deliver, to the Company all copies of such information then in their
possession or control.
-4-
<PAGE>
(d) Immediately after consummation of the Offer, each outstanding
Warrant (as defined in Section 7.4) to purchase Common Stock of the Company
issued under the Company's 1995 Directors Warrant Plan held by a director of the
Company (a "Director Warrant"), shall be purchased by Sub for an amount in cash,
----------------
payable at the time of such purchase, equal to the product of (x) the number of
shares subject to such Director Warrant and (y) the excess of the price paid in
the Offer over the per share exercise price of such Director Warrant.
ARTICLE II
THE MERGER
2.1. The Merger.
----------
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub
----
shall be merged with and into the Company at the Effective Time (as defined in
Section 2.3). Following the Effective Time, the separate corporate existence of
Sub shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
---------------------
obligations of Sub in accordance with the DGCL.
2.2. Closing.
-------
The closing of the Merger will take place at 10:00 a.m. (New York City
time) on a date to be specified by Parent or Sub, which shall be no later than
the second business day after satisfaction or waiver of the conditions set forth
in Article VIII (the "Closing Date"), at the offices of O'Sullivan Graev &
------------
Karabell, LLP, 30 Rockefeller Plaza, 41st Floor, New York, New York 10112,
unless another date, time or place is agreed to in writing by the parties
hereto.
2.3. Effective Time.
--------------
Subject to the provisions of this Agreement, as soon as practicable
after the satisfaction or waiver of the conditions to the Merger set forth
herein, the parties shall file a certificate of merger or other appropriate
documents (in any such case, the "Certificate of Merger") executed in accordance
---------------------
with the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL and other applicable law. The Merger shall
become effective at such time as the Certificate of Merger is duly accepted for
record with the Delaware Secretary of State, or at such other time specified in
the Certificate of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
--------------
2.4. Effects of the Merger.
---------------------
The Merger shall have the effects set forth in Section 259 of the DGCL.
-5-
<PAGE>
2.5. Certificate of Incorporation and By-laws.
----------------------------------------
(a) The Certificate of Incorporation of the Company (the "Certificate
-----------
of Incorporation"), as in effect immediately prior to the Effective Time, shall
- ----------------
be the certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law;
provided, that Parent shall be entitled, in its sole discretion, to amend and/or
- --------
restate the Certificate of Incorporation simultaneously with the Effective Time.
(b) The by-laws of Sub (the "By-laws") as in effect immediately prior
-------
to the Effective Time shall be the by-laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
2.6. Directors.
---------
The directors of Sub, which Parent and Sub agree shall include each of
Jeff D. Bergman and Daniel Dickman, immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, until the earlier of their
death, resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
2.7. Officers.
--------
The officers of the Company and such other persons as designated by
Parent immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1. Effect on Capital Stock.
-----------------------
As of the Effective Time, by virtue of the Merger and without any action
on the part of the holder of any Shares or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
--------------------
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each share
-----------------------------------------------------
of the Common Stock of the Company that is owned by the Company and each Share
that is owned by Parent, Sub or any other direct or indirect wholly owned
subsidiary of Parent shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
-6-
<PAGE>
(c) Conversion of Company Common Stock. Subject to Section 3.1(d),
----------------------------------
each issued and outstanding Share (other than shares to be canceled in
accordance with Section 3.1(b)), together with the associated Rights, shall be
converted into the right to receive from the Surviving Corporation in cash,
without interest, the price actually paid in the Offer (the "Merger
------
Consideration"). As of the Effective Time, all such Shares (and the associated
- -------------
Rights) shall no longer be outstanding and shall be canceled and retired
automatically and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in
---------------------------------
this Agreement to the contrary, any issued and outstanding Shares held by a
person (a "Dissenting Stockholder") who has neither voted in favor of the Merger
----------------------
nor consented in writing thereto and otherwise complies with all the applicable
provisions of the DGCL concerning the right of holders of Company Common Stock
to dissent from the Merger and require appraisal of their Shares ("Dissenting
----------
Shares") shall not be converted as described in Section 3.1(c) but shall become
- ------
the right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the laws of the State of Delaware. If, after
the Effective Time, such Dissenting Stockholder withdraws his demand for
appraisal or fails to perfect or otherwise loses his right of appraisal, in any
case pursuant to the DGCL, his Shares shall be deemed to be converted as of the
Effective Time into the right to receive the Merger Consideration. The Company
shall give Parent (i) prompt notice of any demands for appraisal of Shares
received by the Company and (ii) if and after Sub shall have accepted for
payment Shares pursuant to and subject to the conditions of the Offer (including
the Minimum Condition) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. The Company shall
not, without the prior written consent of Parent, make any payment with respect
to, or settle, offer to settle or otherwise negotiate, any such demands.
3.2. Exchange of Certificates.
------------------------
(a) Paying Agent. Prior to the Effective Time, Parent shall designate
------------
a commercial bank or trust company to act as paying agent in the Merger (the
"Paying Agent"). Parent shall cause the Surviving Corporation to deposit with
------------
the Paying Agent in separate trust for holders of the Certificates (as
hereinafter defined) immediately available funds in an amount sufficient for the
payment of the aggregate Merger Consideration for the shares converted pursuant
to Section 3.1(c) (it being understood that any and all interest earned on funds
made available to the Paying Agent pursuant to this Agreement shall be turned
over to Parent).
(b) Exchange Procedure. As soon as reasonably practicable after the
------------------
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "Certificates"), (i) a letter of transmittal (which
------------
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such
-7-
<PAGE>
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor, and the
Paying Agent shall pay pursuant to irrevocable instructions given by Sub or
Parent, the amount of cash into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 3.1, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, payment may be made to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of such Certificate
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the amount of cash,
without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 3.1. No interest will
be paid or will accrue on the cash payable upon the surrender of any
Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash paid
---------------------------------------------------
upon the surrender of Certificates in accordance with the terms of this Article
III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares formerly represented by such Certificates. At the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason except
notation thereon that a stockholder has elected to exercise his right to
appraisal pursuant to the DGCL they shall be canceled and exchanged as provided
in this Article III.
(d) No Liability. Any funds deposited with the Paying Agent that
------------
remain unclaimed by the former stockholders of the Company for three (3) months
after the Effective Time shall be paid to the Surviving Corporation upon demand,
and any former stockholders of the Company who have not theretofore complied
with the instructions for exchanging their Certificates provided herein shall
thereafter look only to the Surviving Corporation for payment of their claims
for the Merger Consideration set forth in Section 3.1 hereof for each Share held
by such stockholder, without any interest thereon. None of Parent, Sub, the
Company or the Paying Agent shall be liable to any person in respect of any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
prior to seven years after the Effective Time (or immediately prior to such
earlier date on which any payment pursuant to this Article III would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 4.5)), the cash payment in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person previously
entitled thereto.
-8-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
4.1. Organization.
------------
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business as now being conducted. The
Company is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing has not had a material adverse effect
that has not been cured and reasonably would not be expected to have a material
adverse effect (as defined in Section 10.3) or prevent or materially delay the
consummation of the Offer and/or the Merger. The Company has made available to
Parent complete and correct copies of its Certificate of Incorporation and By-
laws, as amended to the date hereof.
4.2 Capitalization.
--------------
The authorized capital stock of the Company consists of 20,000,000 Shares
and 994,600 shares of preferred stock, par value $.01 per share ("Company
-------
Preferred Stock"). At the close of business on June 20, 1997, (a) 5,746,324
- ---------------
Shares were issued and outstanding, (b) no Shares were held by the Company in
its treasury, (c) 573,518 Shares were reserved for issuance upon exercise of
outstanding Company Stock Options (as defined in Section 7.4), (d) 454,750
Shares were issuable upon the exercise of outstanding Warrants (as defined in
Section 7.4) and (e) no shares of Company Preferred Stock were issued and
outstanding. Except as set forth above, and except for shares issued since June
20, 1997 upon the exercise of any Company Stock Option or any Warrant, since
such date no shares of capital stock or other voting securities of the Company
were issued, reserved for issuance, issuable or outstanding. All outstanding
Shares are, and all Shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except for the Rights and except as set forth above,
as of the date hereof, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which any of them is bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the Company or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company (other
than as set forth in Section 7.4).
-9-
<PAGE>
4.3 Subsidiaries.
------------
(a) The authorized capital stock of each of the subsidiaries of the
Company (the "Subsidiaries") is set forth on Schedule 4.3. All of the
------------ ------------
outstanding shares of capital stock of the Subsidiaries are owned of record and
beneficially by the Company, free and clear of all mortgages, liens, pledges,
charges, encumbrances or other security interests (collectively, "Liens").
-----
(b) Except as set forth on Schedule 4.3, since December 31, 1996 no
------------
shares of capital stock or other voting securities of any Subsidiary were
issued, reserved for issuance, issuable or outstanding. All outstanding shares
of capital stock of the Subsidiaries are, and all such shares which may be
issued will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of any Subsidiary having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of the Subsidiaries may vote. As of
the date hereof, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any Subsidiary is a party or by which any of them is bound obligating
the Company or any Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of any Subsidiary or obligating the Company or any Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any shares of capital stock of any Subsidiary. Except for
the Company's interest in its Subsidiaries or as set forth on Schedule 4.3,
neither the Company nor any Subsidiary owns directly or indirectly any interest
or investment in the form of debt or equity in, nor is the Company or any
Subsidiary subject to any obligation or requirement to provide for or to make
any investment in, any person.
4.4 Authority.
---------
The Company has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby (other than, with respect to the Merger, the approval and adoption of
this Agreement by the holders of a majority of the Shares (the "Company
-------
Stockholder Approval")). The execution, delivery and performance of this
- --------------------
Agreement and the consummation by the Company of the Merger and of the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (in each case, other than, with
respect to the Merger, the Company Stockholder Approval). This Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
-10-
<PAGE>
4.5. Consents and Approvals; No Violations.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Exchange Act
(including the filing with the SEC of the Schedule 14D-9 and a proxy or
information statement relating to any required approval by or meeting of the
Company's stockholders of this Agreement (the "Proxy Statement")) and the Hart-
---------------
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
-------
neither the execution, delivery or performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of the Certificate of
Incorporation or By-laws of the Company or any of its Subsidiaries, (b) require
any filing with, notice to, or Permit (as defined in Section 4.11),
authorization, consent or approval of, any Federal, state or local government or
any court, tribunal, administrative agency or commission or other governmental
or other regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity"), (c) result in the creation or imposition of any Liens
-------------------
upon the properties or assets of the Company or any Subsidiary, (d) except as
set forth on Schedule 4.5, result in a violation or breach of, require any
------------
notice to any party pursuant to, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation, acceleration or right of non-renewal or contractually
require any prepayment or offer to purchase any debt or give rise to the loss of
a material benefit) under, any of the terms, conditions or provisions of any
Commitment (as defined in Section 4.10) to which the Company or any of its
Subsidiaries is a party or by which the Company's or any of its Subsidiaries'
properties or assets may be bound, (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets or (f) result in
the loss, forfeiture, revocation, termination or diminution of any Permit (as
defined in Section 4.11) except in the case of clauses (b), (c), (d), (e) or (f)
for failures to fulfill requirements, liens, losses, forfeitures, revocations,
diminutions, violations, breaches or defaults that, individually or in the
aggregate, have not had a material adverse effect that has not been cured and
reasonably would not be expected to have a material adverse effect or prevent or
materially delay the consummation of the Offer and/or the Merger.
4.6. SEC Documents; Financial Statements; Other Financial Information.
----------------------------------------------------------------
(a) The Company has filed with the SEC all reports, forms, schedules
and statements and other documents required to be filed by it (the "SEC
---
Documents"). As of their respective filing dates, (i) the SEC Documents complied
- ---------
in all material respects with the requirements of the Securities Act of 1933
(the Securities Act"), or the Exchange Act, as the case may be, and the rules
--------------
and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and (ii) none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements included in the SEC Documents complied, as of their respective filing
dates as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the
-11-
<PAGE>
periods involved (except as may be indicated in the notes thereto) and fairly
present, in all material respects, the consolidated financial position of the
Company and its Subsidiaries as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set forth
on Schedule 4.6 or in the SEC Documents filed and publicly available prior to
the date hereof, and except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since the date of the
most recent consolidated balance sheet included in the SEC Documents filed and
publicly available prior to the date hereof, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted accounting
principles to be set forth on a balance sheet or in the notes thereto.
(b) All accounts receivable of the Company and each Subsidiary have
arisen from bona fide services provided in the ordinary course of business to
third parties which are not Affiliates (as defined in Rule 405 promulgated under
the Securities Act) of the Company or any Subsidiary or any of their officers,
directors or employees. All accounts receivable are good and collectible in the
ordinary course of business consistent with past practice at the aggregate
recorded amounts thereof.
(c) Schedule 4.6(c) sets forth the consolidated indebtedness owed by the
---------------
Company and its Subsidiaries to any third party (separately identifying the
portion of such indebtedness incurred in respect of any mobile Magnetic
Resonance Imaging unit (each, an "MRI Unit") owned, leased or on order by the
--------
Company or any Subsidiary), and the Company's aggregate consolidated cash and
cash equivalents, each calculated as of the date hereof in accordance with
generally accepted accounting principles, consistently applied. The term
"indebtedness" shall include indebtedness for borrowed money, reimbursement
------------
obligations with respect to letters of credit and similar instruments,
obligations incurred, issued or assumed as the deferred purchase price of
property or services (other than accounts payable incurred in the ordinary
course of business consistent with past practice), obligations of others secured
by (or, for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured) any Lien on property or assets of the
Company or any Subsidiary, capital lease obligations, and obligations in respect
of guarantees of any of the foregoing or any "keep well" or other agreement to
maintain any financial statement condition of another person, in each case,
whether or not matured, liquidated, fixed, contingent, or disputed.
(d) Schedule 4.6(d) sets forth (i) the specifications of each MRI Unit
---------------
owned, leased or on order by the Company or any Subsidiary, (ii) the date that
the Company or any Subsidiary purchased or, in the case of MRI Units on order,
has committed to purchase, such MRI Unit and (iii) the per MRI Unit price paid
to the manufacturer thereof or, in the case of MRI Units on order, that the
Company, any Subsidiary or any source of financing has committed to pay to
manufacturer thereof (specifying the price applicable to the Magnetic Resonance
Imaging equipment and the price applicable to the coach or van used or to be
used to transport such MRI Unit). Except as set forth in Schedule 4.6(d),
---------------
neither the Company nor any Subsidiary has purchased or leased or committed to
purchase or lease any MRI Unit.
-12-
<PAGE>
(e) Schedule 4.6(e) sets forth (i) the date and cost of each upgrade to
---------------
each MRI Unit owned or leased by the Company and (ii) all amounts in excess of
an aggregate of $50,000 that the Company or any Subsidiary has committed to pay
in respect of any pending upgrade.
4.7. Information Supplied.
--------------------
None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (a) the Offer Documents, (b) the
Schedule 14D-9, (c) the information to be filed by the Company in connection
with the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement") or (d) the Proxy Statement, will, in the case of the
- ----------------------
Offer Documents, the Schedule 14D-9 and the Information Statement at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or in the case of the Proxy Statement, at the time the
Proxy Statement is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting (as defined in Section 7.1) contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Schedule 14D-
9, the Information Statement and the Proxy Statement will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
4.8. Absence of Certain Changes or Events.
------------------------------------
Except as disclosed in the SEC Documents (including exhibits thereto)
filed since January 1, 1996 and publicly available prior to the date hereof (the
"Filed SEC Documents"), and except as set forth on Schedule 4.8 hereto, since
------------------- ------------
the date of the most recent audited financial statements included in the Filed
SEC Documents, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course consistent with prior practice, and there
has not been (a) any material adverse change, (b) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, (c) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (d) (i) any granting by
the Company or any Subsidiary to any officer of the Company of any increase in
compensation, except in the ordinary course of business consistent with past
practice as was required under employment agreements in effect as of the date of
the most recent audited financial statements included in the Filed SEC
Documents, (ii) any granting by the Company or any Subsidiary to any officer,
employee, director or consultant of any increase in severance or termination
pay, except as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents or (iii) any entry by the Company
or any Subsidiary into any employment, severance or termination agreement with
any officer, employee, director or consultant, (e) any damage, destruction or
loss to property, whether or not covered by insurance, that, individually or in
the
-13-
<PAGE>
aggregate, has not been cured and would not be reasonably expected to have,
individually or in the aggregate, a material adverse effect, (f) any change in
accounting methods, principles or practices by the Company or any Subsidiary,
(g) any delivery of a notice of non-renewal or any other failure to renew
contracts or agreements between the Company or any Subsidiary, on the one hand,
and hospitals, clinics, medical or healthcare providers, health maintenance
organizations or other customers or third party payors, on the other hand, which
are material, individually or in the aggregate, or (h) any loss of any employee
who earned more than $75,000 in the most recent fiscal year (in salary, bonus
and other cash compensation).
4.9. Litigation.
----------
Except as disclosed on Schedule 4.9 hereto, there is no claim, suit,
------------
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries and there
is no judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any Subsidiary.
4.10. Contracts.
---------
Except as filed as an exhibit to the Filed SEC Documents or set forth on
Schedule 4.10 and delivered to or made available to Parent or its counsel, there
- -------------
are no (a) notes, bonds, mortgages, indentures, leases, or material Permits, or
(b) other contracts, agreements or other instruments or obligations or any
amendments, supplements or restatements of any of the foregoing ((a) and (b),
collectively, "Commitments") that (i) relate to real property, (ii) relate to
-----------
services provided by the Company to hospitals, clinics, medical or healthcare
providers or other customers or services paid for by health maintenance
organizations or other third party payors, (iii) relate to the construction,
reconstruction, maintenance, transportation or use of Magnetic Resonance Imaging
equipment (iv) relate to any Alternative Transaction (as defined below), or (v)
are otherwise material to the business, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole. Neither the
Company nor any Subsidiary is and, to the knowledge of the Company, no other
party is in violation of or in default under (nor does there exist any condition
which upon the passage of time or the giving of notice or both would reasonably
be expected to cause such a violation of or default under) any material
Commitment to which it is a party or by which it or any of its properties or
assets is bound. Each Commitment constitutes a valid and binding obligation on
the Company and/or the Subsidiary party thereto and, to the knowledge of the
Company, each other party thereto, enforceable against such other party in
accordance with its terms.
4.11. Compliance with Laws.
--------------------
The Company and each Subsidiary is in compliance with all applicable
statutes, laws, codes, ordinances, regulations, rules, Permits, judgments,
decrees and orders of any Governmental Entity applicable to its assets,
properties, business or operations, except for such failures to be in compliance
as have not had a material adverse effect that has not been cured and would not
be reasonably expected to have, individually or in the aggregate, a material
adverse effect. The Company and each Subsidiary has in effect all Federal,
state, local and foreign governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits
-14-
<PAGE>
and rights, including all certificates of need and authorizations under
Environmental Laws (as defined below) and exemptions from any of the foregoing
(collectively, "Permits") necessary for it to own, lease or operate its
-------
properties and assets and to carry on its business as now conducted, except for
the failure to have such Permits that, individually or in the aggregate, has not
had and could not reasonably be expected to have a material adverse effect (and
the Company and/or each Subsidiary has timely made appropriate filings for
issuance or renewal thereof). Schedule 4.11 contains a list of all material
-------------
Permits (including, without limitation, all Certificates of Need), and copies
thereof have been provided to Parent or its counsel. No default under any Permit
has occurred, except for defaults under Permits that, individually or in the
aggregate, that has not been cured and reasonably would not be expected to have
a material adverse effect. No investigation or review by any Governmental Entity
with respect to the Company or any Subsidiary is pending or, to the knowledge of
the Company, threatened.
4.12. Environmental Matters.
---------------------
Except as set forth in Schedule 4.12:
-------------
(a) the Company and each Subsidiary is, and has been, in compliance
with all applicable Environmental Laws (as defined below) except for any
noncompliance that, individually or in the aggregate, has not had a material
adverse effect that has not been cured and would not reasonably be expected to
have a material adverse effect. The term "Environmental Laws" means any Federal,
------------------
state, provincial, regional, municipal, local or foreign judgment, order,
decree, statute, law, ordinance, rule, regulation, code, permit, consent,
approval, license, writ, decree, directive, injunction or other enforceable
requirement, including any registration requirement, relating to: (A) Releases
(as defined below) or threatened Releases of Hazardous Materials (as defined
below) into the environment; (B) the generation, treatment, storage, disposal,
use, handling, manufacturing, transportation or shipment of Hazardous Materials;
or (C) otherwise relating to pollution or protection of health or safety or the
environment;
(b) there has been no Release or threatened Release of Hazardous
Materials, in, on, under or affecting any property now or previously owned,
leased, controlled or operated by the Company or any Subsidiary or, to the
knowledge of the Company, any adjacent site. The term "Release" has the meaning
-------
set forth in 42 U.S.C. (S) 9601(22). The term "Hazardous Materials" means any
-------------------
pollutant, contaminant, hazardous, radioactive or toxic substance, material,
constituent or waste, or any other waste, substance, chemical or material
regulated under any Environmental Law, including (1) petroleum, crude oil and
any fractions thereof, (2) natural gas, synthetic gas and any mixtures thereof,
(3) asbestos and/or asbestos-containing material, (4) radon and (5)
polychlorinated biphenyls ("PCBs"), or materials or fluids containing PCBs;
----
(c) there is no pending, or, to the knowledge of the Company,
threatened claim, action, demand, investigation or inquiry by any Governmental
Entity or other person relating to any actual or potential violations of
Environmental Law or any actual or potential obligation to investigate or
remediate a Release or threatened Release of any Hazardous Materials;
(d) neither the Company nor any Subsidiary has assumed, whether by
contract or operation of law, any liabilities or obligations arising under
Environmental Laws in connection
-15-
<PAGE>
with formerly owned, leased or operated properties or facilities or in
connection with any formerly owned divisions, subsidiaries, companies or other
entities; and
(e) there are no underground or aboveground storage tanks,
incinerators or surface impoundments at, on or about, under or within any
property, owned, leased, controlled or operated by the Company or any
Subsidiary, and no such tanks, incinerators or impoundments have been removed
from any such property; and
(f) neither the Company nor any Subsidiary has used any waste disposal
site, or otherwise disposed of, transported, or arranged for the transportation
of, any Hazardous Materials to any place or location, except for any such use,
disposal, transportation or arrangement that has not had a material adverse
effect that has not been cured and reasonably would not be expected to have a
material adverse effect.
4.13. Absence of Changes in Benefit Plans; Labor Relations.
----------------------------------------------------
Except as filed as an exhibit to the Filed SEC Documents and except as
disclosed on Schedule 4.13 hereto or as expressly provided in this Agreement,
-------------
since the date of the most recent audited financial statements included in the
Filed SEC Documents, there has not been any adoption or amendment in any
material respect by the Company or any Subsidiary of any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan or arrangement providing benefits to any
current or former employee, officer or director of the Company or any
Subsidiary. Except as set forth in Schedule 4.13 or as filed as an exhibit to
-------------
the Filed SEC Documents or as expressly provided in this Agreement, there exist
no employment, consulting, severance, termination or indemnification agreements
or arrangements between the Company and any current or former employee, officer
or director of the Company. Schedule 4.13 contains a list of all amounts
-------------
payable or that will or may become payable to each director, officer or employee
or former director, officer or employee of the Company or any Subsidiary
pursuant to any employment, change-in-control, severance or termination
agreement or arrangement other than pursuant to the Employment Agreements.
There are no collective bargaining or other labor union agreements to which the
Company or any Subsidiary is a party or by which it is bound. To the knowledge
of the Company, since January 1, 1994, except as disclosed in the Filed SEC
documents, the Company has not encountered any labor union organizing activity,
or had any actual or threatened employee strikes, work stoppages, slowdowns or
lockouts.
4.14. Employment Matters; Affiliate Transactions.
------------------------------------------
(a) Schedule 4.14(a) sets forth a list of all directors, officers and
----------------
employees of the Company and each Subsidiary as of the date hereof and the
aggregate salary, bonus and other cash compensation paid and the number of
Company Stock Options and/or Warrants granted or issued to each such employee,
officer, and director in the most recently completed fiscal year and paid and
granted or issued to each such person from the beginning of the current fiscal
year to the date hereof.
-16-
<PAGE>
(b) Schedule 4.14(b) sets forth a list of all outstanding Company
----------------
Stock Options and Warrants as of the date hereof, showing for each such Company
Stock Option and Warrant: (i) the number of Shares issuable, (ii) the number of
vested Shares, (iii) the date of grant, (iv) the exercise price and (v) the
holder thereof.
(c) Schedule 4.14(c) sets forth a description of all transactions
----------------
between the Company or its Subsidiaries, on the one hand, and any of their
respective Affiliates, directors, officers, employees, or consultants, on the
other hand, in each case consummated at any time since January 1, 1996. Except
as set forth on Schedule 4.14(c), there are no agreements or arrangements
----------------
between the Company or its Subsidiaries, on the one hand, and any of their
respective Affiliates, directors, officers, employees or consultants, on the
other hand, with respect to any such transactions. No Affiliate, director,
officer, employee or consultant of the Company owns any interest in any asset or
property (real or personal, tangible or intangible), business or contract used
or intended for use or otherwise relating to the business currently conducted or
proposed to be conducted by the Company or any Subsidiary.
4.15. ERISA Compliance.
----------------
(a) Schedule 4.15(a) contains a list and brief description of all
----------------
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
-----
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
-------------
defined in Section 3(1) of ERISA) and all other benefit plans maintained or
contributed to by the Company or any other person or entity that, together with
the Company, is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Internal Revenue Code of 1986, as amended (the "Code") (the Company
and each such other person or entity, a "Commonly Controlled Entity"), for the
--------------------------
benefit of any current or former employees, officers or directors of the Company
or dependents of any such person (collectively, "Benefit Plans"). The Company
-------------
has delivered or made available to Parent true, complete and correct copies of
(i) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Benefit Plan (if any such
report was required), (iii) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required and (iv) each
trust agreement and group annuity contract relating to any Benefit Plan. Each
Benefit Plan has been administered in all material respects in accordance with
its terms. The Company and each Subsidiary and all the Benefit Plans are all in
compliance in all material respects, and all Benefit Plans have been operated
and administered in all material respects with applicable provisions of ERISA
and the Code, and no "reportable event," or "prohibited transaction" (as such
terms are defined in ERISA and the Code, as applicable), or termination has
occurred with respect to any Benefit Plan, and the consummation of the
transaction entered into pursuant to this Agreement will not result in the
occurrence of any such event.
(b) Except as disclosed in Schedule 4.15(b), all Pension Plans
----------------
intended to qualify under Section 401(a) of the Code have been the subject of
determination letters from the Internal Revenue Service to the effect that such
Pension Plans are qualified and exempt from Federal income taxes under Section
401(a) and 501(a), respectively, of the Code, and no such determination letter
has been revoked nor has any such Pension Plan been amended since the
-17-
<PAGE>
date of its most recent determination letter or application therefor in any
respect, and no event has occurred that would adversely affect its qualification
or materially increase its costs. All amendments to Pension Plans required under
ERISA and the Code to be adopted by the Company by December 31, 1994, have been
adopted. There have been no material violations of ERISA or the Code with
respect to the filing of applicable documents, notices or reports (including,
without limitation, annual reports filed on IRS From 5500) relating to any
Benefit Plan maintained by the Company or any Commonly Controlled Entity with
any Governmental Authority or the furnishing of such required documents to the
participants or beneficiaries of such Benefit Plans.
(c) Neither the Company nor any Commonly Controlled Entity has within
the five year period immediately preceding the date hereof maintained,
contributed to or been obligated to contribute to any Benefit Plan that is
subject to Title IV of ERISA or Section 412 of the Code. Neither the Company nor
any Commonly Controlled Entity is required to contribute to any "multiemployer
plan" (as defined in Section 4001(a) (3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or would result in any
"withdrawal liability" (within the meaning of Section 4201 of ERISA) that has
not been fully paid.
(d) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in Schedule 4.15(d), (1) no such Benefit Plan
----------------
is funded through a "welfare benefits fund", as such term is defined in Section
419 (e) of the Code, (2) each such Benefit Plan that is a "group health plan",
as such term is defined in Section 5000 (b)(1) of the Code, complies
substantially with the applicable requirements of Section 4980B(f) of the Code
and (3) except as provided in writing in such plan, there are no understandings,
agreements or undertakings, written or oral, that would prevent any such plan
(including any such plan covering retirees or other former employees) from being
amended or terminated without material liability to the Company or any
Subsidiary on or at any time after the Effective Time. Except as set forth in
Schedule 4.15(d), no Benefit Plan that is a welfare benefit plan provides for
post-retirement medical or life insurance benefits coverage to any current or
former employee, officer, or director of the Company or any dependent of any
such individual except as may be required under Section 4980B of the Code.
(e) Except as set forth on Schedule 4.15(e) and except with respect to
----------------
the Company Stock Options, no employee or director of the Company will be
entitled to any additional compensation or benefits or any acceleration of the
time of payment or vesting of any compensation or benefits under any Benefit
Plan as a result of the transactions contemplated by this Agreement. It shall be
assumed for purposes of the preceding sentence that no payments will be received
by, or accelerated to, any such employee or director as a result of the
termination of such individual's employment/service relationship by the
Surviving Corporation after the Effective Time.
4.16. Taxes.
-----
The Company has filed all tax returns and reports required to be filed by
it (which returns are true and complete in all material respects) and has paid
all taxes due and required to be paid by it. The most recent financial
statements contained in the Filed SEC Documents reflect
-18-
<PAGE>
an adequate reserve for all taxes payable by the Company or any Subsidiary for
all taxable periods and portions thereof through the date of such financial
statements. No deficiencies for any taxes which remain outstanding have been
proposed, asserted or assessed against the Company or any Subsidiary, and no
requests for waivers of the time to assess any such taxes are pending. None of
the Federal income tax returns of the Company or any Subsidiary have been
examined by the United States Internal Revenue Service. As of March 31, 1997
(assuming the Company's taxable year closed on such date), the Company and its
Subsidiaries had consolidated Federal net operating loss carryforwards (the "NOL
---
Carryforwards") totaling $5,500,000. Schedule 4.16 sets forth the periods during
- ------------- -------------
which the NOL Carryforwards arose and the expiration dates of the NOL
Carryforwards, identifies which amounts are currently limited under Section 382
of the Code or the "separate return limitation year" ("SRLY") rules of the
----
consolidated return regulations, and, in the case of NOL Carryforwards currently
limited under Section 382 of the Code, the relevant Section 382 limitation
(within the meaning of Section 382(b) (1) of the Code). As used in this
Agreement, "taxes" shall mean all Federal, state, local and foreign income,
-----
property, sales, payroll, employment, excise, withholding and other taxes,
tariffs or other governmental charges in the nature of a tax as well as any
interest, penalties and additions to tax.
4.17. No Excess Parachute Payments.
----------------------------
Except as set forth on Schedule 4.17, no amount that could be received
-------------
pursuant to the Benefit Plans or any executed and delivered agreements between
the Company or any Subsidiary and any officer, director or employee thereof in
effect as of the date hereof (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this Agreement
by any employee, officer or director of the Company or any Subsidiary who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance, change-in-control
or termination agreement, other compensation arrangement or Benefit Plan
currently in effect would be an "excess parachute payment" (as such term is
defined in Section 280G(b) (1) of the Code). No disqualified individual is
entitled to receive any additional payment from the Company, any Subsidiary, the
Surviving Corporation, or any other person referred to in Q&A 10 under proposed
Treasury Regulation Section 1.280G-1 (a "Parachute Gross-Up Payment") in the
--------------------------
event that the 20 per cent parachute excise tax of Section 4999(a) of the Code
is imposed on such person. Except as set forth in Schedule 4.17, neither the
-------------
Board of Directors of the Company nor the Board of Directors of any Subsidiary
has during the six months prior to the date hereof granted to any officer,
director or employee of the Company or any Subsidiary any right to receive any
Parachute Gross-Up Payment.
4.18. Title to Properties; Condition of Assets.
----------------------------------------
(a) Except as set forth in Schedule 4.18, the Company and each
-------------
Subsidiary has good and marketable title to, or valid leasehold interests in,
all its material properties and assets except for such as are no longer used in
the conduct of its businesses or as have been disposed of in the ordinary course
of business. All such material assets and properties are free and clear of all
Liens other than those set forth in Schedule 4.18 and except for Liens that,
-------------
individually or in the aggregate, do not interfere with the ability of the
Company or any Subsidiary to conduct its
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<PAGE>
business as currently conducted and do not adversely affect the value of, or the
ability to sell, such assets and properties.
(b) The properties and assets of the Company and its Subsidiaries are
in good repair and operating condition, and are sufficient for the conduct of
the business of the Company and the Subsidiaries as presently conducted.
(c) Except as set forth in Schedule 4.18, the Company and each
-------------
Subsidiary has complied in all material respects with the terms of all material
leases to which it is a party or under which it is in occupancy, and all such
leases are in full force and effect. The Company enjoys peaceful and undisturbed
possession under all such material leases.
(d) Neither the Company nor any Subsidiary owns any real property.
4.19. Intellectual Property.
---------------------
The Company and each Subsidiary owns, or is validly licensed or otherwise
has the right to use, without any obligation to make any fixed or contingent
payments, including any royalty payments, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, copyrights and other proprietary intellectual property
rights and computer programs that are used in the conduct of the business of the
Company as now operated (collectively, "Intellectual Property Rights").
----------------------------
Schedule 4.19 sets forth a description of all patents, trademarks and copyrights
- -------------
and applications therefor owned by or licensed to the Company that are used in
the conduct of the business of the Company as now operated. Except as set forth
in Schedule 4.19, no claims are pending or, to the knowledge of the Company,
-------------
threatened that the Company is, and to the knowledge of the Company, neither the
Company nor any Subsidiary is, infringing or otherwise adversely affecting the
rights of any person with regard to any Intellectual Property Right. To the
knowledge of the Company, except as set forth in Schedule 4.19, no person is
-------------
infringing the rights of the Company with respect to any Intellectual Property
Right. The Company has not licensed, or otherwise granted, to any third party,
any rights in or to any Intellectual Property Rights.
4.20. Non-Compete.
-----------
Except as set forth in Schedule 4.20, neither the Company nor any
-------------
Subsidiary is subject to any agreement, covenant or understanding that restricts
the Company or any Subsidiary from entering or conducting any line of business
in any location at any time.
4.21. Voting Requirements.
-------------------
The affirmative vote of the holders of a majority of the outstanding
Shares is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
-20-
<PAGE>
4.22. State Takeover Statutes.
-----------------------
The Board of Directors of the Company has approved the Merger and this
Agreement, and such approval is sufficient to render inapplicable to the Merger,
this Agreement and the transactions contemplated by this Agreement, the
provisions of Section 203 of the DGCL to the extent, if any, such Section is
applicable to the Merger, this Agreement and the transactions contemplated by
this Agreement and the Stockholder Agreement. No other state takeover statute
or similar statute or regulation applies or purports to apply to the Merger,
this Agreement or the transactions contemplated by this Agreement.
4.23. Rights Agreement.
----------------
The Company has taken all necessary actions to ensure that, for the
purposes of the Rights Agreement of the Company dated as of November 8, 1995, as
amended on the date hereof (the "Rights Agreement"), neither Parent nor Sub will
----------------
become an "Acquiring Person", the execution, delivery and performance of this
Agreement and the Stockholder Agreement do not, and the commencement or
consummation of the Offer, the Merger and the other transactions contemplated
hereunder and under the Stockholder Agreement (including pursuant to any
amendment hereto or thereto) will not, result in the grant of any rights to any
person under the Rights Agreement or enable or require any outstanding rights to
be exercised, distributed or triggered, and that the Rights (as defined in the
Rights Agreement) will expire without any further force or effect as of the
Effective Time. Other than Parent and Sub (and their Affiliates), the Company
(or its Board of Directors) has not exempted (or taken any other action
tantamount to exempting) any person or entity from the potential application of
the Rights Agreement.
4.24. Brokers; Schedule of Fees and Expenses.
--------------------------------------
No broker, investment banker, financial advisor or other person, other
than Smith Barney, the fees and expenses of which will be paid by the Company,
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The fees and
expenses incurred and to be incurred in connection with this Agreement and the
transactions contemplated by this Agreement (other than printing and mailing
costs and expenses), including, without limitation, the fees and expenses of
Smith Barney and the fees and expenses of the Company's legal counsel (including
any counsel retained by any independent committee of the Board of Directors of
the Company or any other counsel retained to represent the interests of the
Company or its directors or shareholders), shall not exceed, in the aggregate,
the amount set forth in a disclosure letter delivered to the Parent and
Subsidiary on the date hereof (the "Disclosure Letter").
-----------------
4.25. Opinion of Financial Advisor.
----------------------------
The Board of Directors of the Company has received the opinion of Smith
Barney dated the date of this Agreement to the effect that, as of such date and
based upon and subject to the matters set forth therein, the cash consideration
to be received by holders of Shares (other than Parent and its Affiliates)
pursuant to the Offer and the Merger is fair from a financial point
-21-
<PAGE>
of view to such holders, a signed copy of which opinion has been delivered to
Parent (after receipt thereof by the Company).
4.26. Certain Additional Regulatory Matters.
-------------------------------------
None of the Company, any Affiliate of the Company, or the officers,
directors, or employees or agents of any of the Company or any Affiliate, and
none of the Persons who provide professional services under agreements with any
of the Company or any Affiliate as agents of such entities have engaged in any
activities which constitute material violations of, or are cause for imposition
of material civil penalties upon the Company or mandatory or permissive
exclusion of the Company from Medicare or Medicaid, under (S) (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 material violations of or
deficiencies under the standards of any private accrediting organization from
which the Company seeks accreditation, including the following activities
unless any violations of law resulting from such activities, individually or in
the aggregate, has not had a material adverse effect that has not been cured and
reasonably would not be expected to have a material adverse effect:
(a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(c) presenting or causing to be presented a claim for reimbursement
under CHAMPUS, Medicare, Medicaid or any other State Health Care Program 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 and the Person presenting knows or
should know that the claim is false or fraudulent;
(d) knowingly and willfully offering, paying, soliciting or receiving
any remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (i) in return for referring,
or to induce the referral of, an individual to a Person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by CHAMPUS, Medicare or Medicaid, or any other State
Health Care Program or any Federal Health Care Program, or (iii) in return for,
or to induce, the purchase, lease, or order, or the arranging for or
recommending of the purchase, lease, or order, of any good, facility, service,
or item for which payment may be made in whole or in part by CHAMPUS, Medicare
or Medicaid or any other State Health Care Program or any Federal Health Care
Program; or
(e) knowingly and willfully making or causing to be made or inducing or
seeking to induce the making of any false statement or representation (or
omitting to state a material fact required to be stated therein or necessary to
make the statements contained therein not
-22-
<PAGE>
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).
---
4.27. Medicare/Medicaid Participation.
-------------------------------
Neither the Company nor any existing officers or directors of the
Company who (based on advice by Parent to the Company) is expected to be an
officer, director, agent (as defined in 42 C.F.R. (S) 1001.1001(a)(2)), or
managing employee (as defined in SSA (S) 1126(b) or any regulations promulgated
thereunder) of the Company: (1) has had a civil monetary penalty assessed
against 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:
(a) 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;
(b) 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;
(c) 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;
(d) federal or state laws relating to the interference with or
obstruction of any investigation into any criminal offense described in (a)
through (c) above; or
(e) criminal offenses under federal or state law relating to the
unlawful manufacture, distribution, prescription or dispensing of a controlled
substance.
4.28. Regulated Customers.
-------------------
To the Company's knowledge, each party to each Commitment (other than the
Company and its Subsidiaries) and each other person to which the Company or any
Subsidiary provides services has all Permits necessary or advisable for the
conduct of its business and there are no adverse claims, suits, actions,
proceedings or investigations pending or threatened against such person, in each
case, relating to such Commitment or services.
-23-
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub each represent and warrant to the Company as follows:
5.1. Organization.
------------
Each of Parent and Sub is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
being conducted. Each of Parent and Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualifications
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) could not be
reasonably expected to prevent or materially delay the consummation of the Offer
and/or the Merger. Parent has delivered to the Company complete and correct
copies of its certificate of incorporation and bylaws and the certificate of
incorporation and by-laws of Sub, in each case as amended to the date hereof.
5.2 Authority.
---------
Parent and Sub have requisite power and authority to execute and deliver
this Agreement and the Stockholder Agreement, and to consummate the transactions
contemplated by this Agreement and the Stockholder Agreement. The execution,
delivery and performance of this Agreement and the Stockholder Agreement, and
the consummation of the transactions contemplated by this Agreement and the
Stockholder Agreement, have been duly authorized by all necessary action on the
part of Parent and Sub and no other proceedings on the part of Parent and Sub
are necessary to authorize this Agreement or the Stockholder Agreement or to
consummate the transactions contemplated hereby or thereby. No vote of Parent
shareholders is required to approve this Agreement or the Stockholder Agreement
or the transactions contemplated hereby or thereby. Each of this Agreement and
the Stockholder Agreement has been duly executed and delivered by Parent and Sub
and constitutes a valid and binding obligation of Parent and Sub enforceable
against Parent and Sub in accordance with its terms.
5.3 Consents and Approvals; No Violations.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Exchange Act
(including the filing with the SEC of the Offer Documents), the HSR Act, the
DGCL and state takeover laws, neither the execution, delivery or performance of
this Agreement or the Stockholder Agreement by Parent and Sub, nor the
consummation by Parent and Sub of the transactions contemplated hereby or
thereby will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation or by-laws of Parent and Sub, (ii)
require any filing with, notice to, or permit, authorization, consent or
approval of, any Governmental Entity (except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings would not
reasonably be expected to prevent or materially delay the consummation of the
Offer and/or the
-24-
<PAGE>
Merger), (iii) result in a violation or breach of, require any notice to any
party pursuant to, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation to which Parent or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its subsidiaries or any of their properties or
assets, except in the case of clauses (iii) and (iv) for violations, breaches or
defaults which could not, individually or in the aggregate, be reasonably
expected to prevent or materially delay the consummation of the Offer and/or the
Merger.
5.4. Information Supplied.
--------------------
None of the information supplied or to be supplied by Parent or Sub
specifically for inclusion or incorporation by reference in (i) the Offer
Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the
Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and
the Information Statement, at the respective times the Offer Documents, the
Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the Company's stockholders, or, in the case of the
Proxy Statement, at the time the Proxy Statement is first mailed to the
Company's 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. The Offer
Documents will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Parent or Sub with respect to statements
made or incorporated by reference therein based on information supplied by or on
behalf of the Company specifically for inclusion or incorporation by reference
therein.
5.5 Interim Operations of Sub.
-------------------------
Sub (and any other wholly owned subsidiary of Parent which may be used to
effect the Offer and the Merger pursuant to Section 2.1) was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
5.6 Brokers.
-------
No broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Sub.
5.7 Financing.
---------
Parent has sufficient funds available, directly or through finance
commitments, to purchase, or to cause Sub to purchase, all the Shares pursuant
to the Offer and the Merger and to
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<PAGE>
pay all fees and expenses payable by Parent or Sub related to the transactions
contemplated by this Agreement.
ARTICLE VI
COVENANTS
6.1 Conduct of Business.
-------------------
From the date hereof to the Effective Time, the Company shall, and shall
cause each Subsidiary to, carry on its business in the ordinary course
consistent with past practice and use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers,
licensors, licensees and others having significant business dealings with it.
Without limiting the generality of the foregoing, from the date hereof to the
Effective Time, the Company shall not and shall cause each Subsidiary not to
(except as expressly permitted by this Agreement):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for Shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire any Shares or any
capital stock of the Company or any Subsidiary or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of Shares upon the
exercise of Company Stock Options or warrants to purchase Shares outstanding on
the date hereof in accordance with their present terms);
(c) amend its Certificate of Incorporation or Bylaws or other
comparable charter or organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets or stock of, or by any
other manner, any business or any person or (ii) except as set forth on Schedule
--------
6.1(d), any assets except for the purchase of assets for an amount which does
- ------
not exceed, individually or in the aggregate, $75,000;
(e) except as set forth in Schedule 6.1(e), sell, lease, license,
mortgage or otherwise encumber or subject to any Lien or otherwise dispose of
any of its properties or assets, except sales of inventory or sales of
immaterial assets;
(f) (i) except as set forth in Schedule 6.1(f), incur any indebtedness
or guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any Subsidiary, guarantee any debt
-26-
<PAGE>
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing except for short-
term borrowings incurred in the ordinary course of business consistent with past
practice, or (ii) make any loans, advances or capital contributions to, or
investments in, any other person;
(g) except for the items listed on Schedule 6.1(g), make or agree to
---------------
make any capital expenditure or expenditures with respect to property, plant or
equipment which, individually, is in excess of $50,000 or, in the aggregate, are
in excess of $250,000;
(h) make any material tax election or settle or compromise any material
income tax liability;
(i) except as set forth in Schedule 6.1(i) pay, discharge, settle or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in the most recent consolidated financial statements (or the notes thereto) of
the Company included in the Filed SEC Documents or incurred thereafter in the
ordinary course of business consistent with past practice, or waive any material
benefits of, or agree to modify in any material respect, any confidentiality,
standstill or similar agreements to which the Company or any Subsidiary is a
party;
(j) except in the ordinary course of business consistent with past
practice, modify, amend or terminate any Commitment to which the Company or any
Subsidiary is a party, or waive, release or assign any rights or claims;
(k) enter into any Commitment relating to the distribution, sale or
marketing by third parties of the Company's or any Subsidiary's services;
(l) except as required to comply with applicable law and except as set
forth on Schedule 6.1(1), (i) adopt, enter into, terminate or amend any Benefit
---------------
Plan or other arrangement for the benefit or welfare of any director, officer or
current or former employee, (ii) increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any director, officer or employee
(except for normal increases or bonuses in the ordinary course of business
consistent with past practice), (iii) pay any benefit not provided for under any
Benefit Plan, (iv) except as permitted in clause (ii), grant any awards under
any bonus, incentive, performance or other compensation plan or arrangement or
Benefit Plan (including the grant of stock options, stock appreciation rights,
stock based or stock related awards, performance units or restricted stock, or
the removal of existing restrictions in any Benefit Plans or agreement or awards
made thereunder) or (v) take any action other than in the ordinary course of
business to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or Benefit
Plan; or
(m) authorize any of, or commit or agree to take any of, the foregoing
actions.
-27-
<PAGE>
6.2. No Solicitation.
---------------
(a) The Company shall, shall cause each Subsidiary to and shall direct
and use reasonable efforts to cause its and its Subsidiaries' officers,
directors, employees, representatives and agents to, immediately cease any
discussions or negotiations with any parties other than Parent and Sub that may
be ongoing with respect to an Alternative Transaction (as hereinafter defined).
The Company shall not, shall cause each Subsidiary not to and shall not
authorize or permit any of its or its Subsidiaries' officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it 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 acceptance for payment of shares pursuant to
and subject to the conditions (including the Minimum Condition) of the Offer,
the Board of Directors of the Company determines in good faith, based on advice
from outside counsel, that action is required by reason of the Board of
Directors' fiduciary duties to the Company's stockholders under applicable law,
the Company may (subject to compliance with Section 6.2(c)), in response to an
unsolicited Third Party Proposal (as defined herein), (A) furnish information
with respect to the Company to the person making such Third Party Proposal
pursuant to a confidentiality agreement that is at least as protective of the
Company's interests as is the Confidentiality Agreement (as defined in Section
7.2) and (B) participate in negotiations regarding such an Alternative
Transaction. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director, officer or employee of the Company or any Subsidiary or any investment
banker, financial advisor, attorney, accountant or other representative of the
Company, acting on behalf of the Company, shall be deemed to be a breach of this
Section 6.2(a) by the Company. For purposes of this Agreement, a "Third Party
-----------
Proposal" means a bona fide proposal from a third party, which proposal did not
- --------
result from a breach of this Section 6.2(a) and which third party the Board of
Directors of the Company determines in good faith and upon the advice of a
financial advisor of nationally recognized reputation has the capacity and is
reasonably likely to consummate a Superior Proposal (as defined in Section
9.1(d)). For purposes of this Agreement, an "Alternative Transaction" means any
-----------------------
direct or indirect acquisition or purchase of assets of the Company or any
Subsidiary outside the ordinary course of business or any outstanding equity
securities of the Company or any Subsidiary, any tender offer or exchange offer
that if consummated would result in any person beneficially owning equity
securities of the Company or any merger, consolidation, business combination,
sale of substantially all the assets, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any Subsidiary, other than the
transactions contemplated by this Agreement and other than the acquisition of
Shares pursuant to the exercise of Company Stock Options or Warrants which are
issued and outstanding as of the date hereof.
(b) Neither the Board of Directors of the Company nor any Committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, the
approval or recommendation by such Board of Directors or such committee of the
Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Alternative Transaction or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition
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agreement or other agreement (an "Acquisition Agreement") with respect to an
---------------------
Alternative Transaction unless the Board of Directors of the Company shall have
previously terminated this Agreement pursuant to Section 9.1(d).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.2, the Company shall immediately advise
Parent orally and in writing of any request for information or of any proposal
or any inquiry regarding any Alternative Transaction, the material terms and
conditions of such request, proposal or inquiry and the identity of the person
making such request, proposal or inquiry. The Company will, to the extent
reasonably practicable and not in violation of the Board of Director's fiduciary
duties under applicable law, following receipt of written advice of outside
counsel, keep Parent fully informed of the status and details (including
amendments or proposed amendments) of any such request, proposal or inquiry.
(d) Nothing contained in this Section 6.2 shall prohibit the Company
from at any time taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders, in each case with respect to any
Third Party Proposal, if (i) in the good faith judgment of the Board of
Directors of the Company, following receipt of written advice from outside
counsel, such disclosure is required by reason of the Board of Directors'
fiduciary duties to the Company's stockholders under applicable law and (ii) the
Company shall have provided Parent and Sub with as much advance notice of its
position and proposed disclosure as is possible under the circumstances;
provided, however, that neither the Company nor its Board of Directors nor any
- -------- -------
committee thereof shall, except as permitted by Section 6.2(b), withdraw or
modify, or propose to withdraw or modify, its position with respect to the
Offer, the Merger or this Agreement or approve or recommend, or propose to
approve or recommend, an Alternative Transaction.
6.3 Certain Tax Matters.
-------------------
(a) From the date hereof until the Effective Time, (i) the Company and
each Subsidiary will file all tax returns and reports ("Post-Signing Returns")
--------------------
required to be filed; (ii) the Company and each Subsidiary will timely pay all
taxes shown as due and payable on the Company's Post-Signing Returns that are so
filed; (iii) the Company and each Subsidiary will make provision for all taxes
payable by the Company for which no Post-Signing Return is due prior to the
Effective Time; and (iv) the Company will promptly notify Parent of any action,
suit, proceeding, claim or audit pending against or with respect to the Company
and each Subsidiary in respect of any tax where there is a reasonable
possibility of a determination or decision which would reasonably be expected to
have a significant adverse effect on the Company's or any Subsidiary's tax
liabilities or tax attributes.
(b) The Company shall use its best efforts to obtain from all its
employees who exercised a Company Stock Option or Warrant for which the proper
amount of payroll or employment taxes were not withheld by the Company upon the
exercise of such Option or Warrant, a properly executed IRS Form 4669 from each
such employee, in which such employee
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certifies that such employee has paid in full all taxes applicable to the
compensation income attributable to such exercise.
6.4 Other Actions.
-------------
The Company shall not, and shall cause each Subsidiary not to, take or
omit to take any action, the taking or omission of which would reasonably be
expected to result in (a) any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or inaccurate or (b) any of
the Offer Conditions not being satisfied (subject to the Company's right to take
actions specifically permitted by Section 6.2 or 9.1).
6.5 Advice of Changes; Filings.
--------------------------
The Company shall confer with Parent on a regular and frequent basis as
reasonably requested by Parent, report on operational matters and promptly
advise Parent orally and, if requested by Parent, in writing of any material
change with respect to the Company or any Subsidiary. The Company shall
promptly provide to Parent (or its counsel) copies of all filings made by the
Company or any Subsidiary with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
6.6 Financial Information.
---------------------
The Company shall furnish to Parent the following financial information
(all to be prepared in accordance with generally accepted accounting principles
consistently applied):
(a) as soon as available but in any event within 20 days of each
calendar month, the unaudited consolidated balance sheets, income statements and
cash flow statements of the Company, showing its financial condition as of the
close of such month and the results of operations during such month and for the
then elapsed portion of the Company's fiscal year, in each case, setting forth
the comparative figures for the corresponding month in the prior fiscal year and
the corresponding elapsed portion of the prior fiscal year; and
(b) all documents filed with or submitted to the SEC by the Company
simultaneously with such filing or submission.
6.7 Option Plan.
-----------
As soon as practicable, but in no event more than 15 days after the
Effective Time, Parent shall adopt an employee option plan (the "Plan")
----
consistent with the terms sheet set forth on Schedule 6.7, and containing such
------------
other standard and customary terms and conditions. Parent shall grant options,
pursuant to the terms of the Plan and related option agreements containing
standard and customary terms, to the persons named on such schedule for the
purchase of the amount of common stock of Parent set forth opposite each
person's name on such schedule. Options available under the Plan but not
granted pursuant to Schedule 6.7 shall be available to be granted after the
------------
Effective Time at the discretion of the Board of Directors of Parent in
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consultation with the Chief Executive Officer and Chief Operating Officer of the
Surviving Corporation.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Stockholder Approval; Preparation of Proxy Statement.
----------------------------------------------------
(a) If the Company Stockholder Approval is required by law, the
Company will, as soon as practicable following the acceptance for payment of,
and payment for, Shares by Sub pursuant to and subject to the conditions
(including the Minimum Condition) of the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders (the "Stockholders Meeting") for
--------------------
the purpose of obtaining the Company Stockholder Approval. The Company will,
through its Board of Directors, and subject to such board's fiduciary duties
under applicable law following receipt of written advice of counsel, recommend
to its stockholders that the Company Stockholder Approval be given.
Notwithstanding the foregoing, if Sub or any other subsidiary of Parent shall
acquire at least 90% of the outstanding Shares, the parties shall, at the
request of Parent, take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without a Stockholders Meeting in accordance with Section 253 of the DGCL.
(b) If the Company Stockholder Approval is required by law, the
Company will, at Parent's request, as soon as practicable following the
expiration of the Offer, prepare and file a preliminary 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 the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the staff. The Company will notify Parent 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 Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Stockholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will promptly prepare and mail to its stockholders such
an amendment or supplement. The Company will not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects, unless
required by law, rule, regulation or the SEC staff, in the opinion of outside
counsel; provided, that Parent shall identify its objections and fully cooperate
--------
with the Company to create a mutually satisfactory Proxy Statement. In
connection with such preliminary proxy statement, Proxy Statement and any
amendment or supplement thereto, Parent and Sub should promptly provide all
information reasonably requested by the Company.
(c) Parent agrees to cause all Shares purchased pursuant to the Offer
and all other Shares owned by Parent or any subsidiary of Parent to be voted in
favor of the Company Stockholder Approval.
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<PAGE>
7.2 Access to Information; Confidentiality.
--------------------------------------
The Company and its Subsidiaries shall afford to Parent, and to Parent's
officers, employees, accountants, counsel, financial advisers and other
representatives, reasonable access during normal business hours from the date
hereof to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as Parent
may reasonably request. Except as required by law, Parent will hold, and will
cause its officers, employees, accountants, counsel, financial advisers and
other representatives and Affiliates to hold, any and all information received
from the Company, directly or indirectly, in confidence, according to the terms
of the confidentiality agreement dated as of April 2, 1997, between the Company
and an affiliate of Parent (the "Confidentiality Agreement").
-------------------------
7.3 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer and the Merger, and the other transactions contemplated
by this Agreement, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of any of the transactions
contemplated by this Agreement, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated or
reversed, (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement, and (v) reasonably cooperating with all
potential sources of financing to Parent in connection with the Offer, the
Merger, and the other transactions contemplated by this Agreement, and the
taking of all reasonable steps as may be necessary or advisable to consummate
one or more lending transactions with such potential sources of financing. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Offer,
the Merger, this Agreement, the Stockholder Agreement or any of the other
transactions contemplated by this Agreement or the Stockholder Agreement and
(ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Offer, the Merger, this Agreement, the Stockholder Agreement
or any other transaction contemplated by this Agreement or the Stockholder
Agreement, take all action reasonably necessary to ensure that the Offer, the
Merger and the other transactions contemplated by this Agreement may be
consummated as
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<PAGE>
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Offer, the
Merger, this Agreement, the Stockholder Agreement and the other transactions
contemplated by this Agreement or the Stockholder Agreement. Nothing in this
Agreement shall be deemed to require Parent to dispose of or hold separate any
asset or collection of assets.
(b) The Company shall give prompt notice to Parent of, to the
knowledge of the Company (i) any representation or warranty made by it contained
in this Agreement becoming untrue or inaccurate or (ii) the failure by it or any
Subsidiary to comply with or satisfy any covenant, condition or agreement to be
compiled with or satisfied by it or any Subsidiary under this Agreement;
provided, however, that no such notification shall affect the representations,
- -------- -------
warranties, covenants or agreement of the parties or the conditions to the
obligations of the parties under this Agreement.
7.4 Stock Option Plans and Warrants.
-------------------------------
(a) As soon as practicable following the date hereof but in no event
later than the consummation of the Offer, the Company (or, if appropriate, the
Board of Directors of the Company or any committee administering the Stock
Option Plans (as defined below)) shall (including by adopting resolutions or
taking any other actions) take action so as to allow each outstanding option to
purchase Shares (a "Company Stock Option") heretofore granted under any stock
--------------------
option, stock appreciation rights or stock purchase plan, program or arrangement
of the Company (collectively, the "Stock Option Plans") and each outstanding
------------------
warrant or other right to purchase Shares (a "Warrant") in each case outstanding
-------
immediately prior to the date hereof (except the Director Warrants), whether or
not then exercisable, either (i) shall be canceled immediately after
consummation of the Offer in exchange for an amount in cash, payable at the time
of such cancellation, equal to the product of (x) the number of Shares subject
to such Company Stock Option or Warrant immediately prior to the Effective Time
and (y) the excess of the price per Share to be paid in the Offer over the per
Share exercise price of such Company Stock Option or Warrant (the "Net Amount")
----------
or (ii) shall be converted immediately prior to the Effective Time into the
right solely to receive the Net Amount; provided, that no such cash payment has
--------
been made. The Company shall not make, or agree to make, any payment of any
kind to any holder of a Company Stock Option or a Warrant (except for the
payment described above) without the consent of Parent (which consent will not
be unreasonably withheld).
(b) All Stock Option Plans shall be terminated as of the Effective
Time and the provisions in any other Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company shall be terminated as of the Effective
Time. The Company shall ensure that following the Effective Time, no holder of a
Company Stock Option or Warrant or any participant in any Stock Option Plan
(other than those holders who are parties to an agreement to exchange or roll
their equity interest in the Company for or into equity of Parent or the
Surviving Corporation) shall have any right thereunder to acquire any capital
stock of the Company, Parent or the Surviving Corporation.
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<PAGE>
(c) The Surviving Corporation shall continue to be obligated to pay
the Net Amount to holders of any Company Stock Options or Warrants converted in
accordance with clause (y) of Section 7.4(a).
(d) The Company shall pay its portion and withhold and deposit the
proper amount of all Federal and state payroll and employment taxes required to
be paid and withheld from the Net Amount.
7.5 Indemnification, Exculpation.
----------------------------
(a) All rights to indemnification and exculpation (including the
advancement of expenses) from liabilities for acts or omissions occurring at or
prior to the Effective Time (including with respect to the transactions
contemplated by this Agreement) existing as of the date hereof in favor of the
current or former directors or officers of the Company as provided in its
Certificate of Incorporation, its By-laws and the indemnification agreements set
forth in Schedule 7.5 shall be assumed by the Surviving Corporation in the
------------
Merger, without further action, as of the Effective Time and shall survive the
Merger and shall continue in full force and effect without amendment,
modification or repeal in accordance with their terms for a period of not less
than six years after the Effective Time; provided however, that if any claims
-------- -------
are asserted or made within such period, all rights to indemnification (and to
advancement of expenses) hereunder in respect of any such claims shall continue,
without diminution, until disposition of any and all such claims.
(b) The Parent shall cause the Company to use commercially reasonable
efforts to maintain the Company's existing directors and officers liability
insurance (the "D & O Insurance") covering persons who are currently covered by
the Company's D & O Insurance for a period of six (6) years after the Effective
Time on terms no less favorable than those in effect on the date hereof;
provided, however, that the Parent may substitute therefor policies providing at
- -----------------
least comparable coverage containing terms and conditions no less favorable than
those in effect on the date hereof.
(c) The provisions of this Section 7.5 are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives.
7.6 Directors.
---------
Promptly upon the acceptance for payment of, and payment for, any
Shares by Sub pursuant to and subject to the conditions (including the Minimum
Condition) of the Offer, Sub shall be entitled to designate such number of
directors on the Board of Directors of the Company as will give Sub, subject to
compliance with Section 14(f) of the Exchange Act, a majority of such directors,
and the Company shall, at such time, cause Sub's designees to be so elected by
its existing Board of Directors. Subject to applicable law, the Company shall
take all action requested by Parent necessary to effect any such election,
including mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Parent and Sub shall have provided
to the
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<PAGE>
Company on a timely basis in writing all information required to be included in
the Information Statement and Schedule 14D-9 with respect to Sub's designees).
In connection with the foregoing, the Company will promptly, at the option of
Parent, either increase the size of the Company's Board of Directors and/or
obtain the resignation of such number of its current directors as is necessary
to enable Sub's designees to be elected or appointed to, and to constitute a
majority of, the Company's Board of Directors as provided above.
7.7 Fees and Expenses.
-----------------
(a) Except as otherwise provided herein and as provided below in this
Section 7.7, all fees and expenses incurred in connection with the Offer, the
Merger, this Agreement and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses, whether or not the Offer
or the Merger is consummated, except that printing and mailing costs and
expenses shall be shared equally by Parent and the Company.
(b) In the event that this Agreement is terminated (i) by Parent or
Sub pursuant to Section 9.1(c), (ii) by Parent pursuant to and in accordance
with Section 9.1(b)(i) in connection with any breach by the Company of any
covenant or agreement (including, without limitation, the covenants set forth in
Section 6.2(b)) or any representation or warranty made by the Company in this
Agreement or (iii) pursuant to Section 9.1(d), the Company shall promptly pay to
Parent in immediately available funds the Termination Fee (as defined herein)
plus all Expenses (as defined herein). Notwithstanding the above (but subject to
the payment of the Termination Fee pursuant to the consummation of an
Alternative Transaction or the execution of an Acquisition Agreement as set
forth below), no Termination Fee shall be payable if any termination by Parent
or Sub is solely (A) pursuant to Section 9.1(b)(i) that is caused solely by a
breach of one or more representations and warranties of the Company that is or
are true and correct as of the date hereof but that becomes untrue hereafter
other than any such breach after the date hereof that results from or arises out
of any act or failure to act by the Company, its Subsidiaries or any of their
respective officers, directors, employees or agents, (B) pursuant to Section
9.1(b)(ii), or (C) pursuant to the failure of the conditions set forth in either
paragraph (c) or paragraph (h) of Exhibit A to be satisfied other than any such
failure which results from or arises out of any act or failure to act by the
Company, its Subsidiaries or any of their respective officers, directors,
employees or agents. The "Termination Fee" shall be equal to 4% of the sum of
---------------
(A) the outstanding consolidated indebtedness of the Company and its
Subsidiaries at the time of termination, determined in accordance with generally
accepted accounting principles consistently applied, plus (B) the product of
(i) the total number of shares outstanding at the time of such termination on a
fully diluted basis and (ii) the Offer Price. If this Agreement shall be
terminated for any reason (other than as set forth in clauses (i), (ii) or (iii)
of this Section 7.7(b) for pursuant to Section 9.1(e)), including a termination
pursuant to which no Termination Fee is paid pursuant to this Section 7.7(b),
then the Company shall pay all Expenses to Parent in immediately funds on the
date of such termination, and if, prior to the one year anniversary of such
termination, either an Alternative Transaction shall be consummated or the
Company shall enter into an Acquisition Agreement providing for an Alternative
Transaction, then the Company shall pay to Parent in immediately available funds
the Termination Fee, such payment to be made on the earlier of the date of
consummation of such Alternative Transaction or the one year anniversary of the
date of the termination of this Agreement. The Company acknowledges that
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<PAGE>
the agreements contained in this Section 7.7(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement. Accordingly, if the Company fails
promptly to pay the amount due pursuant to this Section 7.7(b), and, in order to
obtain such payment, Parent commences a suit which results in a judgment against
the Company for the fee set forth in this Section 7.7(b), the Company shall pay
to Parent all costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the fee 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 Parent
and/or Sub, Parent shall pay to the Company all costs and expenses (including
attorney's fees and expenses) in connection with such suit. "Expenses" shall
--------
mean all out-of-pocket expenses incurred by Parent and Sub in connection with
this Agreement, the Stockholder Agreement and the transactions contemplated
hereby and thereby, including fees and expenses of its printer, consultants,
attorneys, accountants, and other advisors, not to exceed $1,750,000.
7.8 Public Announcements.
--------------------
Parent and Sub, on the one hand, and the Company, on the other hand, will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the Offer
and the Merger, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
7.9 Stop Transfer.
-------------
The Company shall not register the transfer of any certificate
representing any Subject Shares (as defined in the Stockholder Agreement),
unless such transfer is made to Parent or Sub or otherwise in compliance with
the Stockholder Agreement. The Company will inscribe upon any certificates
representing Subject Shares tendered by a Stockholder (as defined in the
Stockholder Agreement) for such purpose the following legend:
"THE SHARES OF COMMON STOCK, $.01 PAR VALUE OF SMT HEALTH SERVICES INC.
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT
DATED AS OF JUNE 24, 1997, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED,
EXCEPT IN ACCORDANCE THEREWITH. COPIES OF SUCH AGREEMENT MAY BE OBTAINED
AT THE PRINCIPAL EXECUTIVE OFFICES OF SMT HEALTH SERVICES INC."
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<PAGE>
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger shall be
subject to the prior satisfaction or waiver the following conditions:
(a) Company Stockholder Approval. If required by applicable law, the
----------------------------
Company Stockholder Approval shall have been obtained; provided that Parent and
Sub shall vote all their Shares in favor of the Merger.
(b) No Injunctions or Restraints. No statute, rule, regulation,
----------------------------
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
Governmental Entity or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that each of
-------- -------
the parties shall have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for payment
------------------
and paid for Shares pursuant to and subject to the conditions (including the
Minimum Condition) of the Offer.
(d) HSR Act. Any waiting period (and any extension thereof) applicable
-------
to the consummation of the Merger under the HSR Act shall have expired or been
terminated.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination.
-----------
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the terms of this Agreement by the
stockholders of the Company as follows:
(a) By mutual written consent of Parent and the Company.
(b) By either Parent or the Company:
(i) if (x) as a result of the failure of any of the Offer
Conditions the Offer shall have terminated or expired in accordance with
its terms without Sub having accepted for payment Shares pursuant to and
subject to the conditions (including the
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<PAGE>
Minimum Condition) of the Offer or (y) Sub shall not have accepted for
payment Shares pursuant to the Offer prior to September 30, 1997; provided,
--------
however, that if as of such date any of the conditions set forth in either
-------
paragraph (a) or paragraph (b) of Exhibit A are not satisfied, Parent and
Sub may in their sole discretion extend such date until December 31, 1997;
and provided, further, that the right to terminate this Agreement pursuant
-------- -------
to this Section 9.1(b) (i) shall not be available to any party whose
failure to perform any of its obligations under this Agreement results in
the failure of any such condition or if the failure of such condition
results from facts or circumstances that constitute a breach of any
representation or warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for payment of, or
payment for, Shares pursuant to the Offer or the Merger and such order,
decree or ruling or other action shall have become final and nonappealable.
(c) By Parent or Sub prior to Sub's obligation to accept Shares for
payment pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement which would or reasonably would be expected to give rise to the
failure of a condition set forth in Exhibit A.
(d) By either Parent or the Company if, prior to the obligation of Sub
to accept Shares for payment pursuant to the Offer, (i) the Board of Directors
of the Company determines that a Third Party Proposal for an Alternative
Transaction constitutes a Superior Proposal (as defined below), (ii) the Company
promptly notifies Parent of its determination in writing (unless, following
receipt of written advice of outside counsel, the Board of Directors' fiduciary
duties under applicable law would be violated thereby), 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 Parent of such written notice, (iv) during such ten day
period the Company cooperates with Parent with the intent of enabling, but not
obligating, Parent 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 Company
continues to believe that such Third Party Proposal constitutes a Superior
Proposal and the Company pays to Parent the amount specified under Section
7.7(b) pursuant to the terms thereof; provided that in the event the
--------
determination of the Board of Directors of the Company that such Third Party
Proposal constitutes a Superior Proposal is made less than ten days prior to the
scheduled expiration of the Offer, Parent and Sub will (in their sole
discretion) either (x) reduce the period described in clause (iii) hereof or (y)
extend the Offer, in either case such that the period described in clause (iii)
hereof will end prior to the expiration of the Offer. For purposes of this
Agreement, a "Superior Proposal" means any Third Party Proposal to acquire,
-----------------
directly or indirectly all of the Shares or all or substantially all of the
assets of the Company; provided that (i) the Board of Directors of the Company
--------
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) that such Third Party Proposal is
on terms that are more favorable to the Company's stockholders than the Offer
and the Merger (taking into account all relevant factors,
-38-
<PAGE>
including the amount and form of consideration to be received in respect of the
Shares, the relative value of any non-cash consideration, and the timing and
certainty of closing), (ii) the Board of Directors of the Company 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 Company under applicable law,
and (iii) if required, the financing necessary to consummate a transaction
pursuant to such Third Party Proposal is then committed.
(e) By the Company, if Sub or Parent shall have (i) failed to commence
the Offer within five business days of the date hereof, (ii) failed to pay for
Shares pursuant to the Offer to the extent required by Section 1.1(a) hereof or
(iii) breached in any material respect any of their respective representations,
warranties, other covenants or other agreements contained in this Agreement,
which breach or failure to perform in respect of clause (iii) is incapable of
being cured or has not been cured within 30 days after the giving of written
notice to Parent or Sub, as applicable, except, in any case under clause (iii),
such breaches and failures which would not prevent the consummation of the Offer
or the Merger subject to the terms and conditions of this Agreement.
9.2. Effect of Termination.
---------------------
In the event of a termination of this Agreement by either the Company or
Parent as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Sub or the
Company or their respective officers or directors, except with respect to the
last sentence of Section 1.2(c), Section 5.6, the last sentence of Section 7.2,
Section 7.7, Section 9.1, this Section 9.2 and Article X; provided, however,
-------- -------
that nothing herein shall relieve any party for liability for any breach hereof.
9.3. Amendment.
---------
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
obtaining the Company Stockholder Approval (if required by law), but, after any
such approval, no amendment shall be made which by law requires further approval
by such shareholders without obtaining such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
9.4. Extension; Waiver.
-----------------
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) subject to Section 9.3, waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf
-39-
<PAGE>
of such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
9.5. Procedure for Termination, Amendment, Extension or Waiver.
---------------------------------------------------------
A termination of this Agreement pursuant to Section 9.1, an amendment of
this Agreement pursuant to Section 9.3 or an extension or waiver pursuant to
Section 9.4 shall, in order to be effective, require in the case of Parent, Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors; provided, however, that in the event that Sub's
-------- -------
designees are appointed or elected to the Board of Directors of the Company as
provided in Section 7.6, after the acceptance for payment and payment of Shares
pursuant to and subject to the Conditions (including the Minimum Condition) of
the Offer and prior to the Effective Time, the affirmative vote of a majority of
the directors of the Company that were not designated by Parent or Sub shall be
required by the Company to (i) amend or terminate this Agreement by the Company,
(ii) exercise or waive any of the Company's rights or remedies under this
Agreement, (iii) extend the time for performance of Parent's and Sub's
respective obligations under this Agreement or (iv) take any action to amend or
otherwise modify the Company's Certificate of Incorporation or By-laws.
ARTICLE X
MISCELLANEOUS
10.1. Nonsurvival of Representations, Warranties and Agreements.
---------------------------------------------------------
None of the representations, warranties or covenants (subject to the
succeeding sentence) in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Time. This Section 10.1 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time of the Merger.
10.2. Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed),
sent by overnight courier (providing proof of delivery) or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Parent or Sub, to
Three Rivers Holding Corp.
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
-40-
<PAGE>
Attention: Mr. Josh Harris
Telecopy No.: (212) 261-4102
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
Attention: John J. Suydam, Esq.
Telecopy No.: (212) 408-2420
and
if to the Company, to
SMT Health Services Inc.
10521 Perry Highway
Wexford, PA 15090
Attention: Mr. Jeff D. Bergman, President
Telecopy No.: (412) 933-3311
with a copy to:
Buchanan Ingersoll Professional Corporation
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219-1410
Attention: Ronald Basso, Esq.
Telecopy No.: (412) 562-1041
10.3. Interpretation.
--------------
When a reference is made in this Agreement to an Article or a Section,
such reference shall be to an Article or a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Unless the context otherwise
requires, words importing the singular shall include the plural, and vice versa.
Whenever the words "include", "includes" or "including" are used in this
------- -------- ---------
Agreement, they shall be deemed to be followed by the words "without
-------
limitation". The phrase "made available" in this Agreement shall mean that the
- ---------- --------------
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "subsidiary" of any person means another person, an amount of the voting
----------
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
As used in this Agreement, "material adverse effect" means, when used in respect
-----------------------
of the Company, any effect or condition that, individually or in the aggregate
with any other effect or condition, is
-41-
<PAGE>
materially adverse to the assets, properties, business, financial condition,
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole. As used in this Agreement, "material adverse change" means, when used
-----------------------
in respect of the Company, any change or event that, individually or in the
aggregate with any other change or event, is materially adverse to the assets,
properties, business, financial condition, results of operations or prospects of
the Company and its Subsidiaries, taken as a whole. As used in this Agreement,
the phrase "knowledge" with respect to the Company, means to the actual
---------
knowledge of the Company, its Subsidiaries, and each of their respective
directors and officers, after due inquiry. As used in this Agreement, the term
"person" shall be interpreted broadly and shall include any person, individual,
------
corporation, limited partnership, limited liability company, trust, association
or other entity or business organization of any kind or division thereof.
10.4. Counterparts.
------------
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
10.5. Entire Agreement; Third Party Beneficiaries.
-------------------------------------------
This Agreement (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as provided in
Section 7.5 are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
10.6. Governing Law.
-------------
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware.
10.7. Publicity.
---------
Except as otherwise required by law or the rules of the Nasdaq National
Market, for so long as this Agreement is in effect, neither the Company nor
Parent shall, or shall permit any of its subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld.
10.8. Assignment.
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
which consent will not be unreasonably withheld. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
-42-
<PAGE>
10.9. Enforcement.
-----------
The parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of
Delaware or in a Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit such party to the personal jurisdiction of
any Federal court located in the State of Delaware or any Delaware state court
in the event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action relating to
this Agreement or any of the transactions contemplated hereby in any court other
than a Federal court sitting in the state of Delaware or a Delaware state court
and (iv) waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
-43-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
THREE RIVERS HOLDING CORP.
By: /s/ JOSHUA HARRIS
--------------------------------
Name: Joshua Harris
Title:
THREE RIVERS ACQUISITION CORP.
By: /s/ JOSHUA HARRIS
--------------------------------
Name: Joshua Harris
Title:
SMT HEALTH SERVICES INC.
By: /s/ JEFF D. BERGMAN
--------------------------------
Name: Jeff D. Bergman
Title: CHAIRMAN, PRESIDENT & CEO
-44-
<PAGE>
EXHIBIT A
Conditions of the Offer
-----------------------
Notwithstanding any other term of the Offer, Sub shall not be required
to accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's
obligation to pay for or return tendered Shares after the termination or
withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer
unless (i) there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer (x) such number of Shares that together with Shares
subject to the Stockholder Agreement that shall not have been tendered would
constitute a majority of the Shares (for purposes of this clause (x) only,
"Shares" shall be deemed to refer only to Shares outstanding on the date hereof)
------
and (y) such number of Shares that together with Shares subject to the
Stockholder Agreement that shall not have been tendered would constitute a
majority of the fully diluted Shares as of the date of determination (determined
on a fully diluted basis for all outstanding stock options and any other rights
to acquire Shares) (the conditions in (x) and (y) collectively, the "Minimum
-------
Condition") and (ii) any waiting period under the HSR Act applicable to the
- ---------
purchase of Shares pursuant to the Offer shall have expired or been terminated.
Furthermore, notwithstanding any other term of the Offer, Sub shall not be
required to accept for payment or, subject as aforesaid, to pay for any Shares
not theretofore accepted for payment or paid for, and may terminate the Offer
if, at any time on or after the date hereof and before the acceptance of such
Shares for payment or the payment therefor, any of the following conditions
exists (other than as a result of any action or inaction of Parent or any of its
subsidiaries that constitutes a breach of this Agreement):
(a) there shall be instituted or pending by any person or
Governmental Entity any suit, action or proceeding (i) challenging the
acquisition by Parent or Sub of any Shares under the Offer or pursuant to the
Stockholder Agreement, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of the other
transactions contemplated by this Agreement or the Stockholder Agreement
(including the voting provision thereunder), or seeking to obtain from the
Company, Parent or Sub any damages in connection with the aforesaid transactions
that are material in relation to the Company, (ii) seeking to prohibit or
materially limit the ownership or operation by the Company, Parent or any of
their respective subsidiaries of a material portion of the business or assets of
the Company or its Subsidiaries, or Parent and its subsidiaries taken as a
whole, or to compel the Company or Parent to dispose of or hold separate any
material portion of the business or assets of the Company, or Parent and its
subsidiaries, taken as a whole, as a result of the Offer or any of the other
transactions contemplated by this Agreement or the Stockholder Agreement, (iii)
seeking to impose material limitations on the ability of Parent or Sub to
acquire or hold, or exercise full rights of ownership of, any Shares to be
accepted for payment pursuant to the Offer or purchased under the Stockholder
Agreement including, without limitation, the right to vote such Shares on all
matters properly presented to the stockholders of the Company, (iv) seeking to
prohibit Parent or any of its subsidiaries from effectively controlling in any
material respect any material portion of the assets, properties, business or
operations of the Company or its Subsidiaries or (v) which otherwise is
reasonably likely to have a material adverse effect;
A-1
<PAGE>
(b) there shall be any statute, rule, regulation, judgment, order,
injunction or other restraint enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above; provided, however, that each
-------- -------
of Parent and Sub shall have used reasonable efforts to prevent the entry of any
such injunction or other court order and to appeal as promptly as possible any
injunction or other court order that may be entered;
(c) there shall have occurred any material adverse change;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange or
the NASDAQ, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by federal
or state authorities on the extension of credit by lending institutions, or a
disruption of or material adverse change in either the syndication market for
credit facilities or the financial, banking or capital markets, (iii) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States or (iv) in the case
of any of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(e) any of the representations and warranties of the Company set
forth in this Agreement (without giving effect to any materiality or similar
qualifications contained therein), shall not be true and correct in all material
respects at the date hereof and at the scheduled or extended expiration of the
Offer, except for changes specifically permitted by the Agreement;
(f) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement; or
(g) this Agreement shall have been terminated in accordance with its
terms;
(h) all leases, promissory notes, and other loan or financing
documentation to which the Company or any Subsidiary is a party or by which the
assets or properties of either the Company or any Subsidiary are bound
(including those in respect of the MRI Units owned, leased or on order by the
Company or any Subsidiary) shall have been amended or restated, as necessary, so
that (a) all MRI Units leased by the Company and/or any Subsidiary may be
purchased by the applicable lessee at any time, and the leases thereunder and
all lending or other financing arrangements to which the Company or any
Subsidiary is a party pertaining to the MRI Units owned, leased or on order by
the Company or any Subsidiary may be terminated at any time (other than leases
or lending or other financing arrangements with respect to such MRI Units that
have an aggregate principal amount outstanding of less than $6 million), in each
case without any payment made or liability or obligation incurred by or on
behalf of the Company or any Subsidiary, other than payments made or liabilities
or obligations incurred prior to the Effective Time which, in the aggregate, do
not exceed an amount reasonably acceptable to Parent and the Company and (b)
none of the Merger, the Offer or any of the transactions contemplated
A-2
<PAGE>
hereby shall constitute a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, accelaration or cancellation or right of non-renewal or
give rise to the loss of a material benefit) thereunder; which, in the judgment
of Sub in any such case, and regardless of the circumstances (including any
action or omission by Sub not inconsistent with the terms of this Agreement)
giving rise to any such condition, makes it inadvisable to proceed with such
acceptance for payment or payments.
The foregoing conditions in paragraphs (a) through (h) are for the sole
benefit of Sub and Parent and may, subject to the terms of this Agreement, be
waived by Sub and Parent in whole or in part at any time and from time to time
in their sole discretion. The failure by Parent or Sub at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances
shall not be deemed a waiver with respect to any other facts and circumstances
and each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
A-3
<PAGE>
SCHEDULES TO
AGREEMENT AND PLAN OF MERGER
INTRODUCTION
Reference is made to the Agreement and Plan of Merger, dated as of
June 24, 1997, among Three Rivers Holding Corp., a Delaware corporation, Three
Rivers Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Three Rivers Holding Corp., and SMT Health Services Inc., a Delaware
corporation (the "Agreement"). Capitalized terms used in the schedules and not
---------
otherwise defined shall have the respective meanings ascribed to such terms in
the Agreement. The inclusion of any matter on any schedule shall not be deemed
an admission by the Company as to the materiality of such matter.
Any lease or indebtedness in respect of the MRI Units owned, leased or
on order by the Company or any Subsidiary shall be deemed disclosed for all
schedules to the Agreement if such lease or indebtedness is disclosed on any
schedule to the Agreement.
A-4
<PAGE>
PARENT OPTION PLAN TERMS SHEET
Issuer Three Rivers Holding Corp. ("Issuer")
------
Percent of 10% of the shares outstanding immediately after the
Outstanding Common Effective Time of the Merger (assuming 35,000,000 common
Stock shares of initial equity before granting of options,
options with respect to a total of 3,500,000 shares will
be available for grant).
Allocation Unless the board of directors with the concurrence of
Messrs. Bergman and Dickman unanimously determines
otherwise (except with respect to any employee who has
an employment agreement with SMT Health Services Inc.
(the "Company")), the option shares shall be allocated
-------
to the individuals and in the amounts set forth on the
schedule attached hereto, with any unallocated options to
be allocated by the Compensation Committee in consultation
with Messrs. Bergman and Dickman.
Time Vesting 50% of the total number of available options will vest over
four years (1998, 1999, 2000, 2001), beginning on the first
anniversary of the grant date, which will be 15 days after
the Effective Time. In the event of a sale of the Company
(as defined below) which is followed within six months by
the termination of an employee, all of the options
described in the preceding sentence allocated to such
terminated employee shall vest immediately upon such
termination.
Performance Vesting 50% of total available options will vest over four years
(4/1/99, 4/1/00, 4/1/01, 4/1/02) in equal increments
conditioned upon achievement of annual equity value
targets. The Per Share Equity targets for each of 12/31/98,
12/31/99, 12/31/00 and 12/31/01 are $1.68, $2.35, $3.29 and
$4.61. For each target that is achieved, the options
attributable to that year will vest
B-1
<PAGE>
on April 1 of the following year. If any target is not achieved,
the compensation committee of the board, upon consultation with
management, will have the discretion to cause all or part of
such options to vest. In addition, for any year in which a Per
Share Equity target is missed by less than 20%, the shares that
did not vest in such year shall vest in the next succeeding year
if the Per Share Equity target for such year is attained. Per
Share Equity will equal (((i) EBITDA for the relevant calendar
year times (ii) six) plus ((i) 12/31 cash minus (ii) 12/31
debt)) divided by (as of 12/31 (i) number of shares outstanding
plus (ii) number of shares subject to vested options.
In the event of the sale of the Company (including a merger, the
sale of substantially all assets, or the sale by Apollo of more
than 50% of its common stock, if such sale is made to a company
which after giving effect to such sale will own (i) more than
25% of the outstanding stock of the Company and (ii) more of the
common stock of the Company than is owned by Apollo after such
sale), other than to an affiliate of Apollo, prior to 1/1/03,
all unvested performance-based options will vest if the fair
market value of the per share consideration received in the sale
equals or exceeds the Per Share Equity target established for
12/31 of the nearest year for which Per Share Equity targets
have been established after such sale closes.
Exercise Price Apollo's per share buy-in price.
Expiration Date Options expire ten years from the date of grant.
Tag Along/Drag Shares purchased pursuant to the options ("Shares") will have
Along Rights the benefit of tag along rights if the Issuer is sold and be
subject to drag along rights in favor of the Issuer and/or the
controlling stockholder.
B-2
<PAGE>
Repurchase Right Vested options and Shares will be subject to repurchase
rights in favor of the Issuer and Apollo from and after the
first anniversary of termination of employment at the fair
market value thereof. If employee terminates without good
reason, he must exercise all vested options within 30 days
of termination or lose the right to exercise such options
(unless such employee continues in a consulting or other
material business relationship with the Company in which
case such options must be exercised prior to the termination
of such consulting or other relationship but in any event
within 2 years of the termination of employment), but
employee is entitled to the fair market value of shares
received upon exercise of such options if the repurchase
right is exercised.
Registration Rights An S-8 will be filed within one year of the IPO (as defined
below).
Vesting Vesting of options will occur only during an employee's
term of employment.
IPO If the Issuer sells shares of Common stock in a qualified
public offering (the "IPO") before 1/1/03, all unvested
performance-based options attributable to the years prior to
the year in which the IPO closes vest if the per share net
proceeds to the Issuer equal or exceed the Per Share Equity
target for 12/31 of the nearest year for which Per Share
Equity targets have been established after the IPO closes.
The Per Share Equity performance targets for 12/31 of each
year after the close of the IPO will be measured against the
average closing stock price for the 30 trading days
immediately preceding the applicable target date (with the
five highest and five lowest prices disregarded).
All tag along/drag along rights and repurchase rights
terminate upon consummation of the IPO.
B-3
<PAGE>
<TABLE>
<CAPTION>
Employee Options %
<S> <C> <C>
Baker, P 220,000 6.29%
Bergman, J 800,000 22.86%
Byington, D 30,000 0.86%
Colerich, K 25,000 0.71%
Cook, B 220,000 6.29%
Dickman, D 800,000 22.86%
Grady, LA 25,000 0.71%
Mannas, L 6,000 0.17%
Pannick, A 10,000 0.29%
Pasko, P 20,000 0.57%
Petcheny, R 45,000 1.29%
Pierce, K 9,000 0.26%
Rinaman, ML 9,000 0.26%
Silva, S 25,000 0.71%
Snyder, D 45,000 1.29%
Spindler, D 407,050 11.63%
Stoner, D 10,000 0.29%
Wonsettler, R 50,000 1.43%
Wyatt, P 10,000 0.29%
Zynn, D 407,050 11.63%
</TABLE>
<PAGE>
EXHIBIT (C)(2)
STOCKHOLDER AGREEMENT dated as of June 24, 1997 among THREE RIVERS HOLDING
CORP., a Delaware corporation, ("Parent"), THREE RIVERS ACQUISITION CORP. a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub") and the
individuals listed on Schedule A attached hereto (each, a "Stockholder" and,
collectively, the "Stockholders").
WHEREAS, Parent, Sub, and SMT Health Services Inc. (the "Company")
propose to enter into an Agreement and Plan of Merger dated as of the date
hereof (as the same may be amended or supplemented, the "Merger Agreement")
providing for (i) the making of a cash tender offer (as such offer may be
amended from time to time as permitted under the Merger Agreement, the "Offer")
by Sub for all the outstanding shares of common stock, par value $.01 per share,
of the Company ("Company Common Stock") and (ii) for the merger of Sub with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth in the Merger Agreement; and
WHEREAS, each Stockholder owns the number of shares of Company Common
Stock set forth opposite his or its name on Schedule A attached hereto (such
shares of Company Common Stock, together with any other shares of capital stock
of the Company acquired by such Stockholders after the date hereof and during
the term of this Agreement (including, without limitation, through the exercise
of any stock options, warrants or similar instruments), being collectively
referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that each Stockholder enter into this Agreement;
NOW, THEREFORE, to induce Parent to enter into, and in consideration
of its entering into, the Merger 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 Merger Agreement):
1. Representations and Warranties of each Stockholder.
--------------------------------------------------
Each Stockholder hereby represents and warrants, severally and not
jointly, to Parent as of the date hereof in respect of himself or itself 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, 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
<PAGE>
obligation of the Stockholder enforceable against the Stockholder in accordance
with its terms. Except for the expiration or termination of the waiting periods
under the HSR Act, 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 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 Liens. The Stockholder does not own, of record or beneficially, any
shares of capital stock of the Company 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.
(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 of this Agreement by such Stockholder or the
performance by such
-2-
<PAGE>
Stockholder of its obligations hereunder (it being understood that Smith Barney
Inc. may be entitled to certain fees and expenses in connection with the
transactions contemplated by the Merger Agreement, which fees and expenses shall
be paid by the Company as set forth in the Merger Agreement).
2. Purchase and Sale of Shares.
---------------------------
Each Stockholder hereby severally agrees to sell to Sub, and Sub
hereby agrees, subject to the terms and conditions set forth herein, to
purchase, all Subject Shares set forth opposite such Stockholder's name on
Schedule A hereto (together with the associated Rights (as defined in the Rights
Agreement)), at a price per Share equal to the Offer Price (with no additional
consideration being paid in respect of the Rights). Such Stockholder may tender
such Subject Shares (and the associated Rights) into the Offer and Sub may
direct that such Stockholder tender such Subject Shares (and the associated
Rights) and, subject to applicable Federal securities law, not withdraw any
Subject Shares (or the associated Rights) so tendered. Any Subject Shares (and
the associated Rights) not purchased in the Offer will be sold and purchased
immediately after payment is made under the Offer.
3. Conditions.
----------
Parent's and Sub's obligations to purchase and each Stockholders'
obligations to sell the Subject Shares (and the associated Rights) pursuant to
Section 2 of this Agreement shall be subject to the prior satisfaction or waiver
of the following conditions:
(a) Sub shall have accepted the Shares for payment under the terms
of the Offer;
(b) the Minimum Condition shall have been satisfied;
(c) all waiting periods under the HSR Act applicable to the
exercise of the purchase of the Subject Shares shall have expired or terminated;
(d) all regulatory approvals required by any applicable law, rule,
or regulation, including any applicable local, state, federal or foreign
regulation, shall have been obtained, and each such approval shall be final; and
(e) there exist no preliminary or permanent injunction, or any
other order by any court of competent jurisdiction, restricting, preventing or
prohibiting either the purchase, or the delivery, of the Subject Shares.
-3-
<PAGE>
4. Representation and Warranty of Parent and Sub.
---------------------------------------------
(a) Authority. Parent and Sub have 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 Parent and Sub, and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary action on the part of the Parent and
Sub. This Agreement has been duly executed and delivered by the Parent and Sub
and constitutes a valid and binding obligation of the Parent and Sub enforceable
against the Parent and Sub in accordance with its terms. Except for the
expiration or termination of the waiting periods under the HSR Act,
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 Parent or Sub or to the Parent's or Sub's property or assets,
(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
Parent or Sub or any of the Parent's or Sub's properties or assets.
(b) Brokers. No broker, finder, investment banker or other
-------
person is entitled to any brokerage, finder's or other fee or commission for
which any Stockholder will be liable in connection with the execution of this
Agreement by Parent and Sub or the performance by Parent and Sub of their
obligations hereunder.
(c) Financing. Parent has sufficient funds available, directly
---------
or through finance commitments, to purchase, or to cause Sub to purchase, all
the Subject Shares pursuant to this Agreement and to pay all fees and expenses
payable by Parent or Sub related to the transactions contemplated by this
Agreement.
-4-
<PAGE>
5. Covenants of Each Stockholder.
-----------------------------
Until the termination of this Agreement in accordance with
Section 10, each Stockholder, severally and not jointly, agrees as follows:
(a) In connection with the closing of the purchase and sale
contemplated under Section 2 of this Agreement (other than pursuant to the
Offer), each Stockholder agrees to deliver, either to Sub or as directed by
Parent, all certificates evidencing the Subject Shares held by such Stockholder,
duly endorsed in blank for transfer, or accompanied by stock powers and such
other documents as may be necessary in Parent's judgment to transfer record
ownership of the Subject Shares to Sub or as directed by Parent.
(b) At any meeting of stockholders of the Company called to vote
upon the Merger and the Merger Agreement 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 Merger and the Merger Agreement is sought,
the Stockholder shall vote (or cause to be voted) the Subject Shares in favor of
the Merger, the adoption by the Company of the Merger Agreement and the approval
of the terms thereof and each of the other transactions contemplated by the
Merger Agreement.
(c) At any meeting of stockholders of the Company 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 as such term is defined in Section 6.2 of the Merger
Agreement, (ii) any amendment of the Company's certificate of incorporation or
by-laws or other proposal or transaction involving the Company, which amendment
or other proposal or transaction would be reasonably likely to impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement or change in any manner
the voting rights of any class of Company Common Stock, or (iii) any action that
would cause the Company to breach any representation, warranty or covenant
contained in the Merger Agreement. Subject to Section 12, the Stockholder
further agrees not to enter into any agreement or take any action inconsistent
with the foregoing.
(d) The Stockholder shall not, prior to the earliest of (i) the
Effective Time and (ii) the termination of the Merger Agreement in accordance
with its terms, (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
-5-
<PAGE>
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, the Subject Shares to any person
other than pursuant to the terms of the Offer or the Merger or (B) enter into
any voting arrangement, directly or indirectly, whether by proxy, voting
agreement or otherwise, in respect of the Subject Shares, and the Stockholder
agrees not to commit or agree to take any of the foregoing actions.
(e) Subject to the terms of Section 12, during the term of this
Agreement, the Stockholder shall not, nor shall it permit any investment banker,
financial advisor, attorney, accountant or other representative retained by it,
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 such Stockholder, shall be deemed to be a
violation of this Section 5(e) by such Stockholder.
(f) Until the Effective Time, the Stockholder shall use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate the Offer and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by the Merger Agreement.
(g) Such 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. Each such
beneficiary hereby acknowledges and agrees to be bound by the terms of this
Agreement applicable to it.
(h) (i) In the event that the Merger Agreement shall have been
terminated under circumstances where Parent is or may become entitled to receive
the Termination Fee, as defined in Section 7.7 of the Merger Agreement, each
Stockholder shall pay to Parent on demand an amount equal to all profit
determined in accordance with Section 5(h)(ii) of such Stockholder resulting
from the consummation of any transaction which gives rise to the Company's
obligation to pay the Termination Fee pursuant to the Merger Agreement.
-6-
<PAGE>
(ii) For purposes of this Section 5(h), the profit of any
Stockholder from any Alternative Transaction shall equal (A) the aggregate
consideration that would have been received by such Stockholder pursuant to
such Alternative Transaction if such Stockholder held the same number of
Subject Shares at the consummation of such Alternative Transaction as he
held at the time the Merger Agreement was terminated (including any
consideration that would have been received in respect of any unexercised
stock options or warrants or similar instruments held at the time the
Merger Agreement was terminated), valuing any noncash consideration
(including any residual interest in the Company) at its fair market value
on the date of such consummation less (B) the per share cash consideration
or the per share fair market value of the aggregate consideration that
would have been issuable or payable to such Stockholder (assuming all stock
options, warrants or similar instruments held by such Stockholder were
exercised) if he had received the Merger Consideration pursuant to the
Merger Agreement as originally executed (without giving effect to any
increase in such Merger Consideration).
(iii) In the event that (x) prior to the Effective Time, an
Alternative Transaction shall have been proposed and (y) the Effective Time
of the Merger shall have occurred and Parent for any reason shall have
increased the amount of Merger Consideration payable over that set forth in
the Merger Agreement in effect on the date hereof (the "Merger
Consideration"), each Stockholder shall pay to Parent on demand an amount
in cash equal to the product of (i) the number of Subject Shares held by
such Stockholder (assuming all stock options, warrants or similar
instruments held by such Stockholder were exercised) and (ii) 100% of the
excess, if any, of (A) the per share cash consideration or the per share
fair market value of any noncash consideration, as the case may be,
received by the Stockholder as a result of the Merger, as amended,
determined as of the Effective Time of the Merger, over (B) the amount of
the Original Merger Consideration determined as of the time of the first
increase in the amount of the Original Merger Consideration.
(iv) For purposes of this Section 5(h), the fair market value
of any noncash consideration consisting of:
(A) securities listed on a national securities exchange
or traded on the NASDAQ/NMS shall be equal to the average closing price per
share of such
-7-
<PAGE>
security as reported on such exchange or NASDAQ/NMS for the twenty trading
days prior to the date of determination; and
(B) consideration which is other than cash or
securities of the form specified in clause (A) of this Section 5(h)(iv)
shall be determined by a nationally recognized independent investment
banking firm mutually agreed upon by the parties within 10 business days of
the event requiring selection of such banking firm; provided, however, that
-------- -------
if the parties are unable to agree within two business days after the date
of such event as to the investment banking firm, then the parties shall
each select one firm, and those firms shall select a third investment
banking firm, which third firm shall make such determination; provided
--------
further, that the fees and expenses of such investment banking firm shall
-------
be borne by Parent. The determination of the investment banking firm shall
be final and binding upon the parties.
(v) Any payment of profit under this Section 5(h) shall
(x) if paid in cash, be paid by wire transfer of same day funds to an
account designated by Parent and (y) if paid through a transfer of
securities (with the method and timing of such transfer to be mutually
agreed), be paid as soon as practicable through delivery of such
securities, suitably endorsed for transfer; provided that the Stockholder
--------
shall be required to pay cash under this Section 5(h) only to the extent
the fair market value of the securities transferred pursuant to clause (y)
is less than such Stockholders' profit.
(i) If (i) immediately prior to the expiration of the Offer,
Sub determines that the exercise of options, warrants or other instruments
held by the Stockholders and the sale or tender into the Offer of Subject
Shares acquired thereby either would cause the Minimum Condition to be
satisfied or would cause Sub to own more than 90% of the outstanding Shares
and (ii) Sub exercises its right to extend the Offer in accordance with the
terms and conditions set forth in the Merger Agreement, then upon the
request of Parent or Sub and the Exercise Loan (as defined below), each
Stockholder shall promptly exercise all options, warrants and other
instruments held by such Stockholder and sell the Subject Shares acquired
thereby to Sub or tender such Subject Shares into the Offer (at such
Stockholder's discretion, unless Sub directs that such Stockholder tender
such Subject Shares). Upon delivery of such request, Parent shall lend to
each Stockholder the amount necessary for such Stockholder to pay the
aggregate exercise price in respect of all options,
-8-
<PAGE>
warrants and other instruments (each, an "Exercise Loan"). Each Exercise
-------- ----
Loan shall be evidenced by a promissory note, shall bear interest at the
applicable Federal rate (as defined in Section 7872 of the Internal Revenue
Code of 1986, as amended) and shall be repaid together with accrued but
unpaid interest upon the earlier of (i) the payment of the purchase price
for the Subject Shares (whether pursuant to the Offer or otherwise) and
(ii) the termination of this Agreement pursuant to Section 10.
6. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) Each Stockholder hereby irrevocably grants to, and
appoints, Parent and Josh Harris, in his capacity as an officer of Parent, and
any individual who shall hereafter succeed to any such office of Parent, 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 as such term is defined in Section 6.2
of the Merger Agreement, (ii) any amendment of the Company's certificate of
incorporation or by-laws or other proposal or transaction involving the Company,
which amendment or other proposal or transaction would be reasonably likely to
impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement or change in any
manner the voting rights of any class of Company Common Stock, or (iii) any
action that would cause the Company to breach any representation, warranty or
covenant contained in the Merger Agreement. The proxy granted pursuant to this
Section shall terminate upon the termination of this Agreement pursuant to
Section 10.
(b) Such Stockholder represents that there are no proxies
heretofore given in respect of such Stockholder's Subject Shares.
(c) Such Stockholder hereby affirms that the irrevocable proxy
set forth in this Section 6 is given in connection with the execution of the
Merger 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 212(e)
of the Delaware General Corporation Law (the "DGCL").
-9-
<PAGE>
7. Further Assurances.
------------------
Each Stockholder will, at Parent's 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 Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
8. Certain Events.
--------------
(a) Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Subject Shares (and the
associated Rights) 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 the Company affecting the Company Common Stock, or the
acquisition of additional shares of Company Common Stock or other voting
securities of the Company by any Stockholder, the number of Subject Shares
listed in Schedule A beside the name of such Stockholder shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of Company Common Stock or other voting securities of the
Company issued to or acquired by such Stockholder.
(b) Each Stockholder agrees that such Stockholder will tender
to the Company, immediately after the execution hereof (or, in the event Subject
Shares are acquired subsequent to the date hereof, immediately after such
acquisition), any and all certificates representing such Stockholder's Subject
Shares in order that the Company may inscribe upon such certificates the legend
in accordance with Section 7.9 of the Merger Agreement.
9. 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 (i) Sub may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to any subsidiary of Parent that may be substituted for Sub as contemplated by
Section 10.8 of the Merger Agreement, and (ii) Parent may assign, in its sole
discretion, any and all of its rights, interests and obligations hereunder to
any direct or indirect wholly owned subsidiary of Parent, provided that Parent
will continue to remain primarily liable for its obligations hereunder in the
event of any assignment pursuant to this clause
-10-
<PAGE>
(ii). 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.
10. Termination.
-----------
This Agreement, and all rights and obligations of the parties
hereunder, shall terminate upon the date upon which the Merger Agreement is
terminated in accordance with its terms, provided that a Termination Fee has not
--------
become, and could not at any time in the future become, payable under the Merger
Agreement, in which case Sections 5(h), 6, 7 (as it relates to the other
sections of this Agreement that survive such termination), 8, 9, 10, 11, 13, and
14 shall survive until such Termination Fee is paid.
11. 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 Parent in accordance with Section 10.2 of the Merger
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." Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to them in the Merger Agreement.
(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.
- -11-
<PAGE>
(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 Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
(g) Voidability. If prior to the execution hereof, the Board of
-----------
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action, this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby, so that by the execution and
delivery hereof Parent or Sub would become, or could reasonably be expected to
become an "interested stockholder" with whom the Company would be prevented for
any period pursuant to Section 203 of the DGCL from engaging in any "business
combination" (as such terms are defined in Section 203 of the DGCL), then this
Agreement shall be void and unenforceable until such time as such authorization
and approval shall have been duly and validly obtained.
(h) 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.
12. Stockholder Capacity.
--------------------
No person executing this Agreement who is or becomes during the term
hereof a director or officer of the Company makes any agreement or understanding
herein in his capacity as such director or officer. Each 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, such
Stockholder's Subject Shares and nothing herein (including, without limitation,
the provisions of Section 5(e)) shall limit or affect any actions taken by a
Stockholder in his capacity as an officer or director of the Company.
13. 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
- -12-
<PAGE>
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of Delaware or
in a Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(i) consents to submit such party to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or the transactions contemplated hereby in any court other than a
Federal court sitting in the state of Delaware or a Delaware state court and
(iv) waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
14. Public Announcements.
--------------------
No Stockholder shall issue any press release or make any public
statement without the prior written consent of Parent, except as may be required
by applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
- -13-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
THREE RIVERS HOLDING CORP.
By: /s/ JOSHUA HARRIS
---------------------------------
Name: Joshua Harris
Title:
THREE RIVERS ACQUISITION CORP.
By: /s/ JOSHUA HARRIS
---------------------------------
Name: Joshua Harris
Title:
/s/ JEFF D. BERGMAN
------------------------------------
Jeff D. Bergman, as Stockholder
/s/ DANIEL DICKMAN
------------------------------------
Daniel Dickman, as Stockholder
/s/ DAVID SPINDLER
------------------------------------
David Spindler, as Stockholder
/s/ DAVID ZYNN
------------------------------------
David Zynn, as Stockholder
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Number of
Name and Address Shares of Company
of Stockholder Common Stock Owned
- ---------------------- ------------------
<S> <C>
Jeff D. Bergman 450,791
335 Golfside Drive
Wexford, PA 15090
Daniel Dickman 501,689
603 Golden Oaks Lane
Pittsburgh, PA 15237
David Spindler 46,277
103 Lee Court
McKeesport, PA 15135
David Zynn 24,745
5011 Karrington Drive
Gibsonia, PA 15044
</TABLE>
<PAGE>
EXHIBIT (c)(3)
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the 24th
day of June, 1997 by and between SMT Health Services Inc., a Delaware
corporation (the "Company"), and Jeff D. Bergman (the "Employee"). This
Agreement shall become effective (the "Effective Date") upon the closing of the
offer, by Three Rivers Acquisition Corp., a Delaware corporation ("Acquisition
Corp."), to purchase all of the issued and outstanding common stock, par value
$.01 per share (the "Common Stock") of the Company (the "Tender Offer"). If the
Tender Offer is not consummated, this Agreement shall become null and void and
the employment agreement with Employee dated July 1, 1996 shall remain in full
force and effect.
WITNESSETH:
-----------
WHEREAS, Acquisition Corp. is a wholly-owned subsidiary of Three Rivers
Holding Corp. ("Parent");
WHEREAS, pursuant to an Agreement and Plan of Merger of even date by and
among Parent, Acquisition Corp. and the Company (the "Merger Agreement"),
Acquisition Corp. will commence the Tender Offer and following the consummation
of the Tender Offer, Acquisition Corp. will merge with and into the Company,
with the Company being the survivor, pursuant to the terms and conditions set
forth in the Merger Agreement (the "Merger");
WHEREAS, Parent and the Company desire to secure the continued employment
of Employee by the Company in an executive capacity following the Tender Offer
and Merger; and
WHEREAS, the Company and the Employee desire to enter into this Agreement
in order to set forth certain terms and conditions of Employee's continued
employment with the Company and to terminate the existing employment agreement
dated as of July 1, 1996;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
-----------
Employee and the Employee hereby agrees to continue to be employed by the
Company commencing on the Effective Date for the Term (as defined below) of the
Agreement, in the position and with the duties and responsibilities set forth in
Section 2 below, and upon the other terms and subject to the conditions
hereinafter stated.
<PAGE>
2. Position, Duties and Responsibilities.
--------------------------------------
(a) During the Term of the Agreement, the Employee shall serve as the
Chairman of the Board, President and Chief Executive Officer of the Company and
shall be consulted by the Compensation Committee with respect to compensation
issues. The Employee shall have general executive supervision over the business
and affairs of the Company, subject to the policies and directions of, and the
executive responsibilities that may be assigned to him (which in each case shall
be consistent with his position and title) by and reporting directly and solely
to, the Board of Directors of the Company (the "Board of Directors"). The
Employee shall generally be responsible for supervising the development,
coordination and implementation of the strategies for the Company's business.
The Employee shall have general supervisory authority over the executive
officers and other employees of the Company. The Employee shall be a signatory,
at all times during the term of this Agreement, on all bank accounts, of every
nature and kind, and all other banking arrangements, including safety deposit
boxes, lockbox accounts, and the like. Employee's duties shall be performed
principally at the Company's executive offices which are located in the
Pittsburgh Metropolitan Area and Employee shall not be required to perform
duties outside the Pittsburgh Metropolitan Area which would necessitate changing
his present residence, unless Employee otherwise agrees in writing. For
purposes of this Agreement, the term "Pittsburgh Metropolitan Area" shall
encompass the City of Pittsburgh, Pennsylvania, the Borough of Wexford,
Pennsylvania, and the territory within a fifteen (15) mile radius of such
borough. The Company agrees that it shall not relocate or transfer its
principal executive offices to a location outside the Pittsburgh Metropolitan
Area.
(b) During the Term, the Employee shall devote such time and attention to
affairs of the Company as he reasonably believes is necessary to accomplish the
results set forth in the Company's Business Plan, which has been provided to him
by the Company, as amended from time to time with his concurrence and Employee
shall be prohibited from entering into any other employment relationships;
provided, however, that nothing contained herein shall prohibit the Employee
from (a) engaging in officiating in the National Football League or other
leagues approved by the Board of Directors, (b) serving as a member of the Board
of Directors or officer of any other for-profit entity so long as Employee has
obtained the prior consent of Board of Directors , or (c) engaging in charitable
and community affairs.
3. Term. The initial term of this Agreement shall be for a period of
-----
three (3) years, commencing on the Effective Date (the "Initial Term") . On each
quarterly anniversary of the Effective Date while Employee remains employed
hereunder, commencing one year and three months after the Effective Date, the
Initial Term shall be automatically extended by three months ("Renewal Period"),
and this Agreement shall continue in effect until Employee's employment
hereunder is terminated pursuant to Section 5 hereof (the Initial Term of this
Agreement, as extended by each Renewal Period, is hereinafter defined as the
"Term").
- --------
4. Compensation. For the services rendered by Employee pursuant to
-------------
Section 2 during the Term, the Employee shall be paid the compensation and
receive the benefits as set forth on Exhibit A annexed hereto.
---------
2
<PAGE>
5. Termination of Agreement. The Employee's employment hereunder may be
-------------------------
terminated only as follows:
(a) By the Company Without Cause. The Company may at any time terminate
-----------------------------
the Employee's employment hereunder without Cause, by affirmative vote of a
majority of the entire Board of Directors (without counting the presence or vote
of the Employee), and upon no less than sixty (60) days' prior written notice to
the Employee.
- -------------
(b) By the Employee Without Good Reason. The Employee may at any time
------------------------------------
terminate his employment hereunder for any reason upon no less than sixty (60)
days' prior written notice to the Company; provided; however; Section 5(d)
hereof shall apply in lieu of this Section 5(b) to any termination of employment
by the Employee for Good Reason (as defined therein).
(c) By the Company for Cause. The Company may at any time terminate the
-------------------------
Employee's employment hereunder for Cause. Prior to termination for Cause, the
Company by affirmative vote of a majority of the entire Board of Directors
(without counting the presence or vote of the Employee) shall give the Employee
prompt written notice specifying in reasonable detail the conduct which is
believed to provide the basis for a termination of Employee for Cause (the
"Notice"). "Cause" shall mean only one or more of the following:
(i) The material breach of this Agreement by Employee, which breach shall
not have been cured by Employee within twenty (20) days after the Employee's
receipt from the Company at the direction of a majority of the entire Board of
Directors (without counting the presence or vote of the Employee) of written
notice specifying in reasonable detail the nature of Employee's breach;
(ii) The Employee is charged with a crime involving fraud, theft or
dishonesty involving more than $1,000 or any felony; and
(iii) Any willful act or acts by Employee which is materially injurious to
the Company (excluding any act ratified or approved by the Board of Directors of
the Company and further excluding any act taken by Employee in good faith with a
reasonable belief that such act was in the best interests of the Company).
Neither the Employee's participation in or presence at any meeting at which a
for Cause termination is discussed nor the Employee's efforts to cease or cure
any conduct purported to be sufficient basis for a for Cause termination, shall
be considered an admission, acknowledgment or agreement that such conduct does
in fact provide a sufficient basis for a for Cause termination.
(d) By the Employee for Good Reason. The Employee may terminate employment
--------------------------------
hereunder for Good Reason at any time by providing prompt written notice to the
Company within a reasonable time after the occurrence of the event(s)
constituting such Good Reason. For purposes of this Agreement, "Good Reason"
means only one or more of the following:
3
<PAGE>
(i) The material breach of this Agreement by the Company, which breach
shall not have been cured by the Company within thirty (30) days after the
Company's receipt from the Employee or his agent of written notice specifying in
reasonable detail the nature of the Company's breach.
(ii) The required relocation of the Employee out of the Company's principal
executive offices or the Pittsburgh Metropolitan Area without his specific prior
written consent.
(iii) The assignment to the Employee of any duties inconsistent in any
material respect with the Employee's position (including status and reporting
requirements), authority, duties, powers or responsibilities as contemplated by
Section 2 of this Agreement, or any other diminution of such authority, duties,
position or responsibilities, excluding for this purpose any isolated,
insubstantial action by the Company not taken in bad faith and which is remedied
by the Company within thirty (30) days after receipt of written notice from the
Employee to the Company that such action will be considered a Good Reason
hereunder unless timely remedied.
(iv) A material increase in Employee's responsibilities, workload, required
hours or travel from that required hereunder not remedied by the Company within
thirty (30) days after receipt of written notice from Employee to the Company
that such increase will be considered a Good Reason hereunder unless timely
remedied.
(e) Death. The Employee's employment for all purposes under this Agreement
------
shall terminate upon his death.
(f) Disability. In the event that the Employee is determined by a
-----------
physician's written evaluation delivered to the Company (i) to be "permanently
and totally disabled" as defined in (S) 22(e)(3) of the Internal Revenue Code of
1986, as amended, or (ii) to have been for a period exceeding one year unable to
perform the important duties hereunder due to an injury or sickness (and has not
performed any such work) then the Company may, at its discretion, upon sixty
(60) days notice to the Employee or his guardian, as the case may be, terminate
the Employee's employment hereunder.
(g) Mutual Written Agreement. This Agreement and the Employee's employment
-------------------------
hereunder may be terminated at any time by the mutual written agreement of the
Employee and the Company.
(h) Consulting Arrangement. Either the Company or the Employee may
-----------------------
terminate the Employee's employment under this Agreement, upon at least ninety
(90) days' notice, with such termination to be effective on the first
anniversary after the Effective Date with the Employee thereby agreeing to
provide consulting services to the Company for a period of two (2) years
following such termination and shall receive continued payment of an amount per
annum equal to Base Salary (as defined in Exhibit A) during such two (2) year
period payable no
4
<PAGE>
less frequently than monthly. The Employee's consulting arrangement shall
require him to be available no more than one (1) day per week, via telephone, at
the request of management while taking into account the Employee's prior
commitments and scheduling constraints.
6. Compensation in Event of Termination.
-------------------------------------
(a) Termination by Employee for Good Reason; by Company Without Cause. In
------------------------------------------------------------------
the event that the Employee's employment hereunder is terminated: (i) by the
Company without Cause pursuant to Section 5(a) hereof; or (ii) by the Employee
for Good Reason pursuant to Section 5(d) hereof, then the Company shall pay or
provide in the same manner as before termination, as applicable, the following
compensation and benefits to the Employee:
(i) Immediate payment of full salary, bonuses (average of the two (2) years
first preceding such termination), and benefits to which he is entitled as of
the date of such termination (including Automobile Allowance) during the time
period equal to the remaining Term of the Agreement immediately prior to the
Employee's termination (without regard to any future renewals that would have
occurred absent such termination) (the "Termination Period");
(ii) Any other amounts, awards, benefits or other compensation to which the
Employee is or, prior to his termination of employment, was entitled during the
Termination Period under any of the Company's other cash compensation or bonus
plans which to the extent of any vesting dates occurring during the Termination
Period, shall be considered to vest on such date notwithstanding such
termination; and
(iii) Continuing coverage, to the extent not prohibited by law, during the
Termination Period or until comparable benefits are made available to him in
connection with subsequent employment, whichever period is shorter, for the
Employee and his eligible dependents under all of the Company benefit plans in
effect and applicable to Employee and his eligible dependents as of the date of
termination. In the event that the Employee and/or his eligible dependents,
because of the Employee's terminated status, cannot be covered or fully covered
under any or all of the Company benefit plans, the Company shall continue to
provide the Employee and/or his eligible dependents with the same level of such
coverage in effect prior to termination, on an unfunded basis if necessary.
(b) Termination for Cause by the Company. In the event that the Company
-------------------------------------
shall terminate the Employee's employment hereunder for Cause pursuant to
Section 5(c), this Agreement shall forthwith terminate and the obligations of
the parties hereto shall be as set forth in Section 9 hereof.
(c) Termination by Employee Without Good Reason or for Consulting
-------------------------------------------------------------
Arrangement. In the event that the Employee shall terminate employment
- ------------
hereunder (other than for Good Reason) pursuant to Section 5(b) or Employee's
employment shall be terminated pursuant to Section 5(h) hereof, this Agreement
shall forthwith terminate and the obligations of the parties hereto shall be as
set forth in Section 9 hereof, and in the case of Section 5(h), in accordance
with its terms.
5
<PAGE>
(d) Death. In the event of the death of the Employee, then the Company
------
shall pay (or cause to be paid), within thirty (30) days of such death, or
provide in the same manner as before the Employee's death, as applicable, the
following compensation and benefits to the estate of the Employee, or the
Employee's personal representative, or to those individuals designated in a
writing delivered to the Company by the Employee prior to his death;
(i) A lump sum payment equal to the sum of (A) the Employee's highest
annual Base Salary; (B) the Employee's highest annualized Automobile Allowance;
and (C) the Employee's highest award under the Company's Profit Sharing Plan, in
each case, for any of the three years preceding the date of such termination
(the "Lump Sum Amount"); and
(ii) Continuing coverage, to the extent not prohibited by law, for a period
of twelve (12) months from the date of Employee's death for the Employee's
eligible dependents under all of the Company Benefit Plans in effect and
applicable to Employee and his eligible dependents as of the date of death. In
the event that such eligible dependents, cannot be covered or fully covered
under any or all of the Company benefit plans, the Company shall continue to
provide the Employee and/or his eligible dependents with the same level of such
coverage in effect prior to termination, on an unfunded basis if necessary.
(e) Disability. In the event that the Company elects to terminate the
-----------
Employee's employment hereunder pursuant to Section 5(f), then the Company shall
pay (or cause to be paid) within thirty (30) days of the such termination or
provide in the same manner as before termination, as applicable, the following
compensation and benefits to the Employee or his personal representative:
(i) All amounts as the Employee is entitled to under the Company's
disability policy and program applicable to Employee;
(ii) The Lump Sum Amount; and
(iii) Continuing coverage, to the extent not prohibited by law, for a
period of twelve (12) months from the date of Employee's termination or until
comparable benefits are made available to him in connection with subsequent
employment, whichever period is shorter, for the Employee and his eligible
dependents under all of the Company Benefit Plans in effect and applicable to
Employee and his eligible dependents as of the date of termination. In the
event that the Employee and his eligible dependents, because of the Employee's
terminated status, cannot be covered or fully covered under any or all of the
Company benefit plans, the Company shall continue to provide the Employee and/or
his eligible dependents with the same level of such coverage in effect prior to
termination, on the unfunded basis if necessary.
(f) Mutual Written Consent. In the event that the Employee and the Company
-----------------------
shall terminate the Employer's employment by mutual written agreement, the
Company shall pay
6
<PAGE>
such compensation and provide such benefits, if any, as the parties may mutually
agree upon in writing.
The Employee shall not be required to mitigate the amount of any payment
provided for in this Section 6 by seeking employment or otherwise, nor shall any
amounts received from employment, insurance or otherwise by the Employee offset
or reduce in any manner the obligations of the Company hereunder.
7. Representations. The Employee hereby represents and warrants that he
----------------
has provided the Company with properly executed IRS Forms 4669 for each tax year
in which he has exercised a Company Option or Warrant which certifies that such
Employee has paid in full all income and other taxes attributable to the
compensation income he was required to recognize for federal income tax purposes
in such year and such Employee hereby acknowledges that the statements made in
such Forms 4669 are true, complete and correct.
8. Expenses. Employee will be reimbursed all reasonable, ordinary and
---------
necessary business expenses, including expenses for entertainment, travel and
similar items that are approved by the Company. The Company will reimburse
Employee for all expenses upon a presentation of Employee of itemized accounts
of such expenditures in accordance and in the manner in a form reasonably
described by the Company.
9. Effect of Termination. Upon the termination of the Employee's
----------------------
employment hereunder, neither the Company nor the Employee shall have any
remaining duties or obligations hereunder except that:
(a) the Company shall:
(i) Pay the employee's accrued salary and any other accrued benefits for
all periods ending on or prior to the date of termination under Sections 4, 5 or
6 hereof and Exhibit A annexed hereto;
---------
(ii) Reimburse the Employee for expenses incurred in accordance with
Section 8 hereof for all periods ending on or prior to the date of termination;
(iii) Pay or otherwise provide for any benefits, payments or continuation
or conversion rights in accordance with the provisions of any Company benefit
plan of which the Employee or any of his dependents is or was a participant and
to which Employee or his dependents are entitled through date of termination or
as otherwise required by law;
(iv) Pay all compensation previously deferred by Employee and not yet paid
by Company (together with interest, if any, thereon) and any other accrued
benefits, including accrued vacation pay and the annual estate planning
allowance through the date of termination not yet paid by the Company.
7
<PAGE>
(v) Pay the Employee and his beneficiaries any compensation or provide the
Employee or his eligible dependents any benefits due pursuant to Sections 4, 5
and 6 hereof or Exhibit A annexed hereto.
---------
(b) Employee shall remain bound by the terms of Section 10 hereof.
(c) The Company shall be authorized to withhold from any payment to the
Employee, his estate or his beneficiaries hereunder all such amounts, if any,
that the Company may reasonably determine it is required to withhold pursuant to
any applicable law or regulation.
10. Restrictions. The Company has invested and will continue to invest
-------------
considerable resources in the development of its business and in the research,
development and design of its activities and their delivery, which investment
has or will result in the generation of proprietary, confidential and/or trade
secret data, information, techniques and materials, both tangible and
intangible, which are owned by the Company.
(a) The Employee agrees that during the Term and for a period of two (2)
years from the last day for which the Employee receives any payment either as a
consultant or an employee (the "Restriction Period") (e.g., if Employee receives
two years "severance" upon termination, then the Restriction Period is four (4)
years from the date of termination), he will not directly or indirectly (i)
engage in imaging business (the "Company Business") within the United States;
(ii) compete or participate as agent, employee, consultant, advisor,
representative or otherwise in any enterprise engaged in a business which has
any material operations engaged in the Company Business within the United
States; or (iii) compete or participate as a stockholder, partner or joint
venturer, or have any direct or indirect financial interest, in any enterprise
which has any material operations engaged in the Company Business within the
United States; provided, however, that nothing contained herein shall prohibit
the Employee from (A) owning, operating or managing any business, or acting upon
any business opportunity after obtaining approval of a majority of the Board of
Directors of the Company and a majority of the independent members of the Board
of Directors of the Company (if any); or (B) owning no more than five percent
(5%) of the equity of any entity with respect to which Employee does not serve
as an officer, director, employee, consultant or in any other capacity other
than as an investor.
(b) The Employee shall abide by and be bound as part of the employment
relationship created by this Agreement to comply with the provisions regarding
confidential information, attached as Exhibit B annexed hereto.
---------
(c) To the extent the Employee develops, makes, conceives, contributes to
or reduces to practice any intellectual property related to the duties of the
Employee hereunder or which results in any way from the Employee using the
resources of the Company, such intellectual property is and shall be the sole
and exclusive property of the Company. Accordingly, the Employee shall abide by
and be bound to comply with the provisions regarding ownership of intellectual
property, attached as Exhibit C annexed hereto.
---------
8
<PAGE>
(d) During the Term and the Restriction Period, the Employee shall abide by
and be bound to comply with the additional restrictive covenants of the Company
attached as Exhibit D annexed hereto.
---------
(e) Employee agrees and acknowledges that the compensation due to him
hereunder shall be full and adequate consideration for the Employee's agreement
to the foregoing restrictions.
Nothing in this Section 10 is intended to enhance or increase the rights
otherwise available to the Employee in respect of an unlawful act or omission by
the Company.
11. Acknowledgment. The Employee acknowledges that the restrictions set
---------------
forth in Section 10 hereto are reasonable in scope and essential to the
preservation of the Company's business and proprietary properties and that the
compensation paid to him pursuant to paragraph 10(e) fully compensates him for
accepting such restrictions. The Company acknowledges that the compensation paid
to the Employee pursuant to paragraph 10(e) is a reasonable payment for his
acceptance of the restrictions in Section 10.
12. Severability of Covenants. The covenants of the Employee contained in
--------------------------
Section 10 hereto shall be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action of
the Employee against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
such covenants. If, at the time of enforcement, any sentence, paragraph, clause,
or combination of the same of such independent agreement in Section 10 is in
violation of the law of any state where applicable, such sentence, paragraph,
clause, or combination of the same shall be void in the jurisdictions where it
is unlawful, and the remainder of such paragraph in Section 10 shall remain
binding on the parties. In the event that any part of any covenant of Section 10
is determined by a court of law to be overly broad thereby making the covenant
unenforceable, the parties agree that such court shall substitute a judicially
enforceable limitation in its place, and that as so modified, the covenants
shall be binding upon the parties as if originally set forth in this Agreement.
13. Notices. All notices and other communications hereunder shall be in
--------
writing and shall be deemed to have been given if delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid, or
by telecopy (immediately followed by telephone confirmation of delivery of such
telecopy with the intended recipient of such notice and by notice in writing
sent promptly by registered or certified mail as provided above) to the parties
to this Agreement at the following addresses or at such other address for a
party as shall be specified by like notice:
9
<PAGE>
To the Company:
Josh Harris
SMT Health Services Inc.
c/o Parent
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
(212) 261-4000
(212) 261-4102 (facsimile)
With a copy to:
John J. Suydam, Esquire
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
(212) 408-2400
(212) 408-2420 (facsimile)
To the Employee:
Jeff D. Bergman
335 Golfside Drive
Wexford, Pennsylvania 15090
With a copy to:
Ronald Basso, Esquire
Buchanan Ingersoll Professional Corporation
One Oxford Centre
20th Floor, 301 Grant Street
Pittsburgh, Pennsylvania 15219
(412) 562-3943
(412) 562-1041 (facsimile)
All such notices and communications shall be deemed to have been received on the
date of personal delivery, on the date that the telecopy is confirmed as having
been received or on the third business day after the mailing thereof, as the
case may be.
14. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its choice of law provisions.
15. Severability. If any provision of this Agreement is held to be
-------------
illegal, invalid or unenforceable under present or future laws effective during
the Term, such provision shall be
10
<PAGE>
fully severable and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and the remaining provisions hereof shall remain in full force and effect and
shall not be effected by the illegal, invalid or unenforceable provision or by
its severance herefrom. Furthermore, in lieu of illegal, invalid or
unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar in terms to the illegal, invalid or
unenforceable provision as may be possible and still be legal, valid or
enforceable. The lack of deductibility or recharacterization for tax or
accounting purposes, or the imposition of any excise taxes or penalties, fines
or other charges, or imposition of any injunction or similar restraint against
the Company with respect to the payment of any amount or provision of any
benefit hereunder, shall not be construed to make the provisions of this
Agreement providing for such payment or provision "illegal, invalid or
unenforceable", nor in any manner reduce the entitlement of the Employee, or his
successor or assign to receive such payment or benefit.
16. Recharacterization of Payments. To the extent that, but for this
-------------------------------
Section 16, any payment or benefit hereunder is determined by the Company's
outside auditors, Internal Revenue Service, or by any court of component
jurisdiction to be an "Excess Parachute Payment" as defined in Section 280G
(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), such
amount as may be necessary to preclude any such payment or benefit from being
considered an "Excess Parachute Payment" shall be recharacterized and shall
constitute an unsecured, long-term loan from the Company to the Employee, his
personal representative, his successors or assigns, as the case may be, payable
together with accrued interest on the tenth anniversary of the payment of such
recharacterized payment or the receipt of such recharacterized benefit, with
interest at the Applicable Federal Rate for loans in excess of nine years, as
defined in Section 1274 of the Code, on such principal amount. Such loan shall
be evidenced by a promissory note in the form attached hereto as Exhibit E.
17. Indemnification. The Company agrees to indemnify the Employee to the
----------------
fullest extent permitted by law for his services to, or on behalf of the
Company, as an Employee hereunder, as a director and in any and every other
capacity in which he may serve the Company or its interests. In furtherance of
such agreement to indemnify, but not by way of limitation, from and after the
Merger, the terms of the Company's Certificate of Incorporation and By-Laws
shall provide for such indemnification and payment of expenses substantially the
same as contained in Exhibit F, such provisions are hereby incorporated by
---------
reference as if fully stated herein. Additionally, the provisions of Exhibit G
---------
shall supplement such provisions. For the purpose of this Agreement, any
amendment to said Certificate of Incorporation or By-Laws shall not be effective
to reduce, qualify or otherwise limit the scope, benefit or enforceability of
this provision; provided, however, if any such amendment extends or improves the
-------- -------
scope, benefit or enforceability of the indemnification and payment of expenses
contained in such By-Laws for any officer, director, employee or agent, such
extended or improved provisions shall be deemed to be incorporated by reference
herein for the benefit of the Employee without any further action by the Company
or the Employee.
18. Arbitration. Except as otherwise provided herein, in the event of any
------------
controversy, dispute or claim arising out of, or relating to, this Agreement, or
the breach thereof, or arising out
11
<PAGE>
of any other matter relating to the Employee's employment with the Company or
the termination of such employment, the parties may seek recourse only for
temporary or preliminary injunctive relief to the courts having jurisdiction
thereof and if any relief other than injunctive relief is sought, the Company
and the Employee agree that such underlying controversy, dispute or claim shall
be settled by arbitration conducted in Pittsburgh, Pennsylvania, in accordance
with this Section 18 of the Agreement and the Commercial Arbitration Rules of
the American Arbitration Association ("AAA"). The matter shall be heard and
decided, and awards rendered, by a panel of three (3) arbitrators (the
"Arbitration Panel") each of which shall have at least ten (10) years'
experience in executive compensation and employment matters. The Company and the
Employee shall each select one qualified arbitrator from the AAA National Panel
of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third
qualified arbitrator from the Commercial Panel. The award rendered by the
Arbitration Panel shall be final and binding as between the parties hereto and
their heirs, executors, administrators, successors and assigns, and judgment on
the award may be entered by any court having jurisdiction thereof.
19. Entire Agreement. This Agreement sets forth the entire understanding
-----------------
of the parties with respect to the matters specified herein. No other terms or
conditions and no amendments or modifications shall be binding unless made in
writing and signed by the parties hereto. Upon the Effective Date, the parties
agree that the Employee Agreement dated as of July 1, 1996, shall terminate
without further obligation to either party.
20. Binding Effect. This Agreement shall be binding upon the parties
---------------
hereto and shall inure to the benefit of such parties, their respective heirs,
representatives, successors and permitted assigns. This Agreement may not be
assigned by the Employee nor may it be assigned by the Company without the
Employee's consent.
21. Expenses. The Company shall bear the costs of all expenses associated
---------
with the creation, negotiation and execution of this Agreement, including the
fees of its counsel, the Employee's counsel and of any consultant retained by
the Company to advise the Employee and/or the Board of Directors with respect to
the terms and conditions of this Agreement. The Company shall bear the full cost
of each arbitrator selected pursuant to Section 18 hereof with respect to any
dispute hereunder. Otherwise, each party shall pay their individual expenses
with respect to this Agreement. In the event of any litigation or arbitration,
the party that ultimately prevails shall be reimbursed all of its reasonable
expenses.
* * * SIGNATURES APPEAR ON THE FOLLOWING PAGE * * *
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
THREE RIVERS HOLDING CORP.
By: /s/ JOSHUA HARRIS
____________________________________
Name: Joshua Harris
__________________________________
Title:_________________________________
THREE RIVERS ACQUISITION CORP.
By: /s/ JOSHUA HARRIS
____________________________________
Name: Joshua Harris
__________________________________
Title:_________________________________
SMT HEALTH SERVICES INC.
By: /s/ DANIEL DICKMAN
____________________________________
Name: Daniel Dickman
__________________________________
Title: EXECUTIVE VICE PRESIDENT & COO
_________________________________
EMPLOYEE:
/s/ JEFF D. BERGMAN
----------------------------------
Jeff D. Bergman
13
<PAGE>
EXHIBIT A
COMPENSATION AND BENEFITS OF JEFF D. BERGMAN
--------------------------------------------
1. Compensation. (a) Base Salary. The Employee's base salary (the
------------- ------------
"Base Salary"), payable in accordance with the Company's payroll policies, shall
be at least $240,000 per year, adjusted upward every January 1 (commencing
January 1, 1998) to reflect the increase in the cost of living, if any, between
the date of this Agreement and the date of each such adjustment. Such
adjustments shall be based upon the Consumer Price Index, by Major Groups, for
Wage Earners and Clerical Workers (1967=100) For All Items United States (the
"CPI") (or if that index is discontinued during the Term, a similar index (the
"Alternative Index") prepared by a department or agency of the United Stated
Government, to be agreed upon by the Employee and the Company.)
(b) Bonus. The Company shall make available and the Employee shall
------
participate in a bonus pool (the "Bonus Pool" or the "Profit Sharing Plan")
equal to fifteen percent (15%) of the Company's pre-tax income (excluding the
effect of the Bonus Pool and adjusted for any non-recurring gains and losses)
for the twelve (12) month period ended on June 30, 1997, but in no event
resulting in a Bonus Pool greater than $1,240,000, of the Company and its
consolidated subsidiaries as determined by the Company's independent public
accountants for financial reporting purposes in accordance with generally
accepted accounting principles, practices and methods, consistently applied. The
Bonus Pool shall be a fixed annual amount and the Employee shall be eligible to
receive one-quarter (1/4) of the Bonus Pool. The payment of the Employee's
portion of the Bonus Pool shall be conditioned on achievement by the Company of
reasonably achievable performance objectives established by the Compensation
Committee and occur following each June 30 and December 31, with the December 31
payment adjusting for any excess/shortfall in the June 30 payment. The board of
directors may, but need not, consider the recommendation of any committee of the
Board in determining such participants and allocations. The Profit Sharing Plan
shall provide that it may not be terminated suspended, revoked or the like, or
amended, except by resolution of a majority of the directors then in office.
2. Car Allowance. The Company shall pay to the Employee, on the first day
--------------
of each month during the Term, a monthly automobile allowance (the "Automobile
Allowance") of not less than $1,000, to help defray the costs associated with
Employee's acquisition or maintenance (by lease or otherwise) of an automobile
and the related insurance and maintenance therefor. The Automobile Allowance
shall be adjusted upward every January 1 (commencing January 1, 1998) to reflect
the increase in the cost of living, if any, between the date of this Agreement
and the date of each such adjustment. Such adjustments shall be based upon the
CPI (or if that index is discontinued during the Term, the Alternate Index).
3. Vacation. The Employee shall be entitled to all legal holidays, and
---------
six (6) weeks paid vacation per annum, with the option to accrue any unused
vacation time to subsequent periods or to collect payment for any unused
vacation at the end of each fiscal year at the Employee's then applicable Base
Salary.
A - 1
<PAGE>
4. Insurance and Benefits. The Employee and his "dependents," to the
-----------------------
extent eligible thereunder, shall be entitled to participate in all employee and
executive benefit plans, programs and policies currently available to other
Company employees of comparable status, title and experience, as well as any
plans, programs and policies adopted by the Company during the Term of this
Agreement.
5. Life Insurance. Assuming the Employee is insurable at ordinary rates,
---------------
the Company shall pay for the entire premium on a life insurance contract, in
the amount of $1,000,000 on the life of the Employee, which shall be subject to
a "split dollar" plan pursuant to which the Employee shall have the exclusive
right to designate the beneficiary, and shall have the right to have the policy
transferred to his name upon his termination of employment without additional
cost. Pursuant to such "split dollar" plan, Employee is expected to recognize
income with respect to the PS58 cost of such insurance. The Employee shall
cooperate in any effort by the Company to secure additional key man life
insurance on his life, in such amount as may be determined by the Board of
Directors, with the beneficiaries designated by the Company.
6. Estate and Tax Planning Allowance. The Company shall pay the Employee
----------------------------------
a tri-annual (every third year) Estate and Tax Planning Allowance of up to
$7,500 to help defray the costs associated with Estate and Tax Planning (which
shall be due and payable on the presentation of invoices for such services). The
Estate and Tax Planning Allowance shall be adjusted upward on each third
anniversary of this Agreement to reflect the increase in the cost of living, if
any, between the date of this Agreement and the date of each such adjustment.
Such adjustment shall be based upon the CPI (or if that index is discontinued
during the Term, the Alternate Index).
7. Club Allowance. The Company shall pay or reimburse the Employee for
---------------
the monthly or annual dues for a membership by the Employee in one local country
club, one out-of-town country club and one business club, each of the Employee's
own selection, subject to approval by the Compensation Committee that each such
club is an appropriate business venue for furthering the Company's business
interest.
8. 401k Plan. The Company shall maintain a 401k Plan similar to the 401k
----------
Plan which the Company maintained prior to the Merger.
A - 2
<PAGE>
EXHIBIT B
PROVISIONS RELATED TO CONFIDENTIAL INFORMATION
----------------------------------------------
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof. As used herein the term "Confidential
Information" means any and all information in any way related to the products or
business of the Company which is communicated to, developed in whole or in part
by, or access to which is obtained by the Employee. Such information may be in
tangible or intangible form and shall include, but shall not be limited to, any
such information embodied in or consisting of drawings, data, blueprints,
memoranda, correspondence, flow charts, production and operating manuals,
engineering technology, instrumentation, specifications, operating know-how,
identity and involvement of research personnel, customer lists, sales and market
information, business plans, process designs, documents, source codes, object
codes, formulas, algorithms, trade secrets, information received in confidence
from customers or others having dealings with the Company and any other
information relating to the business of the Company, whether existing as of or
developed or acquired after the date hereof.
Restrictions. During the term of employment of the Employee by the Company
-------------
and thereafter, the Employee (i) shall maintain the Confidential Information in
strict confidence; (ii) shall not disclose any Confidential Information to any
person or other entity; (iii) shall not use any Confidential Information to the
detriment of the Company or for the benefit of the Employee or any other person
or entity; (iv) shall not authorize or permit such use or disclosure; and (v)
shall comply with the policies and procedures of the Company regarding use and
disclosure of Confidential Information.
Protection and Return. The Employee shall take measures reasonably
----------------------
necessary to safeguard the Confidential Information and to prevent its
unauthorized use or disclosure and shall surrender to the Company at any time
upon request, and in any event upon termination of the employment of the
Employee by the Company, all Confidential Information, equipment, documents and
records of any nature related to the business of the Company and all copies
thereof in the possession or control of the Employee.
Exceptions. The restrictions on disclosure and use of Confidential
-----------
Information shall not prevent the Employee from: (i) using information in the
proper performance of the Employee's duties; (ii) disclosing information to
another employee or consultant to whom disclosure is required to properly
perform the duties of either; (iii) disclosing information to another person or
entity pursuant to a binding confidentiality agreement in a Company-approved
form as part of the proper performance of the duties of the Employee or as
authorized in writing by the Board of Directors; (iv) using or disclosing
information to the extent such information is or may be, through no fault or
disclosure of the Employee, generally made known to the public or throughout the
industry in which the Company is engaged; or (v) using or disclosing information
which is disclosed to the Employee after termination of the Employee's
employment with the Company by a third-party who is under no duty or obligation
not to disclose such information.
B - 1
<PAGE>
EXHIBIT C
PROVISIONS RELATED
TO OWNERSHIP OF INTELLECTUAL PROPERTY
-------------------------------------
(a) Definitions. The term the "Company" means SMT Health Services Inc., or
------------
any subsidiary thereof. The term "Intellectual Property" means any information,
invention, data, discovery, product, process, trade secret, source code, object
code, computer program, data base, data file, copyright, trademark, service mark
or other intellectual property (whether or not such property can be protected by
copyright, patent or otherwise and whether or not reduced to writing or to
practice) developed, made, conceived, contributed to or reduced to practice by
any Company employee, officer, director, representative or agent or by any
person or entity under contract with or pursuant to any other arrangement with
the Company, which is in any way related to the business, operations or proposed
operations of the Company or which is in any way the result of any person or
entity having used the Company's resources, whether laboratory equipment,
personnel, computers, communications facilities, programs, information, data
bases, office facilities, process designs or otherwise.
(b) Ownership. The Employee acknowledges that any and all Intellectual
----------
Property is and shall be owned solely and exclusively by the Company and the
Employee shall have no ownership or other rights with respect thereto.
(c) Disclosure and Assignment. Any and all Intellectual Property
--------------------------
developed, made, conceived, contributed to or reduced to practice by the
Employee, alone or with others, during the period of the Employee's employment
or other association with the Company, whether or not during working hours, (i)
which is within the scope of the duties, projects or technologies to which the
Employee was assigned or became involved during the period of the Employee's
employment or other association with the Company; (ii) which is related to any
area for which the Employee was assigned responsibility during the Employee's
employment or association with the Company; or (iii) which is in any way the
result of the Employee having used the Company's resources, whether laboratory
equipment, personnel, computers, communications facilities, programs,
information, data bases, office facilities, process designs or otherwise, is and
shall be owned solely and exclusively by the Company. To the extent any such
Intellectual Property can be protected by copyright, and is deemed in anyway to
fall within the definition of "work made for hire" as such term is defined in 17
U.S.C. (S)101, such Intellectual Property shall be considered to have been
produced under contract for the Company as a work made for hire. In any event,
and regardless of whether such Intellectual Property is deemed to be a "work
made for hire", the Employee shall disclose any and all such Intellectual
Property to the Company and does hereby assign to the Company any and all right,
title and interest the Employee may have in such Intellectual Property
including, but not limited to, any and all copyright, patent and other
intellectual property and proprietary rights the Employee otherwise may have had
in such Intellectual Property, such as the right to secure copyright
registrations, renewals, reissues and extensions and to file for and obtain
patent and other property and proprietary right protection with respect thereto.
Upon the Company's request at any time and from time to time, including
C - 1
<PAGE>
any time after termination of the Employee's employment with the Company, the
Employee shall execute and assign to the Company applications to domestic and
foreign governmental agencies for copyrights and letters patent covering such
Intellectual Property and the Employee shall execute and deliver to the Company
such other instruments as the Company deems necessary to vest in the Company the
sole ownership of and exclusive worldwide rights in and to, all of such
Intellectual Property.
C - 2
<PAGE>
EXHIBIT D
ADDITIONAL RESTRICTIVE COVENANTS
--------------------------------
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof
No Customer Contact. The Employee shall not directly or indirectly contact
--------------------
any Customer (as defined in the next sentence) for the purpose of introducing,
offering, or selling to such Customer any products or services that compete with
the products and services offered by the Company. For purposes of this
paragraph, "Customer" shall mean anyone (i) with whom the Employee or any person
reporting to the Employee has had contact or has had negotiations on behalf of
the Company during the term of the Employee's employment with the Company, (ii)
with whom any other person has had contact or has had negotiations on behalf of
the Company during the year immediately preceding termination of the Employee's
employment with the Company, of which contact or negotiations the Employee had
knowledge while the Employee was employed by the Company, or (iii) whom the
Employee knew (while the Employee was employed by the Company) the Company
intended to contact during the year immediately preceding or the year
immediately following termination of the Employee's employment.
No Solicitation. The Employee shall not directly or indirectly solicit an
----------------
employee or consultant of the Company to terminate his or her employment or
contractual relationship with the Company and become employed or engaged by the
Employee or any other person or entity in substantially the same or a similar
business as that engaged in by the Company if such employment would involve the
performance of services and duties substantially the same or similar to those
the employee or consultant performed for the Company.
D - 1
<PAGE>
EXHIBIT E
PROMISSORY NOTE
---------------
$ Dated as of
-------------- --------------
FOR VALUE RECEIVED, intending to be legally bound, the undersigned
("Maker") hereby promises to pay to the order of SMT Health Services Inc., its
successors and assigns (hereinafter referred to as "Payee") upon the schedule
set forth below, the principal sum of Dollars ($ ), together
----- ----------
with interest on the unpaid principal amount of this Promissory Note from time
to time outstanding. The unpaid principal amount of this Promissory Note shall
bear interest at the rate of [APPLICABLE LONG TERM FEDERAL RATE] per annum.
Maker shall pay to Payee the entire principal amount and all accrued interest on
[THE TENTH ANNIVERSARY OF THE DATE OF THE NOTE].
Payments shall be made to Payee at the principal office of the Payee or
such other place as Payee may designate in writing to Maker, in lawful money of
the United States of America in immediately available funds without set-off,
counterclaim or other deduction of any nature.
Maker may prepay this Promissory Note at any time in whole or in part
without payment of penalty; provided, however, that any such prepayment of
principal shall be accompanied by the payment of interest accrued to the date of
such prepayment and all costs, expenses or charges then owed to Payee pursuant
to this Promissory Note.
Upon the occurrence of any one of the following events ("Events of
Default"), the entire principal amount outstanding and all accrued interest
thereunder shall at the option of Payee, without any prior notice, presentment
or demand, become immediately due and payable in full:
(i) Failure of the Maker to perform or observe any of the Maker's covenants
or agreements under this Promissory Note; or
(ii) An assignment by the Maker for the benefit of the Maker's creditors,
or the commencement by or against the Maker of any bankruptcy, insolvency,
liquidation, receivership or similar proceedings.
Payee may, without notice and without releasing the liability of Maker,
grant extensions and/or renewals hereof from time to time or for any term or
terms. No delay by Payee or their assignee in exercising any power or right
hereunder, and no partial exercise of such power or right, shall operate in any
way as a waiver of any subsequent exercise thereof. Payee shall not be liable
for or prejudiced by failure to collect or lack of diligence in bringing suit on
this Promissory Note or any renewal or extension hereof. This Promissory Note
shall be governed and construed under the laws of the Commonwealth of
Pennsylvania. Demand, presentment, protest, notice of dishonor and notice of
default are hereby waived. If any provision of this
E - 1
<PAGE>
Promissory Note shall for any reason be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision of this
Promissory Note, but this Promissory Note shall be construed as if this
Promissory Note had never contained the invalid or unenforceable provision.
Maker agrees that his liability hereunder shall be binding upon his personal
representatives, heirs assigns; provided, however, that Maker may not assign or
transfer his obligation hereunder without the prior written consent of Payee.
This Promissory Note may be assigned by Payee without the consent of Maker.
MAKER:
----------------------------
JEFF D. BERGMAN
E - 2
<PAGE>
EXHIBIT F
The Company's certificate of incorporation shall provide as follows:
- --------------------------------------------------------------------
1. Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, incorporator, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise shall be entitled to be indemnified by the Corporation to the full
extent then permitted by law or to the extent that a court of competent
jurisdiction shall deem proper or permissible under the circumstances, whichever
is greater against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred by him in connection with such action, suit
or proceeding. Such right of indemnification shall inure whether or not the
claim asserted is based on matters which antedate the adoption of this Article
Seventh. Such right of indemnification shall continue as to a person who has
ceased to be a director, officer, incorporator, employee, or agent and shall
inure to the benefit of the heirs and personal representatives of such person.
2. The personal liability of directors of the Corporation is hereby eliminated
to the fullest extent permitted by paragraph 7 of Subsection (b) of Section 102
of the General Corporation Law of the State of Delaware as the same may be
amended and supplemented.
The Company's By-laws shall provide as follows:
- -----------------------------------------------
1. The Corporation shall, to the fullest extent permitted by the laws of the
state of incorporation, indemnify any and all persons whom it shall have power
to indemnify against any and all of the costs, expenses, liabilities or other
matters incurred by them by reason of having been officers or directors of the
Corporation, any subsidiary of the Corporation or of any other corporation for
which he acted as officer or director at the request of the Corporation.
F - 1
<PAGE>
EXHIBIT G
SECTION 1. General. The Company shall indemnify Employee if he is a party
-------
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding ("Payments") if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, including without
limitation, those resulting from actual or alleged breach or neglect of duty,
error, misstatement or misleading statement, gross negligence, negligence or act
giving rise to strict or products liability, whether occurring prior to or after
the date of the Employee's current Employment Agreement. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that Employee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Company shall indemnify Employee if he
------------------
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against Payments if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, including without limitation,
those resulting from actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, gross negligence, negligence or act giving
rise to strict or products liability, whether occurring prior to or after the
date of the Employee's current Employment Agreement; provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which Employee shall have been adjudged to be liable to the Company unless and
only to the extent that the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, Employee is fairly and reasonably entitled to indemnity for
Payments which the Court of Chancery or such other court shall deem proper.
SECTION 3. Indemnification in Certain Cases. If Employee is entitled to
--------------------------------
indemnification in respect to a portion, but not all, of any matter pursuant to
Section 1 or Section 2 hereof, the Company shall indemnify Employee to the
maximum extent for such portion. To
G - 1
<PAGE>
the extent that Employee has been successful in whole or in part on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2 hereof, or in defense of any claim, issue or matter therein, or
shall otherwise be determined to be entitled to indemnification in whole or in
part, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with such matter.
SECTION 4. Advances for Expenses. Expenses (including attorneys' fees)
---------------------
incurred in defending a civil or criminal action, suit or proceeding shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of Employee to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Company as authorized herein or otherwise.
SECTION 5. Rights Not-Exclusive. The indemnification and advancement of
---------------------
expenses provided by, or granted pursuant to, the other subsections hereof shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any law,
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
SECTION 6. Insurance. The Company shall purchase and maintain insurance
---------
on behalf of Employee against any liability asserted against him and incurred by
him in the capacity of a director, officer, employee agent, of the Company or of
another corporation, partnership, joint venture, trust or other enterprise, or
arising out of his status as such, whether or not the Company would have the
power to indemnify him against such liability under the provisions of Section 17
of his Employment Agreement including the provisions hereof.
SECTION 7. Definition of Company. For the purposes hereof, references to
---------------------
the "Company" include all constituent corporations absorbed in a consolidation
or merger as well as the resulting or surviving corporation so that if Employee
is or was a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions hereof with respect to the resulting or surviving corporation as
he would if he had served the resulting or surviving corporation in the same
capacity.
SECTION 8. Survival of Rights. The indemnification and advancement of
-------------------
expenses provided by, or granted pursuant to Section 17 of the Employee's
Employment Agreement, including without limitation this Exhibit G shall continue
---------
even when Employee has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his heirs, executors and administrators.
G - 2
<PAGE>
EXHIBIT (C)(4)
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the 24th
day of June, 1997 by and between SMT Health Services Inc., a Delaware
corporation (the "Company") and Daniel Dickman (the "Employee"). This Agreement
--------------
shall become effective (the "Effective Date") upon the closing of the offer, by
Three Rivers Acquisition Corp., a Delaware corporation ("Acquisition Corp."), to
purchase all of the issued and outstanding common stock, par value $.01 per
share (the "Common Stock") of the Company (the "Tender Offer"). If the Tender
Offer is not consummated, this Agreement shall become null and void and the
employment agreement with Employee dated July 1, 1996 shall remain in full force
and effect.
WITNESSETH:
-----------
WHEREAS, Acquisition Corp. is a wholly-owned subsidiary of Three Rivers
Holding Corp. ("Parent");
WHEREAS, pursuant to an Agreement and Plan of Merger of even date by and
among Parent, Acquisition Corp. and the Company (the "Merger Agreement"),
Acquisition Corp. will commence the Tender Offer and following the consummation
of the Tender Offer, Acquisition Corp. will merge with and into the Company,
with the Company being the survivor, pursuant to the terms and conditions set
forth in the Merger Agreement (the "Merger");
WHEREAS, Parent and the Company desire to secure the continued employment
of Employee by the Company in an executive capacity following the Tender Offer
and Merger; and
WHEREAS, the Company and the Employee desire to enter into this Agreement
in order to set forth certain terms and conditions of Employee's continued
employment with the Company and to terminate the existing employment agreement
dated as of July 1, 1996;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
-----------
Employee and the Employee hereby agrees to continue to be employed by the
Company commencing on the Effective Date for the Term (as defined below) of the
Agreement, in the position and with the duties and responsibilities set forth in
Section 2 below, and upon the other terms and subject to the conditions
hereinafter stated.
<PAGE>
2. Position, Duties and Responsibilities.
--------------------------------------
(a) During the Term of the Agreement, the Employee shall serve as
Executive Vice President, Chief Operating Officer, Director of the Company and
shall be consulted by the Compensation Committee with respect to compensation
issues. The Employee shall have general executive supervision over the
property, business and affairs of the Company, subject to the policies and
directions of, and the executive responsibilities that may be assigned to him
(which in each case shall be consistent with his position and title) by and
reporting directly and solely to, the Board of Directors of the Company (the
"Board of Directors"). The Employee shall generally be responsible for
supervising the development, coordination and implementation of the strategies
for the Company's business. The Employee shall have general supervisory
authority over the executive officers (other than the Chief Executive Officer
and President) and other employees of the Company. The Employee shall be a
signatory, at all times during the term of this Agreement, on all bank accounts,
of every nature and kind, and all other banking arrangements, including safety
deposit boxes, lockbox accounts, and the like. Employee's duties shall be
performed principally at the Company's executive offices which are located in
the Pittsburgh Metropolitan Area and Employee shall not be required to perform
duties outside the Pittsburgh Metropolitan Area which would necessitate changing
his present residence, unless Employee otherwise agrees in writing. For
purposes of this Agreement, the term "Pittsburgh Metropolitan Area" shall
encompass the City of Pittsburgh, Pennsylvania, the Borough of Wexford,
Pennsylvania, and the territory within a fifteen (15) mile radius of such
borough. The Company agrees that it shall not relocate or transfer its
principal executive offices to a location outside the Pittsburgh Metropolitan
Area.
(b) During the Term, the Employee shall devote such time and attention
to affairs of the Company as he reasonably believes is necessary to accomplish
the results set forth in the Company's Business Plan, which has been provided to
him by the Company, as amended from time to time with his concurrence and
Employee shall be prohibited from entering into any other employment
relationships; provided, however, that nothing contained herein shall prohibit
the Employee from (a) serving as a member of the Board of Directors or officer
of any other for-profit entity so long as Employee has obtained the prior
consent of Board of Directors, or (b) engaging in charitable and community
affairs.
3. Term. The initial term of this Agreement shall be for a period of
-----
three (3) years, commencing on the Effective Date (the "Initial Term"). On each
quarterly anniversary of the Effective Date while Employee remains employed
hereunder, commencing one year and three months after the Effective Date, the
Initial Term shall be automatically extended by three months ("Renewal Period"),
and this Agreement shall continue in effect until Employee's employment
hereunder is terminated pursuant to Section 5 hereof (the Initial Term of this
Agreement, as extended by each Renewal Period, is hereinafter defined as the
"Term").
4. Compensation. For the services rendered by Employee pursuant to
-------------
Section 2 during the Term, the Employee shall be paid the compensation and
receive the benefits as set forth on Exhibit A annexed hereto.
---------
5. Termination of Agreement. The Employee's employment hereunder may be
-------------------------
terminated only as follows:
- 2 -
<PAGE>
(a) By the Company Without Cause. The Company may at any time
-----------------------------
terminate the Employee's employment hereunder without Cause, by affirmative vote
of a majority of the entire Board of Directors (without counting the presence or
vote of the Employee), and upon no less than sixty (60) days' prior written
notice to the Employee.
(b) By the Employee Without Good Reason. The Employee may at any time
------------------------------------
terminate his employment hereunder for any reason upon no less than sixty (60)
days' prior written notice to the Company; provided; however; Section 5(d)
hereof shall apply in lieu of this Section 5(b) to any termination of employment
by the Employee for Good Reason (as defined therein).
(c) By the Company for Cause. The Company may at any time terminate
-------------------------
the Employee's employment hereunder for Cause. Prior to termination for Cause,
the Company by affirmative vote of a majority of the entire Board of Directors
(without counting the presence or vote of the Employee) shall give the Employee
prompt written notice specifying in reasonable detail the conduct which is
believed to provide the basis for a termination of Employee for Cause (the
"Notice"). "Cause" shall mean only one or more of the following:
(i) The material breach of this Agreement by Employee, which
breach shall not have been cured by Employee within twenty (20) days after the
Employee's receipt from the Company at the direction of a majority of the entire
Board of Directors (without counting the presence or vote of the Employee) of
written notice specifying in reasonable detail the nature of Employee's breach;
(ii) The Employee is charged with a crime involving fraud,
theft or dishonesty involving more than $1,000 or any felony; and
(iii) Any willful act or acts by Employee which is materially
injurious to the Company (excluding any act ratified or approved by the Board of
Directors of the Company and further excluding any act taken by Employee in good
faith with a reasonable belief that such act was in the best interests of the
Company).
Neither the Employee's participation in or presence at any meeting at which a
for Cause termination is discussed nor the Employee's efforts to cease or cure
any conduct purported to be sufficient basis for a for Cause termination, shall
be considered an admission, acknowledgment or agreement that such conduct does
in fact provide a sufficient basis for a for Cause termination.
(d) By the Employee for Good Reason. The Employee may terminate
--------------------------------
employment hereunder for Good Reason at any time by providing prompt written
notice to the Company within a reasonable time after the occurrence of the
event(s) constituting such Good Reason. For purposes of this Agreement, "Good
Reason" means only one or more of the following:
(i) The material breach of this Agreement by the Company,
which breach shall not have been cured by the Company within thirty (30) days
after the Company's
- 3 -
<PAGE>
receipt from the Employee or his agent of written notice specifying in
reasonable detail the nature of the Company's breach.
(ii) The required relocation of the Employee out of the
Company's principal executive offices or the Pittsburgh Metropolitan Area
without his specific prior written consent.
(iii) The assignment to the Employee of any duties inconsistent
in any material respect with the Employee's position (including status and
reporting requirements), authority, duties, powers or responsibilities as
contemplated by Section 2 of this Agreement, or any other diminution of such
authority, duties, position or responsibilities, excluding for this purpose any
isolated, insubstantial action by the Company not taken in bad faith and which
is remedied by the Company within thirty (30) days after receipt of written
notice from the Employee to the Company that such action will be considered a
Good Reason hereunder unless timely remedied.
(iv) A material increase in Employee's responsibilities,
workload, required hours or travel from that required hereunder not remedied by
the Company within thirty (30) days after receipt of written notice from
Employee to the Company that such increase will be considered a Good Reason
hereunder unless timely remedied.
(e) Death. The Employee's employment for all purposes under this
------
Agreement shall terminate upon his death.
(f) Disability. In the event that the Employee is determined by a
-----------
physician's written evaluation delivered to the Company (i) to be "permanently
and totally disabled" as defined in (S) 22(e)(3) of the Internal Revenue Code of
1986, as amended, or (ii) to have been for a period exceeding one year unable to
perform the important duties hereunder due to an injury or sickness (and has not
performed any such work) then the Company may, at its discretion, upon sixty
(60) days notice to the Employee or his guardian, as the case may be, terminate
the Employee's employment hereunder.
(g) Mutual Written Agreement. This Agreement and the Employee's
-------------------------
employment hereunder may be terminated at any time by the mutual written
agreement of the Employee and the Company.
(h) Consulting Arrangement. Either the Company or the Employee may
----------------------
terminate the Employee's employment under this Agreement, upon at least ninety
(90) days' notice, with such termination to be effective on the first
anniversary after the Effective Date with the Employee thereby agreeing to
provide consulting services to the Company for a period of two (2) years
following such termination and shall receive continued payment of an amount per
annum equal to Base Salary (as defined in Exhibit A) during such two (2) year
period payable no less frequently than monthly. The Employee's consulting
arrangement shall require him to be available no more than one (1) day per week,
via telephone, at the request of management while taking into account the
Employee's prior commitments and scheduling constraints.
- 4 -
<PAGE>
6. Compensation in Event of Termination.
-------------------------------------
(a) Termination by Employee for Good Reason; by Company Without Cause.
-----------------------------------------------------------------
In the event that the Employee's employment hereunder is terminated: (i) by the
Company without Cause pursuant to Section 5(a) hereof; or (ii) by the Employee
for Good Reason pursuant to Section 5(d) hereof, then the Company shall pay or
provide in the same manner as before termination, as applicable, the following
compensation and benefits to the Employee:
(i) Immediate payment of full salary, bonuses (average of the
two (2) years first preceding such termination), and benefits to which he is
entitled as of the date of such termination (including Automobile Allowance)
during the time period equal to the remaining Term of the Agreement immediately
prior to the Employee's termination (without regard to any future renewals that
would have occurred absent such termination) (the "Termination Period");
(ii) Any other amounts, awards, benefits or other compensation
to which the Employee is or, prior to his termination of employment, was
entitled during the Termination Period under any of the Company's other cash
compensation or bonus plans which to the extent of any vesting dates occurring
during the Termination Period, shall be considered to vest on such date
notwithstanding such termination; and
(iii) Continuing coverage, to the extent not prohibited by law,
during the Termination Period or until comparable benefits are made available to
him in connection with subsequent employment, whichever period is shorter, for
the Employee and his eligible dependents under all of the Company benefit plans
in effect and applicable to Employee and his eligible dependents as of the date
of termination. In the event that the Employee and/or his eligible dependents,
because of the Employee's terminated status, cannot be covered or fully covered
under any or all of the Company benefit plans, the Company shall continue to
provide the Employee and/or his eligible dependents with the same level of such
coverage in effect prior to termination, on an unfunded basis if necessary.
(b) Termination for Cause by the Company. In the event that the
-------------------------------------
Company shall terminate the Employee's employment hereunder for Cause pursuant
to Section 5(c), this Agreement shall forthwith terminate and the obligations of
the parties hereto shall be as set forth in Section 9 hereof.
(c) Termination by Employee Without Good Reason or for Consulting
-------------------------------------------------------------
Arrangement. In the event that the Employee shall terminate employment
- ------------
hereunder (other than for Good Reason) pursuant to Section 5(b) or Employee's
employment shall be terminated pursuant to Section 5(h) hereof, this Agreement
shall forthwith terminate and the obligations of the parties hereto shall be as
set forth in Section 9 hereof, and in the case of Section 5(h), in accordance
with its terms.
(d) Death. In the event of the death of the Employee, then the
------
Company shall pay (or cause to be paid), within thirty (30) days of such death,
or provide in the same manner as before the Employee's death, as applicable, the
following compensation and benefits to the estate of the Employee, or the
Employee's personal representative, or to those individuals designated in a
writing delivered to the Company by the Employee prior to his death;
- 5 -
<PAGE>
(i) A lump sum payment equal to the sum of (A) the Employee's
highest annual Base Salary; (B) the Employee's highest annualized Automobile
Allowance; and (C) the Employee's highest award under the Company's Profit
Sharing Plan, in each case, for any of the three years preceding the date of
such termination (the "Lump Sum Amount"); and
(ii) Continuing coverage, to the extent not prohibited by law,
for a period of twelve (12) months from the date of Employee's death for the
Employee's eligible dependents under all of the Company Benefit Plans in effect
and applicable to Employee and his eligible dependents as of the date of death.
In the event that such eligible dependents, cannot be covered or fully covered
under any or all of the Company benefit plans, the Company shall continue to
provide the Employee and/or his eligible dependents with the same level of such
coverage in effect prior to termination, on an unfunded basis if necessary.
(e) Disability. In the event that the Company elects to terminate the
-----------
Employee's employment hereunder pursuant to Section 5(f), then the Company shall
pay (or cause to be paid) within thirty (30) days of the such termination or
provide in the same manner as before termination, as applicable, the following
compensation and benefits to the Employee or his personal representative:
(i) All amounts as the Employee is entitled to under the
Company's disability policy and program applicable to Employee;
(ii) The Lump Sum Amount; and
(iii) Continuing coverage, to the extent not prohibited by law,
for a period of twelve (12) months from the date of Employee's termination or
until comparable benefits are made available to him in connection with
subsequent employment, whichever period is shorter, for the Employee and his
eligible dependents under all of the Company Benefit Plans in effect and
applicable to Employee and his eligible dependents as of the date of
termination. In the event that the Employee and his eligible dependents, because
of the Employee's terminated status, cannot be covered or fully covered under
any or all of the Company benefit plans, the Company shall continue to provide
the Employee and/or his eligible dependents with the same level of such coverage
in effect prior to termination, on the unfunded basis if necessary.
(f) Mutual Written Consent. In the event that the Employee and the
-----------------------
Company shall terminate the Employer's employment by mutual written agreement,
the Company shall pay such compensation and provide such benefits, if any, as
the parties may mutually agree upon in writing.
The Employee shall not be required to mitigate the amount of any payment
provided for in this Section 6 by seeking employment or otherwise, nor shall any
amounts received from employment, insurance or otherwise by the Employee offset
or reduce in any manner the obligations of the Company hereunder.
- 6 -
<PAGE>
7. Representations. The Employee hereby represents and warrants that he
----------------
has provided the Company with properly executed IRS Forms 4669 for each tax year
in which he has exercised a Company Option or Warrant which certifies that such
Employee has paid in full all income and other taxes attributable to the
compensation income he was required to recognize for federal income tax purposes
in such year and such Employee hereby acknowledges that the statements made in
such Forms 4669 are true, complete and correct.
8. Expenses. Employee will be reimbursed all reasonable, ordinary and
---------
necessary business expenses, including expenses for entertainment, travel and
similar items that are approved by the Company. The Company will reimburse
Employee for all expenses upon a presentation of Employee of itemized accounts
of such expenditures in accordance and in the manner in a form reasonably
described by the Company.
9. Effect of Termination. Upon the termination of the Employee's
----------------------
employment hereunder, neither the Company nor the Employee shall have any
remaining duties or obligations hereunder except that:
(a) the Company shall:
(i) Pay the employee's accrued salary and any other accrued
benefits for all periods ending on or prior to the date of termination under
Sections 4, 5 and 6 hereof and Exhibit A annexed hereto;
---------
(ii) Reimburse the Employee for expenses incurred in accordance
with Section 8 hereof for all periods ending on or prior to the date of
termination;
(iii) Pay or otherwise provide for any benefits, payments or
continuation or conversion rights in accordance with the provisions of any
Company benefit plan of which the Employee or any of his dependents is or was a
participant and to which Employee or his dependents are entitled through date of
termination or as otherwise required by law;
(iv) Pay all compensation previously deferred by Employee and
not yet paid by Company (together with interest, if any, thereon) and any other
accrued benefits, including accrued vacation pay and the annual estate planning
allowance through the date of termination not yet paid by the Company;
(v) Pay the Employee and his beneficiaries any compensation or
provide the Employee or his eligible dependents any benefits due pursuant to
Sections 4, 5 and 6 hereof or Exhibit A annexed hereto.
---------
(b) Employee shall remain bound by the terms of Section 10 hereof.
(c) The Company shall be authorized to withhold from any payment to
the Employee, his estate or his beneficiaries hereunder all such amounts, if
any, that the Company may reasonably determine it is required to withhold
pursuant to any applicable law or regulation.
- 7 -
<PAGE>
10. Restrictions. The Company has invested and will continue to invest
-------------
considerable resources in the development of its business and in the research,
development and design of its activities and their delivery, which investment
has or will result in the generation of proprietary, confidential and/or trade
secret data, information, techniques and materials, both tangible and
intangible, which are owned by the Company.
(a) The Employee agrees that during the Term and for a period of two
(2) years from the last day for which the Employee receives any payment either
as a consultant or an employee (the "Restriction Period") (e.g., if Employee
receives two years "severance" upon termination, then the Restriction Period is
four (4) years from the date of termination), he will not directly or
indirectly (i) engage in the imaging business (the "Company Business") within
the United States; (ii) compete or participate as agent, employee, consultant,
advisor, representative or otherwise in any enterprise engaged in a business
which has any material operations engaged in the Company Business within the
United States; or (iii) compete or participate as a stockholder, partner or
joint venturer, or have any direct or indirect financial interest, in any
enterprise which has any material operations engaged in the Company Business
within the United States; provided, however, that nothing contained herein shall
prohibit the Employee from (A) owning, operating or managing any business, or
acting upon any business opportunity after obtaining approval of a majority of
the Board of Directors of the Company and a majority of the independent members
of the Board of Directors of the Company (if any); or (B) owning no more than
five percent (5%) of the equity of any entity with respect to which Employee
does not serve as an officer, director, employee, consultant or in any other
capacity other than as an investor.
(b) The Employee shall abide by and be bound as part of the employment
relationship created by this Agreement to comply with the provisions regarding
confidential information, attached as Exhibit B annexed hereto.
---------
(c) To the extent the Employee develops, makes, conceives, contributes
to or reduces to practice any intellectual property related to the duties of the
Employee hereunder or which results in any way from the Employee using the
resources of the Company, such intellectual property is and shall be the sole
and exclusive property of the Company. Accordingly, the Employee shall abide by
and be bound to comply with the provisions regarding ownership of intellectual
property, attached as Exhibit C annexed hereto.
---------
(d) During the Term and the Restriction Period, the Employee shall
abide by and be bound to comply with the additional restrictive covenants of the
Company attached as Exhibit D annexed hereto.
---------
(e) Employee agrees and acknowledges that the compensation due to him
hereunder shall be full and adequate consideration for the Employee's agreement
to the foregoing restrictions.
Nothing in this Section 10 is intended to enhance or increase the rights
otherwise available to the Employee in respect of an unlawful act or omission by
the Company.
- 8 -
<PAGE>
11. Acknowledgment. The Employee acknowledges that the restrictions set
---------------
forth in Section 10 hereto are reasonable in scope and essential to the
preservation of the Company's business and proprietary properties and that the
compensation paid to him pursuant to paragraph 10(e) fully compensates him for
accepting such restrictions. The Company acknowledges that the compensation
paid to the Employee pursuant to paragraph 10(e) is a reasonable payment for his
acceptance of the restrictions in Section 10.
12. Severability of Covenants. The covenants of the Employee contained in
--------------------------
Section 10 hereto shall be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action of
the Employee against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
such covenants. If, at the time of enforcement, any sentence, paragraph,
clause, or combination of the same of such independent agreement in Section 10
is in violation of the law of any state where applicable, such sentence,
paragraph, clause, or combination of the same shall be void in the jurisdictions
where it is unlawful, and the remainder of such paragraph in Section 10 shall
remain binding on the parties. In the event that any part of any covenant of
Section 10 is determined by a court of law to be overly broad thereby making the
covenant unenforceable, the parties agree that such court shall substitute a
judicially enforceable limitation in its place, and that as so modified, the
covenants shall be binding upon the parties as if originally set forth in this
Agreement.
13. Notices. All notices and other communications hereunder shall be in
--------
writing and shall be deemed to have been given if delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid, or
by telecopy (immediately followed by telephone confirmation of delivery of such
telecopy with the intended recipient of such notice and by notice in writing
sent promptly by registered or certified mail as provided above) to the parties
to this Agreement at the following addresses or at such other address for a
party as shall be specified by like notice:
To the Company:
Josh Harris
SMT Health Services Inc.
c/o Parent
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
(212) 261-4000
(212) 261-4102 (facsimile)
With a copy to:
John J. Suydam, Esquire
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
(212) 408-2400
(212) 408-2420 (facsimile)
- 9 -
<PAGE>
To the Employee:
Daniel Dickman
603 Golden Oaks Lane
Pittsburgh, Pennsylvania 15237
With a copy to:
Ronald Basso, Esquire
Buchanan Ingersoll Professional Corporation
One Oxford Centre
20th Floor, 301 Grant Street
Pittsburgh, Pennsylvania 15219
(412) 562-3943
(412) 562-1041 (facsimile)
All such notices and communications shall be deemed to have been received on the
date of personal delivery, on the date that the telecopy is confirmed as having
been received or on the third business day after the mailing thereof, as the
case may be.
14. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its choice of law provisions.
15. Severability. If any provision of this Agreement is held to be
-------------
illegal, invalid or unenforceable under present or future laws effective during
the Term, such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be effected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of illegal, invalid or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to the
illegal, invalid or unenforceable provision as may be possible and still be
legal, valid or enforceable. The lack of deductibility or recharacterization
for tax or accounting purposes, or the imposition of any excise taxes or
penalties, fines or other charges, or imposition of any injunction or similar
restraint against the Company with respect to the payment of any amount or
provision of any benefit hereunder, shall not be construed to make the
provisions of this Agreement providing for such payment or provision "illegal,
invalid or unenforceable", nor in any manner reduce the entitlement of the
Employee, or his successor or assign to receive such payment or benefit.
16. Recharacterization of Payments. To the extent that, but for this
-------------------------------
Section 16, any payment or benefit hereunder is determined by the Company's
outside auditors, Internal Revenue Service, or by any court of component
jurisdiction to be an "Excess Parachute Payment" as defined in Section 280G
(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), such
amount as may be necessary to preclude any such payment or benefit from being
considered an "Excess Parachute Payment" shall be recharacterized and shall
constitute an unsecured, long-
- 10 -
<PAGE>
term loan from the Company to the Employee, his personal representative, his
successors or assigns, as the case may be, payable together with accrued
interest on the tenth anniversary of the payment of such recharacterized payment
or the receipt of such recharacterized benefit, with interest at the Applicable
Federal Rate for loans in excess of nine years, as defined in Section 1274 of
the Code, on such principal amount. Such loan shall be evidenced by a promissory
note in the form attached hereto as Exhibit E.
---------
17. Indemnification. The Company agrees to indemnify the Employee to the
----------------
fullest extent permitted by law for his services to, or on behalf of the
Company, as an Employee hereunder, as a director and in any and every other
capacity in which he may serve the Company or its interests. In furtherance of
such agreement to indemnify, but not by way of limitation, from and after the
Merger, the terms of the Company's Certificate of Incorporation and By-Laws
shall provide for such indemnification and payment of expenses substantially the
same as contained in Exhibit F, such provisions are hereby incorporated by
---------
reference as if fully stated herein. Additionally, the provisions of Exhibit G
---------
shall supplement such provisions. For the purpose of this Agreement, any
amendment to said Certificate of Incorporation or By-Laws shall not be effective
to reduce, qualify or otherwise limit the scope, benefit or enforceability of
this provision; provided, however, if any such amendment extends or improves the
-------- -------
scope, benefit or enforceability of the indemnification and payment of expenses
contained in such By-Laws for any officer, director, employee or agent, such
extended or improved provisions shall be deemed to be incorporated by reference
herein for the benefit of the Employee without any further action by the Company
or the Employee.
18. Arbitration. Except as otherwise provided herein, in the event of any
------------
controversy, dispute or claim arising out of, or relating to, this Agreement, or
the breach thereof, or arising out of any other matter relating to the
Employee's employment with the Company or the termination of such employment,
the parties may seek recourse only for temporary or preliminary injunctive
relief to the courts having jurisdiction thereof and if any relief other than
injunctive relief is sought, the Company and the Employee agree that such
underlying controversy, dispute or claim shall be settled by arbitration
conducted in Pittsburgh, Pennsylvania, in accordance with this Section 18 of the
Agreement and the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). The matter shall be heard and decided, and awards
rendered, by a panel of three (3) arbitrators (the "Arbitration Panel") each of
which shall have at least ten (10) years' experience in executive compensation
and employment matters. The Company and the Employee shall each select one
qualified arbitrator from the AAA National Panel of Commercial Arbitrators (the
"Commercial Panel") and AAA shall select a third qualified arbitrator from the
Commercial Panel. The award rendered by the Arbitration Panel shall be final
and binding as between the parties hereto and their heirs, executors,
administrators, successors and assigns, and judgment on the award may be entered
by any court having jurisdiction thereof.
19. Entire Agreement. This Agreement sets forth the entire understanding
-----------------
of the parties with respect to the matters specified herein. No other terms or
conditions and no amendments or modifications shall be binding unless made in
writing and signed by the parties hereto. Upon the Effective Date, the parties
agree that the Employee Agreement dated as of July 1, 1996, shall terminate
without further obligation to either party.
- 11 -
<PAGE>
20. Binding Effect. This Agreement shall be binding upon the parties
---------------
hereto and shall inure to the benefit of such parties, their respective heirs,
representatives, successors and permitted assigns. This Agreement may not be
assigned by the Employee nor may it be assigned by the Company without the
Employee's consent.
21. Expenses. The Company shall bear the costs of all expenses associated
---------
with the creation, negotiation and execution of this Agreement, including the
fees of its counsel, the Employee's counsel and of any consultant retained by
the Company to advise the Employee and/or the Board of Directors with respect to
the terms and conditions of this Agreement. The Company shall bear the full
cost of each arbitrator selected pursuant to Section 18 hereof with respect to
any dispute hereunder. Otherwise, each party shall pay their individual
expenses with respect to this Agreement. In the event of any litigation or
arbitration, the party that ultimately prevails shall be reimbursed all of its
reasonable expenses.
* * * SIGNATURES APPEAR ON THE FOLLOWING PAGE * * *
- 12 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
THREE RIVERS HOLDING CORP.
By: /s/ JOSHUA HARRIS
__________________________
Name: Joshua Harris
________________________
Title:
_________________________
THREE RIVERS ACQUISITION CORP.
By: /s/ JOSHUA HARRIS
__________________________
Name: Joshua Harris
________________________
Title:
_________________________
SMT HEALTH SERVICES INC.
By: /s/ JEFF D. BERGMAN
__________________________
Name: Jeff D. Bergman
________________________
Title: CHAIRMAN, PRESIDENT & CEO
__________________________
EMPLOYEE:
/s/ DANIEL DICKMAN
_____________________________
Daniel Dickman
- 13 -
<PAGE>
EXHIBIT A
COMPENSATION AND BENEFITS OF DANIEL DICKMAN
-------------------------------------------
1. Compensation. (a) Base Salary. The Employee's base salary (the
------------- ------------
"Base Salary"), payable in accordance with the Company's payroll policies, shall
be at least $240,000 per year, adjusted upward every January 1 (commencing
January 1, 1998) to reflect the increase in the cost of living, if any, between
the date of this Agreement and the date of each such adjustment. Such
adjustments shall be based upon the Consumer Price Index, by Major Groups, for
Wage Earners and Clerical Workers (1967=100) For All Items United States (the
"CPI") (or if that index is discontinued during the Term, a similar index (the
"Alternative Index") prepared by a department or agency of the United Stated
Government, to be agreed upon by the Employee and the Company.)
(b) Bonus. The Company shall make available and the Employee shall
------
participate in a bonus pool (the "Bonus Pool" or the "Profit Sharing Plan")
equal to fifteen percent (15%) of the Company's pre-tax income (excluding the
effect of the Bonus Pool and adjusted for any non-recurring gains and losses)
for the twelve (12) month period ended on June 30, 1997, but in no event
resulting in a Bonus Pool greater than $1,240,000, of the Company and its
consolidated subsidiaries as determined by the Company's independent public
accountants for financial reporting purposes in accordance with generally
accepted accounting principles, practices and methods, consistently applied.
The Bonus Pool shall be a fixed annual amount and the Employee shall be eligible
to receive one-quarter (1/4) of the Bonus Pool. The payment of the Employee's
portion of the Bonus Pool shall be conditioned on achievement by the Company of
reasonably achievable performance objectives established by the Compensation
Committee and occur following each June 30 and December 31, with the December 31
payment adjusting for any excess/shortfall in the June 30 payment. The Board of
Directors may, but need not, consider the recommendation of any committee of the
Board in determining such participants and allocations. The Profit Sharing Plan
shall provide that it may not be terminated suspended, revoked or the like, or
amended, except by resolution of a majority of the directors then in office.
2. Car Allowance. The Company shall pay to the Employee, on the first
--------------
day of each month during the Term, a monthly automobile allowance (the
"Automobile Allowance") of not less than $1,000, to help defray the costs
associated with Employee's acquisition or maintenance (by lease or otherwise) of
an automobile and the related insurance and maintenance therefor. The
Automobile Allowance shall be adjusted upward every January 1 (commencing
January 1, 1998) to reflect the increase in the cost of living, if any, between
the date of this Agreement and the date of each such adjustment. Such
adjustments shall be based upon the CPI (or if that index is discontinued during
the Term, the Alternate Index).
3. Vacation. The Employee shall be entitled to all legal holidays, and
---------
six (6) weeks paid vacation per annum, with the option to accrue any unused
vacation time to subsequent
A - 1
<PAGE>
periods or to collect payment for any unused vacation at the end of each fiscal
year at the Employee's then applicable Base Salary.
4. Insurance and Benefits. The Employee and his "dependents," to the
-----------------------
extent eligible thereunder, shall be entitled to participate in all employee and
executive benefit plans, programs and policies currently available to other
Company employees of comparable status, title and experience, as well as any
plans, programs and policies adopted by the Company during the Term of this
Agreement.
5. Life Insurance. Assuming the Employee is insurable at ordinary rates,
---------------
the Company shall pay for the entire premium on a life insurance contract, in
the amount of $1,000,000 on the life of the Employee, which shall be subject to
a "split dollar" plan pursuant to which the Employee shall have the exclusive
right to designate the beneficiary, and shall have the right to have the policy
transferred to his name upon his termination of employment without additional
cost. Pursuant to such "split dollar" plan, Employee is expected to recognize
income with respect to the PS58 cost of such insurance. The Employee shall
cooperate in any effort by the Company to secure additional key man life
insurance on his life, in such amount as may be determined by the Board of
Directors, with the beneficiaries designated by the Company.
6. Estate and Tax Planning Allowance. The Company shall pay the Employee
----------------------------------
a tri-annual (every third year) Estate and Tax Planning Allowance of up to
$7,500 to help defray the costs associated with Estate and Tax Planning (which
shall be due and payable on the presentation of invoices for such services).
The Estate and Tax Planning Allowance shall be adjusted upward on each third
anniversary of this Agreement to reflect the increase in the cost of living, if
any, between the date of this Agreement and the date of each such adjustment.
Such adjustment shall be based upon the CPI (or if that index is discontinued
during the Term, the Alternate Index).
7. Club Allowance. The Company shall pay or reimburse the Employee for
---------------
the monthly or annual dues for a membership by the Employee in one local country
club, one out-of-town country club and one business club, each of the Employee's
own selection, subject to approval by the Compensation Committee that each such
club is an appropriate business venue for furthering the Company's business
interest.
8. 401k Plan. The Company shall maintain a 401k Plan similar to the
---------
401k Plan which the Company maintained prior to the Merger.
A - 2
<PAGE>
EXHIBIT B
PROVISIONS RELATED TO CONFIDENTIAL INFORMATION
----------------------------------------------
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof. As used herein the term "Confidential
Information" means any and all information in any way related to the products or
business of the Company which is communicated to, developed in whole or in part
by, or access to which is obtained by the Employee. Such information may be in
tangible or intangible form and shall include, but shall not be limited to, any
such information embodied in or consisting of drawings, data, blueprints,
memoranda, correspondence, flow charts, production and operating manuals,
engineering technology, instrumentation, specifications, operating know-how,
identity and involvement of research personnel, customer lists, sales and market
information, business plans, process designs, documents, source codes, object
codes, formulas, algorithms, trade secrets, information received in confidence
from customers or others having dealings with the Company and any other
information relating to the business of the Company, whether existing as of or
developed or acquired after the date hereof.
Restrictions. During the term of employment of the Employee by the Company
-------------
and thereafter, the Employee (i) shall maintain the Confidential Information in
strict confidence; (ii) shall not disclose any Confidential Information to any
person or other entity; (iii) shall not use any Confidential Information to the
detriment of the Company or for the benefit of the Employee or any other person
or entity; (iv) shall not authorize or permit such use or disclosure; and (v)
shall comply with the policies and procedures of the Company regarding use and
disclosure of Confidential Information.
Protection and Return. The Employee shall take measures reasonably
----------------------
necessary to safeguard the Confidential Information and to prevent its
unauthorized use or disclosure and shall surrender to the Company at any time
upon request, and in any event upon termination of the employment of the
Employee by the Company, all Confidential Information, equipment, documents and
records of any nature related to the business of the Company and all copies
thereof in the possession or control of the Employee.
Exceptions. The restrictions on disclosure and use of Confidential
-----------
Information shall not prevent the Employee from: (i) using information in the
proper performance of the Employee's duties; (ii) disclosing information to
another employee or consultant to whom disclosure is required to properly
perform the duties of either; (iii) disclosing information to another person or
entity pursuant to a binding confidentiality agreement in a Company-approved
form as part of the proper performance of the duties of the Employee or as
authorized in writing by the Board of Directors; (iv) using or disclosing
information to the extent such information is or may be, through no fault or
disclosure of the Employee, generally made known to the public or throughout the
industry in which the Company is engaged; or (v) using or disclosing information
B - 1
<PAGE>
which is disclosed to the Employee after termination of the Employee's
employment with the Company by a third-party who is under no duty or obligation
not to disclose such information.
B - 2
<PAGE>
EXHIBIT C
PROVISIONS RELATED
TO OWNERSHIP OF INTELLECTUAL PROPERTY
-------------------------------------
(a) Definitions. The term the "Company" means SMT Health Services Inc., or
------------
any subsidiary thereof. The term "Intellectual Property" means any information,
invention, data, discovery, product, process, trade secret, source code, object
code, computer program, data base, data file, copyright, trademark, service mark
or other intellectual property (whether or not such property can be protected by
copyright, patent or otherwise and whether or not reduced to writing or to
practice) developed, made, conceived, contributed to or reduced to practice by
any Company employee, officer, director, representative or agent or by any
person or entity under contract with or pursuant to any other arrangement with
the Company, which is in any way related to the business, operations or proposed
operations of the Company or which is in any way the result of any person or
entity having used the Company's resources, whether laboratory equipment,
personnel, computers, communications facilities, programs, information, data
bases, office facilities, process designs or otherwise.
(b) Ownership. The Employee acknowledges that any and all Intellectual
----------
Property is and shall be owned solely and exclusively by the Company and the
Employee shall have no ownership or other rights with respect thereto.
(c) Disclosure and Assignment. Any and all Intellectual Property
--------------------------
developed, made, conceived, contributed to or reduced to practice by the
Employee, alone or with others, during the period of the Employee's employment
or other association with the Company, whether or not during working hours, (i)
which is within the scope of the duties, projects or technologies to which the
Employee was assigned or became involved during the period of the Employee's
employment or other association with the Company; (ii) which is related to any
area for which the Employee was assigned responsibility during the Employee's
employment or association with the Company; or (iii) which is in any way the
result of the Employee having used the Company's resources, whether laboratory
equipment, personnel, computers, communications facilities, programs,
information, data bases, office facilities, process designs or otherwise, is and
shall be owned solely and exclusively by the Company. To the extent any such
Intellectual Property can be protected by copyright, and is deemed in anyway to
fall within the definition of "work made for hire" as such term is defined in 17
U.S.C. (S)101, such Intellectual Property shall be considered to have been
produced under contract for the Company as a work made for hire. In any event,
and regardless of whether such Intellectual Property is deemed to be a "work
made for hire", the Employee shall disclose any and all such Intellectual
Property to the Company and does hereby assign to the Company any and all right,
title and interest the Employee may have in such Intellectual Property
including, but not limited to, any and all copyright, patent and other
intellectual property and proprietary rights the Employee otherwise may have had
in such Intellectual Property, such as the right to secure copyright
registrations, renewals, reissues and extensions and to file for and obtain
patent and other property and proprietary right protection
C - 1
<PAGE>
with respect thereto. Upon the Company's request at any time and from time to
time, including any time after termination of the Employee's employment with the
Company, the Employee shall execute and assign to the Company applications to
domestic and foreign governmental agencies for copyrights and letters patent
covering such Intellectual Property and the Employee shall execute and deliver
to the Company such other instruments as the Company deems necessary to vest in
the Company the sole ownership of and exclusive worldwide rights in and to, all
of such Intellectual Property.
C - 2
<PAGE>
EXHIBIT D
ADDITIONAL RESTRICTIVE COVENANTS
--------------------------------
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof
No Customer Contact. The Employee shall not directly or indirectly contact
--------------------
any Customer (as defined in the next sentence) for the purpose of introducing,
offering, or selling to such Customer any products or services that compete with
the products and services offered by the Company. For purposes of this
paragraph, "Customer" shall mean anyone (i) with whom the Employee or any person
reporting to the Employee has had contact or has had negotiations on behalf of
the Company during the term of the Employee's employment with the Company, (ii)
with whom any other person has had contact or has had negotiations on behalf of
the Company during the year immediately preceding termination of the Employee's
employment with the Company, of which contact or negotiations the Employee had
knowledge while the Employee was employed by the Company, or (iii) whom the
Employee knew (while the Employee was employed by the Company) the Company
intended to contact during the year immediately preceding or the year
immediately following termination of the Employee's employment.
No Solicitation. The Employee shall not directly or indirectly solicit an
----------------
employee or consultant of the Company to terminate his or her employment or
contractual relationship with the Company and become employed or engaged by the
Employee or any other person or entity in substantially the same or a similar
business as that engaged in by the Company if such employment would involve the
performance of services and duties substantially the same or similar to those
the employee or consultant performed for the Company.
D - 1
<PAGE>
EXHIBIT E
PROMISSORY NOTE
---------------
$________________ Dated as of ______________
FOR VALUE RECEIVED, intending to be legally bound, the undersigned
("Maker") hereby promises to pay to the order of SMT Health Services Inc., its
successors and assigns (hereinafter referred to as "Payee") upon the schedule
set forth below, the principal sum of ____________________ Dollars
($_____________________), together with interest on the unpaid principal amount
of this Promissory Note from time to time outstanding. The unpaid principal
amount of this Promissory Note shall bear interest at the rate of [APPLICABLE
LONG TERM FEDERAL RATE] per annum. Maker shall pay to Payee the entire
principal amount and all accrued interest on [THE TENTH ANNIVERSARY OF THE DATE
OF THE NOTE].
Payments shall be made to Payee at the principal office of the Payee or
such other place as Payee may designate in writing to Maker, in lawful money of
the United States of America in immediately available funds without set-off,
counterclaim or other deduction of any nature.
Maker may prepay this Promissory Note at any time in whole or in part
without payment of penalty; provided, however, that any such prepayment of
principal shall be accompanied by the payment of interest accrued to the date of
such prepayment and all costs, expenses or charges then owed to Payee pursuant
to this Promissory Note.
Upon the occurrence of any one of the following events ("Events of
Default"), the entire principal amount outstanding and all accrued interest
thereunder shall at the option of Payee, without any prior notice, presentment
or demand, become immediately due and payable in full:
(i) Failure of the Maker to perform or observe any of the Maker's
covenants or agreements under this Promissory Note; or
(ii) An assignment by the Maker for the benefit of the Maker's
creditors, or the commencement by or against the Maker of any bankruptcy,
insolvency, liquidation, receivership or similar proceedings.
Payee may, without notice and without releasing the liability of Maker,
grant extensions and/or renewals hereof from time to time or for any term or
terms. No delay by Payee or their assignee in exercising any power or right
hereunder, and no partial exercise of such power or right, shall operate in any
way as a waiver of any subsequent exercise thereof. Payee shall not be liable
for or prejudiced by failure to collect or lack of diligence in bringing suit on
this Promissory Note or any renewal or extension hereof. This Promissory Note
shall be governed and construed under the laws of the Commonwealth of
Pennsylvania. Demand, presentment,
E - 1
<PAGE>
protest, notice of dishonor and notice of default are hereby waived. If any
provision of this Promissory Note shall for any reason be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Promissory Note, but this Promissory Note shall be construed
as if this Promissory Note had never contained the invalid or unenforceable
provision. Maker agrees that his liability hereunder shall be binding upon his
personal representatives, heirs assigns; provided, however, that Maker may not
assign or transfer his obligation hereunder without the prior written consent of
Payee. This Promissory Note may be assigned by Payee without the consent of
Maker.
MAKER:
_______________________________
DANIEL DICKMAN
E - 2
<PAGE>
EXHIBIT F
The Company's certificate of incorporation shall provide as follows:
--------------------------------------------------------------------
1. Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, incorporator, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise shall be entitled to be indemnified by the Corporation to the full
extent then permitted by law or to the extent that a court of competent
jurisdiction shall deem proper or permissible under the circumstances, whichever
is greater against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred by him in connection with such action, suit
or proceeding. Such right of indemnification shall inure whether or not the
claim asserted is based on matters which antedate the adoption of this Article
Seventh. Such right of indemnification shall continue as to a person who has
ceased to be a director, officer, incorporator, employee, or agent and shall
inure to the benefit of the heirs and personal representatives of such person.
2. The personal liability of directors of the Corporation is hereby eliminated
to the fullest extent permitted by paragraph 7 of Subsection (b) of Section 102
of the General Corporation Law of the State of Delaware as the same may be
amended and supplemented.
The Company's By-laws shall provide as follows:
-----------------------------------------------
1. The Corporation shall, to the fullest extent permitted by the laws of the
state of incorporation, indemnify any and all persons whom it shall have power
to indemnify against any and all of the costs, expenses, liabilities or other
matters incurred by them by reason of having been officers or directors of the
Corporation, any subsidiary of the Corporation or of any other corporation for
which he acted as officer or director at the request of the Corporation.
F - 1
<PAGE>
EXHIBIT G
SECTION 1. General. The Company shall indemnify Employee if he is a party
-------
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding ("Payments") if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, including without
limitation, those resulting from actual or alleged breach or neglect of duty,
error, misstatement or misleading statement, gross negligence, negligence or act
giving rise to strict or products liability, whether occurring prior to or after
the date of the Employee's current Employment Agreement. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that Employee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Company shall indemnify Employee if he
------------------
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against Payments if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, including without limitation,
those resulting from actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, gross negligence, negligence or act giving
rise to strict or products liability, whether occurring prior to or after the
date of the Employee's current Employment Agreement; provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which Employee shall have been adjudged to be liable to the Company unless and
only to the extent that the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, Employee is fairly and reasonably entitled to indemnity for
Payments which the Court of Chancery or such other court shall deem proper.
SECTION 3. Indemnification in Certain Cases. If Employee is entitled to
--------------------------------
indemnification in respect to a portion, but not all, of any matter pursuant to
Section 1 or Section 2 hereof, the Company shall indemnify Employee to the
maximum extent for such portion. To
G - 1
<PAGE>
the extent that Employee has been successful in whole or in part on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2 hereof, or in defense of any claim, issue or matter therein, or
shall otherwise be determined to be entitled to indemnification in whole or in
part, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with such matter.
SECTION 4. Advances for Expenses. Expenses (including attorneys' fees)
---------------------
incurred in defending a civil or criminal action, suit or proceeding shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of Employee to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Company as authorized herein or otherwise.
SECTION 5. Rights Not-Exclusive. The indemnification and advancement of
--------------------
expenses provided by, or granted pursuant to, the other subsections hereof shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any law,
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
SECTION 6. Insurance. The Company shall purchase and maintain insurance
---------
on behalf of Employee against any liability asserted against him and incurred by
him in the capacity of a director, officer, employee agent, of the Company or of
another corporation, partnership, joint venture, trust or other enterprise, or
arising out of his status as such, whether or not the Company would have the
power to indemnify him against such liability under the provisions of Section 17
of his Employment Agreement including the provisions hereof.
SECTION 7. Definition of Company. For the purposes hereof, references to
---------------------
the "Company" include all constituent corporations absorbed in a consolidation
or merger as well as the resulting or surviving corporation so that if Employee
is or was a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions hereof with respect to the resulting or surviving corporation as
he would if he had served the resulting or surviving corporation in the same
capacity.
SECTION 8. Survival of Rights. The indemnification and advancement of
------------------
expenses provided by, or granted pursuant to Section 17 of the Employee's
Employment Agreement, including without limitation this Exhibit G shall continue
---------
even when Employee has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his heirs, executors and administrators.
G - 2
<PAGE>
EXHIBIT (c)(5)
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the 24th
day of June, 1997 by and between SMT Health Services Inc., a Delaware
corporation (the "Company"), and David Spindler (the "Employee"). This
--------------
Agreement shall become effective (the "Effective Date") upon the closing of the
offer, by Three Rivers Acquisition Corp., a Delaware corporation ("Acquisition
Corp."), to purchase all of the issued and outstanding common stock, par value
$.01 per share (the "Common Stock") of the Company (the "Tender Offer"). If the
Tender Offer is not consummated, this Agreement shall become null and void and
the employment agreement with Employee dated October 1, 1996 shall remain in
full force and effect.
WITNESSETH:
-----------
WHEREAS, Acquisition Corp. is a wholly-owned subsidiary of Three Rivers
Holding Corp. ("Parent");
WHEREAS, pursuant to an Agreement and Plan of Merger of even date by and
among Parent, Acquisition Corp. and the Company (the "Merger Agreement"),
Acquisition Corp. will commence the Tender Offer and following the consummation
of the Tender Offer, Acquisition Corp. will merge with and into the Company,
with the Company being the survivor, pursuant to the terms and conditions set
forth in the Merger Agreement (the "Merger");
WHEREAS, Parent and the Company desire to secure the continued employment
of Employee by the Company in an executive capacity following the Tender Offer
and Merger; and
WHEREAS, the Company and the Employee desire to enter into this Agreement
in order to set forth certain terms and conditions of Employee's continued
employment with the Company and to terminate the existing employment agreement
dated as of October 1, 1996;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
-----------
Employee and the Employee hereby agrees to continue to be employed by the
Company commencing on the Effective Date for the Term (as defined below) of the
Agreement, in the position and with the duties and responsibilities set forth in
Section 2 below, and upon the other terms and subject to the conditions
hereinafter stated.
<PAGE>
2. Position, Duties and Responsibilities.
--------------------------------------
(a) During the Term of the Agreement, the Employee shall serve as
Senior Vice President of Operations and Marketing of the Company. The Employee
shall have general executive supervision over the operations and marketing
activities of the Company, subject to the policies and directions of, and the
executive responsibilities that may be assigned to him (which in each case shall
be consistent with his position and title) by the Board of Directors of the
Company (the "Board of Directors"). The Employee shall have general supervisory
authority over day-to-day operations and securing new customers or markets for
the Company, reporting to the Executive Vice President. Employee's duties shall
be based at the Company's executive offices which are located in the Pittsburgh
Metropolitan Area and Employee shall not be required to perform duties outside
the Pittsburgh Metropolitan Area which would necessitate changing his present
residence, unless Employee otherwise agrees in writing. For purposes of this
Agreement, the term "Pittsburgh Metropolitan Area" shall encompass the City of
Pittsburgh, Pennsylvania, the Borough of Wexford, Pennsylvania, and the
territory within a fifteen (15) mile radius of such borough. The Company agrees
that it shall not relocate or transfer its principal executive offices to a
location outside the Pittsburgh Metropolitan Area.
(b) During the Term, the Employee shall devote such time and attention
to affairs of the Company as are necessary to faithfully and diligently perform
his duties and responsibilities hereunder; provided, however, that nothing
contained herein shall prohibit the Employee from (a) serving as a member of the
Board of Directors of any other for-profit entity so long as Employee has
obtained the prior consent of the President or Executive Vice President, or (b)
engaging in charitable and community affairs.
3. Term. The initial term of this Agreement shall be for a period of
-----
three (3) years, commencing on the Effective Date (the "Initial Term") . On
each quarterly anniversary of the Effective Date while Employee remains employed
hereunder, commencing one year and three months after the Effective Date, the
Initial Term shall be automatically extended by three months ("Renewal Period"),
and this Agreement shall continue in effect until Employee's employment
hereunder is terminated pursuant to Section 5 hereof (the Initial Term of this
Agreement, as extended by each Renewal Period, is hereinafter defined as the
"Term").
4. Compensation. For the services rendered by Employee pursuant to
-------------
Section 2 during the Term, the Employee shall be paid the compensation and
receive the benefits as set forth on Exhibit A annexed hereto.
---------
5. Termination of Agreement. The Employee's employment hereunder may be
-------------------------
terminated only as follows:
(a) By the Company Without Cause. The Company may at any time
-----------------------------
terminate the Employee's employment hereunder without Cause, by affirmative vote
of a
- 2 -
<PAGE>
majority of the entire Board of Directors, and upon no less than sixty (60)
days' prior written notice to the Employee.
(b) By the Employee Without Good Reason. The Employee may at any time
------------------------------------
terminate his employment hereunder for any reason upon no less than sixty (60)
days' prior written notice to the Company; provided; however; Section 5(d)
hereof shall apply in lieu of this Section 5(b) to any termination of employment
by the Employee for Good Reason (as defined therein).
(c) By the Company for Cause. The Company may at any time terminate
-------------------------
the Employee's employment hereunder for Cause. Prior to termination for Cause,
the Company by affirmative vote of a majority of the entire Board of Directors
shall give the Employee prompt written notice specifying in reasonable detail
the conduct which is believed to provide the basis for a termination of Employee
for Cause (the "Notice"). "Cause" shall mean only one or more of the following:
(i) The material breach of this Agreement by Employee, which
breach shall not have been cured by Employee within twenty (20) days after the
Employee's receipt from the Company at the direction of a majority of the entire
Board of Directors of written notice specifying in reasonable detail the nature
of Employee's breach;
(ii) The Employee is charged with a crime involving fraud,
theft or dishonesty involving more than $1,000 or any felony; and
(iii) Any willful act or acts by Employee which is materially
injurious to the Company (excluding any act ratified or approved by the Board of
Directors of the Company and further excluding any act taken by Employee in good
faith with a reasonable belief that such act was in the best interests of the
Company).
Neither the Employee's participation in or presence at any meeting at which a
for Cause termination is discussed nor the Employee's efforts to cease or cure
any conduct purported to be sufficient basis for a for Cause termination, shall
be considered an admission, acknowledgment or agreement that such conduct does
in fact provide a sufficient basis for a for Cause termination.
(d) By the Employee for Good Reason. The Employee may terminate
--------------------------------
employment hereunder for Good Reason at any time by providing prompt written
notice to the Company within a reasonable time after the occurrence of the
event(s) constituting such Good Reason. For purposes of this Agreement, "Good
Reason" means only one or more of the following:
(i) The material breach of this Agreement by the Company,
which breach shall not have been cured by the Company within thirty (30) days
after the Company's receipt from the Employee or his agent of written notice
specifying in reasonable detail the nature of the Company's breach.
- 3 -
<PAGE>
(ii) The required relocation of the Employee out of the
Company's principal executive offices or the Pittsburgh Metropolitan Area
without his specific prior written consent.
(iii) The assignment to the Employee of any duties inconsistent
in any material respect with the Employee's position (including status and
reporting requirements), authority, duties, powers or responsibilities as
contemplated by Section 2 of this Agreement, or any other diminution of such
authority, duties, position or responsibilities, excluding for this purpose any
isolated, insubstantial action by the Company not taken in bad faith and which
is remedied by the Company within thirty (30) days after receipt of written
notice from the Employee to the Company that such action will be considered a
Good Reason hereunder unless timely remedied.
(iv) A material increase in Employee's responsibilities,
workload, required hours or travel from that required hereunder not remedied by
the Company within thirty (30) days after receipt of written notice from
Employee to the Company that such increase will be considered a Good Reason
hereunder unless timely remedied.
(e) Death. The Employee's employment for all purposes under this
------
Agreement shall terminate upon his death.
(f) Disability. In the event that the Employee is determined by a
-----------
physician's written evaluation delivered to the Company (i) to be "permanently
and totally disabled" as defined in (S) 22(e)(3) of the Internal Revenue Code of
1986, as amended, the Company may, at its discretion, upon sixty (60) days
notice to the Employee or his guardian, as the case may be, terminate the
Employee's employment hereunder.
(g) Mutual Written Agreement. This Agreement and the Employee's
-------------------------
employment hereunder may be terminated at any time by the mutual written
agreement of the Employee and the Company.
6. Compensation in Event of Termination.
-------------------------------------
(a) Termination by Employee for Good Reason; by Company Without Cause.
-----------------------------------------------------------------
In the event that the Employee's employment hereunder is terminated: (i) by the
Company without Cause pursuant to Section 5(a) hereof; or (ii) by the Employee
for Good Reason pursuant to Section 5(d) hereof, then the Company shall pay or
provide in the same manner as before termination, as applicable, the following
compensation and benefits to the Employee:
(i) Immediate payment of full salary, bonuses (average of the
two (2) years first preceding such termination) and benefits to which he is
entitled as of the date of such termination (including Automobile Allowance)
during the time period equal to the remaining Term of the Agreement immediately
prior to the Employee's termination (without regard to any future renewals that
would have occurred absent such termination) (the "Termination Period");
- 4 -
<PAGE>
(ii) Any other amounts, awards, benefits or other compensation
to which the Employee is or, prior to his termination of employment, was
entitled during the Termination Period under any of the Company's other cash
compensation or bonus plans which to the extent of any vesting dates occurring
during the Termination Period, shall be considered to vest on such date
notwithstanding such termination; and
(iii) Continuing coverage, to the extent not prohibited by law,
during the Termination Period or until comparable benefits are made available to
him in connection with subsequent employment, whichever period is shorter, for
the Employee and his eligible dependents under all of the Company benefit plans
in effect and applicable to Employee and his eligible dependents as of the date
of termination. In the event that the Employee and/or his eligible dependents,
because of the Employee's terminated status, cannot be covered or fully covered
under any or all of the Company benefit plans, the Company shall continue to
provide the Employee and/or his eligible dependents with the same level of such
coverage in effect prior to termination, on an unfunded basis if necessary.
(b) Termination for Cause by the Company. In the event that the
-------------------------------------
Company shall terminate the Employee's employment hereunder for Cause pursuant
to Section 5(c), this Agreement shall forthwith terminate and the obligations of
the parties hereto shall be as set forth in Section 9 hereof.
(c) Termination by Employee Without Good Reason. In the event that
--------------------------------------------
the Employee shall terminate employment hereunder (other than for Good Reason)
pursuant to Section 5(b) hereof, this Agreement shall forthwith terminate and
the obligations of the parties hereto shall be as set forth in Section 9 hereof.
(d) Death. In the event of the death of the Employee, then the
------
Company shall pay (or cause to be paid), within thirty (30) days of such death,
or provide in the same manner as before the Employee's death, as applicable, the
following compensation and benefits to the estate of the Employee, or the
Employee's personal representative, or to those individuals designated in a
writing delivered to the Company by the Employee prior to his death;
(i) A lump sum payment equal to the sum of (A) the Employee's
highest annual Base Salary; (B) the Employee's highest annualized Automobile
Allowance; and (C) the Employee's highest award under the Company's Profit
Sharing Plan, in each case, for any of the three years preceding the date of
such termination (the "Lump Sum Amount"); and
(ii) Continuing coverage, to the extent not prohibited by law,
for a period of twelve (12) months from the date of Employee's death for the
Employee's eligible dependents under all of the Company Benefit Plans in effect
and applicable to Employee and his eligible dependents as of the date of death.
In the event that such eligible dependents, cannot be covered or fully covered
under any or all of the Company benefit plans, the Company shall continue to
provide the Employee and/or his eligible dependents with the same level of such
coverage in effect prior to termination, on an unfunded basis if necessary.
- 5 -
<PAGE>
(e) Disability. In the event that the Company elects to terminate the
-----------
Employee's employment hereunder pursuant to Section 5(f), then the Company shall
pay (or cause to be paid) within thirty (30) days of the such termination or
provide in the same manner as before termination, as applicable, the following
compensation and benefits to the Employee or his personal representative:
(i) All amounts as the Employee is entitled to under the
Company's disability policy and program applicable to Employee;
(ii) The Lump Sum Amount; and
(iii) Continuing coverage, to the extent not prohibited by law,
for a period of twelve (12) months from the date of Employee's termination or
until comparable benefits are made available to him in connection with
subsequent employment, whichever period is shorter, for the Employee and his
eligible dependents under all of the Company Benefit Plans in effect and
applicable to Employee and his eligible dependents as of the date of
termination. In the event that the Employee and his eligible dependents, because
of the Employee's terminated status, cannot be covered or fully covered under
any or all of the Company benefit plans, the Company shall continue to provide
the Employee and/or his eligible dependents with the same level of such coverage
in effect prior to termination, on the unfunded basis if necessary.
(f) Mutual Written Consent. In the event that the Employee and the
-----------------------
Company shall terminate the Employer's employment by mutual written agreement,
the Company shall pay such compensation and provide such benefits, if any, as
the parties may mutually agree upon in writing.
The Employee shall not be required to mitigate the amount of any payment
provided for in this Section 6 by seeking employment or otherwise, nor shall any
amounts received from employment, insurance or otherwise by the Employee offset
or reduce in any manner the obligations of the Company hereunder.
7. Representations. The Employee hereby represents and warrants that he
----------------
has provided the Company with properly executed IRS Forms 4669 for each tax year
in which he has exercised a Company Option or Warrant which certifies that such
Employee has paid in full all income and other taxes attributable to the
compensation income he was required to recognize for federal income tax purposes
in such year and such Employee hereby acknowledges that the statements made in
such Forms 4669 are true, complete and correct.
8. Expenses. Employee will be reimbursed all reasonable, ordinary and
---------
necessary business expenses, including expenses for entertainment, travel and
similar items that are approved by the Company. The Company will reimburse
Employee for all expenses upon a presentation of Employee of itemized accounts
of such expenditures in accordance and in the manner in a form reasonably
described by the Company.
- 6 -
<PAGE>
9. Effect of Termination. Upon the termination of the Employee's
----------------------
employment hereunder, neither the Company nor the Employee shall have any
remaining duties or obligations hereunder except that:
(a) the Company shall:
(i) Pay the employee's accrued salary and any other accrued
benefits for all periods ending on or prior to the date of termination under
Sections 4, 5 and 6 hereof and Exhibit A annexed hereto;
---------
(ii) Reimburse the Employee for expenses incurred in accordance
with Section 8 hereof for all periods ending on or prior to the date of
termination;
(iii) Pay or otherwise provide for any benefits, payments or
continuation or conversion rights in accordance with the provisions of any
Company benefit plan of which the Employee or any of his dependents is or was a
participant and to which Employee or his dependents are entitled through date of
termination or as otherwise required by law;
(iv) Pay all compensation previously deferred by Employee and
not yet paid by Company (together with interest, if any, thereon) and any other
accrued benefits, including accrued vacation pay through the date of termination
not yet paid by the Company;
(v) Pay the Employee and his beneficiaries any compensation or
provide the Employee or his eligible dependents any benefits due pursuant to
Sections 4, 5 or 6 hereof or Exhibit A annexed hereto.
---------
(b) Employee shall remain bound by the terms of Section 10 hereof.
(c) The Company shall be authorized to withhold from any payment to
the Employee, his estate or his beneficiaries hereunder all such amounts, if
any, that the Company may reasonably determine it is required to withhold
pursuant to any applicable law or regulation.
10. Restrictions. The Company has invested and will continue to invest
-------------
considerable resources in the development of its business and in the research,
development and design of its activities and their delivery, which investment
has or will result in the generation of proprietary, confidential and/or trade
secret data, information, techniques and materials, both tangible and
intangible, which are owned by the Company.
(a) The Employee agrees that during the Term and for a period of two
(2) years from the last day for which the Employee receives any payment either
as a consultant or an employee (the "Restriction Period") (e.g., if Employee
receives two years "severance" upon termination, then the Restriction Period is
four (4) years from the date of termination), he will not directly or indirectly
(i) engage in the imaging business (the "Company Business") within the United
States; (ii) compete or participate as agent, employee, consultant, advisor,
representative or otherwise in any enterprise engaged in a business which has
any material operations engaged
- 7 -
<PAGE>
in the Company Business within the United States; or (iii) compete or
participate as a stockholder, partner or joint venturer, or have any direct or
indirect financial interest, in any enterprise which has any material operations
engaged in the Company Business within the United States; provided, however,
that nothing contained herein shall prohibit the Employee from (A) owning,
operating or managing any business, or acting upon any business opportunity
after obtaining approval of a majority of the Board of Directors of the Company
and a majority of the independent members of the Board of Directors of the
Company (if any); or (B) owning no more than five percent (5%) of the equity of
any entity with respect to which Employee does not serve as an officer,
director, employee, consultant or in any other capacity other than as an
investor.
(b) The Employee shall abide by and be bound as part of the employment
relationship created by this Agreement to comply with the provisions regarding
confidential information, attached as Exhibit B annexed hereto.
---------
(c) To the extent the Employee develops, makes, conceives, contributes
to or reduces to practice any intellectual property related to the duties of the
Employee hereunder or which results in any way from the Employee using the
resources of the Company, such intellectual property is and shall be the sole
and exclusive property of the Company. Accordingly, the Employee shall abide by
and be bound to comply with the provisions regarding ownership of intellectual
property, attached as Exhibit C annexed hereto.
---------
(d) During the Term and the Restriction Period, the Employee shall
abide by and be bound to comply with the additional restrictive covenants of the
Company attached as Exhibit D annexed hereto.
---------
(e) Employee agrees and acknowledges that the compensation due to him
hereunder shall be full and adequate consideration for the Employee's agreement
to the foregoing restrictions.
Nothing in this Section 10 is intended to enhance or increase the rights
otherwise available to the Employee in respect of an unlawful act or omission by
the Company.
11. Acknowledgment. The Employee acknowledges that the restrictions set
---------------
forth in Section 10 hereto are reasonable in scope and essential to the
preservation of the Company's business and proprietary properties and that the
compensation paid to him pursuant to paragraph 10(e) fully compensates him for
accepting such restrictions. The Company acknowledges that the compensation
paid to the Employee pursuant to paragraph 10(e) is a reasonable payment for his
acceptance of the restrictions in Section 10.
12. Severability of Covenants. The covenants of the Employee contained in
--------------------------
Section 10 hereto shall be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action of
the Employee against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
such covenants. If, at the time of enforcement, any
- 8 -
<PAGE>
sentence, paragraph, clause, or combination of the same of such independent
agreement in Section 10 is in violation of the law of any state where
applicable, such sentence, paragraph, clause, or combination of the same shall
be void in the jurisdictions where it is unlawful, and the remainder of such
paragraph in Section 10 shall remain binding on the parties. In the event that
any part of any covenant of Section 10 is determined by a court of law to be
overly broad thereby making the covenant unenforceable, the parties agree that
such court shall substitute a judicially enforceable limitation in its place,
and that as so modified, the covenants shall be binding upon the parties as if
originally set forth in this Agreement.
13. Notices. All notices and other communications hereunder shall be in
--------
writing and shall be deemed to have been given if delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid, or
by telecopy (immediately followed by telephone confirmation of delivery of such
telecopy with the intended recipient of such notice and by notice in writing
sent promptly by registered or certified mail as provided above) to the parties
to this Agreement at the following addresses or at such other address for a
party as shall be specified by like notice:
To the Company:
Josh Harris
SMT Health Services Inc.
c/o Parent
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
(212) 261-4000
(212) 261-4102 (facsimile)
With a copy to:
John J. Suydam, Esquire
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
(212) 408-2400
(212) 408-2420 (facsimile)
David Spindler
439 Jeffreys Drive
Elizabeth, Pennsylvania 15037
- 9 -
<PAGE>
With a copy to:
Ronald Basso, Esquire
Buchanan Ingersoll Professional Corporation
One Oxford Centre
20th Floor, 301 Grant Street
Pittsburgh, Pennsylvania 15219
(412) 562-3943
(412) 562-1041 (facsimile)
All such notices and communications shall be deemed to have been received on the
date of personal delivery, on the date that the telecopy is confirmed as having
been received or on the third business day after the mailing thereof, as the
case may be.
14. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its choice of law provisions.
15. Severability. If any provision of this Agreement is held to be
-------------
illegal, invalid or unenforceable under present or future laws effective during
the Term, such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be effected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of illegal, invalid or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to the
illegal, invalid or unenforceable provision as may be possible and still be
legal, valid or enforceable. The lack of deductibility or recharacterization
for tax or accounting purposes, or the imposition of any excise taxes or
penalties, fines or other charges, or imposition of any injunction or similar
restraint against the Company with respect to the payment of any amount or
provision of any benefit hereunder, shall not be construed to make the
provisions of this Agreement providing for such payment or provision "illegal,
invalid or unenforceable", nor in any manner reduce the entitlement of the
Employee, or his successor or assign to receive such payment or benefit.
16. Recharacterization of Payments. To the extent that, but for this
-------------------------------
Section 16, any payment or benefit hereunder is determined by the Company's
outside auditors, Internal Revenue Service, or by any court of component
jurisdiction to be an "Excess Parachute Payment" as defined in Section 280G
(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), such
amount as may be necessary to preclude any such payment or benefit from being
considered an "Excess Parachute Payment" shall be recharacterized and shall
constitute an unsecured, long-term loan from the Company to the Employee, his
personal representative, his successors or assigns, as the case may be, payable
together with accrued interest on the tenth anniversary of the payment of such
recharacterized payment or the receipt of such recharacterized benefit, with
interest at the Applicable Federal Rate for loans in excess of nine years, as
defined in Section
- 10 -
<PAGE>
1274 of the Code, on such principal amount. Such loan shall be evidenced by a
promissory note in the form attached hereto as Exhibit E.
---------
17. Indemnification. The Company agrees to indemnify the Employee to the
----------------
fullest extent permitted by law for his services to, or on behalf of the
Company, as an Employee hereunder, as a director and in any and every other
capacity in which he may serve the Company or its interests. In furtherance of
such agreement to indemnify, but not by way of limitation, from and after the
Merger, the terms of the Company's Certificate of Incorporation and By-Laws
shall provide for such indemnification and payment of expenses substantially the
same as contained in Exhibit F, such provisions are hereby incorporated by
---------
reference as if fully stated herein. Additionally, the provisions of Exhibit G
---------
shall supplement such provisions. For the purpose of this Agreement, any
amendment to said Certificate of Incorporation or By-Laws shall not be effective
to reduce, qualify or otherwise limit the scope, benefit or enforceability of
this provision; provided, however, if any such amendment extends or improves the
-------- -------
scope, benefit or enforceability of the indemnification and payment of expenses
contained in such By-Laws for any officer, director, employee or agent, such
extended or improved provisions shall be deemed to be incorporated by reference
herein for the benefit of the Employee without any further action by the Company
or the Employee.
18. Arbitration. Except as otherwise provided herein, in the event of any
------------
controversy, dispute or claim arising out of, or relating to, this Agreement, or
the breach thereof, or arising out of any other matter relating to the
Employee's employment with the Company or the termination of such employment,
the parties may seek recourse only for temporary or preliminary injunctive
relief to the courts having jurisdiction thereof and if any relief other than
injunctive relief is sought, the Company and the Employee agree that such
underlying controversy, dispute or claim shall be settled by arbitration
conducted in Pittsburgh, Pennsylvania, in accordance with this Section 18 of the
Agreement and the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). The matter shall be heard and decided, and awards
rendered, by a panel of three (3) arbitrators (the "Arbitration Panel") each of
which shall have at least ten (10) years' experience in executive compensation
and employment matters. The Company and the Employee shall each select one
qualified arbitrator from the AAA National Panel of Commercial Arbitrators (the
"Commercial Panel") and AAA shall select a third qualified arbitrator from the
Commercial Panel. The award rendered by the Arbitration Panel shall be final
and binding as between the parties hereto and their heirs, executors,
administrators, successors and assigns, and judgment on the award may be entered
by any court having jurisdiction thereof.
19. Entire Agreement. This Agreement sets forth the entire understanding
-----------------
of the parties with respect to the matters specified herein. No other terms or
conditions and no amendments or modifications shall be binding unless made in
writing and signed by the parties hereto. Upon the Effective Date, the parties
agree that the Employee Agreement dated as of October 1, 1996, shall terminate
without further obligation to either party.
20. Binding Effect. This Agreement shall be binding upon the parties
---------------
hereto and shall inure to the benefit of such parties, their respective heirs,
representatives, successors and
- 11 -
<PAGE>
permitted assigns. This Agreement may not be assigned by the Employee nor may it
be assigned by the Company without the Employee's consent.
21. Expenses. The Company shall bear the costs of all expenses associated
---------
with the creation, negotiation and execution of this Agreement, including the
fees of its counsel, the Employee's counsel and of any consultant retained by
the Company to advice the Employee and/or the Board of Directors with respect to
the terms and conditions of this Agreement. The Company shall bear the full
cost of each arbitrator selected pursuant to Section 18 hereof with respect to
any dispute hereunder. Otherwise, each party shall pay their individual
expenses with respect to this Agreement. In the event of any litigation or
arbitration, the party that ultimately prevails shall be reimbursed all of its
reasonable expenses.
* * * SIGNATURES APPEAR ON THE FOLLOWING PAGE * * *
- 12 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
THREE RIVERS HOLDING CORP.
By: /s/ JOSHUA HARRIS
_____________________________
Name: Joshua Harris
___________________________
Title:
____________________________
THREE RIVERS ACQUISITION CORP.
By: /s/ JOSHUA HARRIS
_____________________________
Name: Joshua Harris
___________________________
Title:
____________________________
SMT HEALTH SERVICES INC.
By: /s/ JEFF D. BERGMAN
_____________________________
Name: Jeff D. Bergman
___________________________
Title: CHAIRMAN, PRESIDENT & CEO
____________________________
EMPLOYEE:
/s/ DAVID SPINDLER
________________________________
David Spindler
- 13 -
<PAGE>
EXHIBIT A
COMPENSATION AND BENEFITS OF DAVID SPINDLER
-------------------------------------------
1. Compensation. (a) Base Salary. The Employee's base salary (the
------------- ------------
"Base Salary"), payable in accordance with the Company's payroll policies, shall
be at least $140,000 per year, adjusted upward every January 1 (commencing
January 1, 1998) to reflect the increase in the cost of living, if any, between
the date of this Agreement and the date of each such adjustment. Such
adjustments shall be based upon the Consumer Price Index, by Major Groups, for
Wage Earners and Clerical Workers (1967=100) For All Items United States (the
"CPI") (or if that index is discontinued during the Term, a similar index (the
"Alternative Index") prepared by a department or agency of the United Stated
Government, to be agreed upon by the Employee and the Company.)
(b) Bonus. The Company shall make available and the Employee shall
------
participate in a bonus pool (the "Bonus Pool" or the "Profit Sharing Plan")
equal to fifteen percent (15%) of the Company's pre-tax income (excluding the
effect of the Bonus Pool and adjusted for any non-recurring gains and losses)
for the twelve (12) month period ended on June 30, 1997, but in no event
resulting in a Bonus Pool greater than $1,240,000, of the Company and its
consolidated subsidiaries as determined by the Company's independent public
accountants for financial reporting purposes in accordance with generally
accepted accounting principles, practices and methods, consistently applied.
The Bonus Pool shall be a fixed annual amount. The payment of the Employee's
portion of the Bonus Pool shall be conditioned on achievement by the Company of
reasonably achievable performance objectives established by the Compensation
Committee and occur following each June 30 and December 31, with the December 31
payment adjusting for any excess/shortfall in the June 30 payment. The Board of
Directors may, but need not, consider the recommendation of any committee of the
Board in determining such participants and allocations. The Profit Sharing Plan
shall provide that it may not be terminated suspended, revoked or the like, or
amended, except by resolution of a majority of the directors then in office.
2. Car. The Company shall provide Employee with a late model automobile
----
selected periodically by Employee, and approved by the President or the
Executive Vice President (both as to the timing of such a replacement and
selection of such replacement).
3. Vacation. The Employee shall be entitled to all legal holidays, and
---------
six (6) weeks paid vacation per annum, with the option to accrue any unused
vacation time to subsequent periods or to collect payment for any unused
vacation at the end of each fiscal year at the Employee's then applicable Base
Salary.
4. Insurance and Benefits. The Employee and his "dependents," to the
-----------------------
extent eligible thereunder, shall be entitled to participate in all employee and
executive benefit plans, programs and policies currently available to other
Company employees of comparable status, title and experience, as well as any
plans, programs and policies adopted by the Company during the Term of this
Agreement.
A - 1
<PAGE>
5. Life Insurance. Assuming the Employee is insurable at ordinary rates,
---------------
the Company shall pay for the entire premium on a life insurance contract, in
the amount of $500,000 on the life of the Employee, which shall be subject to a
"split dollar" plan pursuant to which the Employee shall have the exclusive
right to designate the beneficiary, and shall have the right to have the policy
transferred to his name upon his termination of employment without additional
cost. Pursuant to such "split dollar" plan, Employee is expected to recognize
income with respect to the PS58 cost of such insurance. The Employee shall
cooperate in any effort by the Company to secure additional key man life
insurance on his life, in such amount as may be determined by the Board of
Directors, with the beneficiaries designated by the Company.
6. 401k Plan. The Company shall maintain a 401k Plan similar to the
---------
401k Plan which the Company maintained prior to the Merger.
A - 2
<PAGE>
EXHIBIT B
PROVISIONS RELATED TO CONFIDENTIAL INFORMATION
----------------------------------------------
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof. As used herein the term "Confidential
Information" means any and all information in any way related to the products or
business of the Company which is communicated to, developed in whole or in part
by, or access to which is obtained by the Employee. Such information may be in
tangible or intangible form and shall include, but shall not be limited to, any
such information embodied in or consisting of drawings, data, blueprints,
memoranda, correspondence, flow charts, production and operating manuals,
engineering technology, instrumentation, specifications, operating know-how,
identity and involvement of research personnel, customer lists, sales and market
information, business plans, process designs, documents, source codes, object
codes, formulas, algorithms, trade secrets, information received in confidence
from customers or others having dealings with the Company and any other
information relating to the business of the Company, whether existing as of or
developed or acquired after the date hereof.
Restrictions. During the term of employment of the Employee by the Company
-------------
and thereafter, the Employee (i) shall maintain the Confidential Information in
strict confidence; (ii) shall not disclose any Confidential Information to any
person or other entity; (iii) shall not use any Confidential Information to the
detriment of the Company or for the benefit of the Employee or any other person
or entity; (iv) shall not authorize or permit such use or disclosure; and (v)
shall comply with the policies and procedures of the Company regarding use and
disclosure of Confidential Information.
Protection and Return. The Employee shall take measures reasonably
----------------------
necessary to safeguard the Confidential Information and to prevent its
unauthorized use or disclosure and shall surrender to the Company at any time
upon request, and in any event upon termination of the employment of the
Employee by the Company, all Confidential Information, equipment, documents and
records of any nature related to the business of the Company and all copies
thereof in the possession or control of the Employee.
Exceptions. The restrictions on disclosure and use of Confidential
-----------
Information shall not prevent the Employee from: (i) using information in the
proper performance of the Employee's duties; (ii) disclosing information to
another employee or consultant to whom disclosure is required to properly
perform the duties of either; (iii) disclosing information to another person or
entity pursuant to a binding confidentiality agreement in a Company-approved
form as part of the proper performance of the duties of the Employee or as
authorized in writing by the Board of Directors; (iv) using or disclosing
information to the extent such information is or may be, through no fault or
disclosure of the Employee, generally made known to the public or throughout the
industry in which the Company is engaged; or (v) using or disclosing information
which is disclosed to the Employee after termination of the Employee's
employment with the Company by a third-party who is under no duty or obligation
not to disclose such information.
B - 1
<PAGE>
EXHIBIT C
PROVISIONS RELATED
TO OWNERSHIP OF INTELLECTUAL PROPERTY
-------------------------------------
(a) Definitions. The term the "Company" means SMT Health Services Inc., or
------------
any subsidiary thereof. The term "Intellectual Property" means any information,
invention, data, discovery, product, process, trade secret, source code, object
code, computer program, data base, data file, copyright, trademark, service mark
or other intellectual property (whether or not such property can be protected by
copyright, patent or otherwise and whether or not reduced to writing or to
practice) developed, made, conceived, contributed to or reduced to practice by
any Company employee, officer, director, representative or agent or by any
person or entity under contract with or pursuant to any other arrangement with
the Company, which is in any way related to the business, operations or proposed
operations of the Company or which is in any way the result of any person or
entity having used the Company's resources, whether laboratory equipment,
personnel, computers, communications facilities, programs, information, data
bases, office facilities, process designs or otherwise.
(b) Ownership. The Employee acknowledges that any and all Intellectual
----------
Property is and shall be owned solely and exclusively by the Company and the
Employee shall have no ownership or other rights with respect thereto.
(c) Disclosure and Assignment. Any and all Intellectual Property
--------------------------
developed, made, conceived, contributed to or reduced to practice by the
Employee, alone or with others, during the period of the Employee's employment
or other association with the Company, whether or not during working hours, (i)
which is within the scope of the duties, projects or technologies to which the
Employee was assigned or became involved during the period of the Employee's
employment or other association with the Company; (ii) which is related to any
area for which the Employee was assigned responsibility during the Employee's
employment or association with the Company; or (iii) which is in any way the
result of the Employee having used the Company's resources, whether laboratory
equipment, personnel, computers, communications facilities, programs,
information, data bases, office facilities, process designs or otherwise, is and
shall be owned solely and exclusively by the Company. To the extent any such
Intellectual Property can be protected by copyright, and is deemed in anyway to
fall within the definition of "work made for hire" as such term is defined in 17
U.S.C. (S)101, such Intellectual Property shall be considered to have been
produced under contract for the Company as a work made for hire. In any event,
and regardless of whether such Intellectual Property is deemed to be a "work
made for hire", the Employee shall disclose any and all such Intellectual
Property to the Company and does hereby assign to the Company any and all right,
title and interest the Employee may have in such Intellectual Property
including, but not limited to, any and all copyright, patent and other
intellectual property and proprietary rights the Employee otherwise may have had
in such Intellectual Property, such as the right to secure copyright
registrations, renewals, reissues and extensions and to file for and obtain
patent and other property and proprietary right protection with respect thereto.
Upon the Company's request at any time and from time to time, including
C - 1
<PAGE>
any time after termination of the Employee's employment with the Company, the
Employee shall execute and assign to the Company applications to domestic and
foreign governmental agencies for copyrights and letters patent covering such
Intellectual Property and the Employee shall execute and deliver to the Company
such other instruments as the Company deems necessary to vest in the Company the
sole ownership of and exclusive worldwide rights in and to, all of such
Intellectual Property.
C - 2
<PAGE>
EXHIBIT D
ADDITIONAL RESTRICTIVE COVENANTS
--------------------------------
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof
No Customer Contact. The Employee shall not directly or indirectly contact
--------------------
any Customer (as defined in the next sentence) for the purpose of introducing,
offering, or selling to such Customer any products or services that compete with
the products and services offered by the Company. For purposes of this
paragraph, "Customer" shall mean anyone (i) with whom the Employee or any person
reporting to the Employee has had contact or has had negotiations on behalf of
the Company during the term of the Employee's employment with the Company, (ii)
with whom any other person has had contact or has had negotiations on behalf of
the Company during the year immediately preceding termination of the Employee's
employment with the Company, of which contact or negotiations the Employee had
knowledge while the Employee was employed by the Company, or (iii) whom the
Employee knew (while the Employee was employed by the Company) the Company
intended to contact during the year immediately preceding or the year
immediately following termination of the Employee's employment.
No Solicitation. The Employee shall not directly or indirectly solicit an
----------------
employee or consultant of the Company to terminate his or her employment or
contractual relationship with the Company and become employed or engaged by the
Employee or any other person or entity in substantially the same or a similar
business as that engaged in by the Company if such employment would involve the
performance of services and duties substantially the same or similar to those
the employee or consultant performed for the Company.
D - 1
<PAGE>
EXHIBIT E
PROMISSORY NOTE
---------------
$__________________ Dated as of ______________
FOR VALUE RECEIVED, intending to be legally bound, the undersigned
("Maker") hereby promises to pay to the order of SMT Health Services Inc., its
successors and assigns (hereinafter referred to as "Payee") upon the schedule
set forth below, the principal sum of ____________________ Dollars
($_____________________), together with interest on the unpaid principal amount
of this Promissory Note from time to time outstanding. The unpaid principal
amount of this Promissory Note shall bear interest at the rate of [APPLICABLE
LONG TERM FEDERAL RATE] per annum. Maker shall pay to Payee the entire
principal amount and all accrued interest on [THE TENTH ANNIVERSARY OF THE DATE
OF THE NOTE].
Payments shall be made to Payee at the principal office of the Payee or
such other place as Payee may designate in writing to Maker, in lawful money of
the United States of America in immediately available funds without set-off,
counterclaim or other deduction of any nature.
Maker may prepay this Promissory Note at any time in whole or in part
without payment of penalty; provided, however, that any such prepayment of
principal shall be accompanied by the payment of interest accrued to the date of
such prepayment and all costs, expenses or charges then owed to Payee pursuant
to this Promissory Note.
Upon the occurrence of any one of the following events ("Events of
Default"), the entire principal amount outstanding and all accrued interest
thereunder shall at the option of Payee, without any prior notice, presentment
or demand, become immediately due and payable in full:
(i) Failure of the Maker to perform or observe any of the
Maker's covenants or agreements under this Promissory Note; or
(ii) An assignment by the Maker for the benefit of the Maker's
creditors, or the commencement by or against the Maker of any bankruptcy,
insolvency, liquidation, receivership or similar proceedings.
Payee may, without notice and without releasing the liability of Maker,
grant extensions and/or renewals hereof from time to time or for any term or
terms. No delay by Payee or their assignee in exercising any power or right
hereunder, and no partial exercise of such power or right, shall operate in any
way as a waiver of any subsequent exercise thereof. Payee shall not be liable
for or prejudiced by failure to collect or lack of diligence in bringing suit on
this Promissory Note or any renewal or extension hereof. This Promissory Note
shall be governed and construed under the laws of the Commonwealth of
Pennsylvania. Demand, presentment, protest, notice of dishonor and notice of
default are hereby waived. If any provision of this
E - 1
<PAGE>
Promissory Note shall for any reason be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision of this
Promissory Note, but this Promissory Note shall be construed as if this
Promissory Note had never contained the invalid or unenforceable provision.
Maker agrees that his liability hereunder shall be binding upon his personal
representatives, heirs assigns; provided, however, that Maker may not assign or
transfer his obligation hereunder without the prior written consent of Payee.
This Promissory Note may be assigned by Payee without the consent of Maker.
MAKER:
______________________________
DAVID SPINDLER
E - 2
<PAGE>
EXHIBIT F
The Company's certificate of incorporation shall provide as follows:
1. Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, incorporator, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise shall be entitled to be indemnified by the Corporation to the full
extent then permitted by law or to the extent that a court of competent
jurisdiction shall deem proper or permissible under the circumstances, whichever
is greater against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred by him in connection with such action, suit
or proceeding. Such right of indemnification shall inure whether or not the
claim asserted is based on matters which antedate the adoption of this Article
Seventh. Such right of indemnification shall continue as to a person who has
ceased to be a director, officer, incorporator, employee, or agent and shall
inure to the benefit of the heirs and personal representatives of such person.
2. The personal liability of directors of the Corporation is hereby eliminated
to the fullest extent permitted by paragraph 7 of Subsection (b) of Section 102
of the General Corporation Law of the State of Delaware as the same may be
amended and supplemented.
The Company's By-laws shall provide as follows:
1. The Corporation shall, to the fullest extent permitted by the laws of the
state of incorporation, indemnify any and all persons whom it shall have power
to indemnify against any and all of the costs, expenses, liabilities or other
matters incurred by them by reason of having been officers or directors of the
Corporation, any subsidiary of the Corporation or of any other corporation for
which he acted as officer or director at the request of the Corporation.
F - 1
<PAGE>
EXHIBIT G
SECTION 1. General. The Company shall indemnify Employee if he is a party
-------
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding ("Payments") if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, including without
limitation, those resulting from actual or alleged breach or neglect of duty,
error, misstatement or misleading statement, gross negligence, negligence or act
giving rise to strict or products liability, whether occurring prior to or after
the date of the Employee's current Employment Agreement. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that Employee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Company shall indemnify Employee if he
------------------
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against Payments if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, including without limitation,
those resulting from actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, gross negligence, negligence or act giving
rise to strict or products liability, whether occurring prior to or after the
date of the Employee's current Employment Agreement; provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which Employee shall have been adjudged to be liable to the Company unless and
only to the extent that the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, Employee is fairly and reasonably entitled to indemnity for
Payments which the Court of Chancery or such other court shall deem proper.
SECTION 3. Indemnification in Certain Cases. If Employee is entitled to
--------------------------------
indemnification in respect to a portion, but not all, of any matter pursuant to
Section 1 or Section 2 hereof, the Company shall indemnify Employee to the
maximum extent for such portion. To the extent that Employee has been
successful in whole or in part on the merits or otherwise in
G - 1
<PAGE>
defense of any action, suit or proceeding referred to in Sections 1 and 2
hereof, or in defense of any claim, issue or matter therein, or shall otherwise
be determined to be entitled to indemnification in whole or in part, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with such matter.
SECTION 4. Advances for Expenses. Expenses (including attorneys' fees)
---------------------
incurred in defending a civil or criminal action, suit or proceeding shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of Employee to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Company as authorized herein or otherwise.
SECTION 5. Rights Not-Exclusive. The indemnification and advancement of
--------------------
expenses provided by, or granted pursuant to, the other subsections hereof shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any law,
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
SECTION 6. Insurance. The Company shall purchase and maintain insurance
---------
on behalf of Employee against any liability asserted against him and incurred by
him in the capacity of a director, officer, employee agent, of the Company or of
another corporation, partnership, joint venture, trust or other enterprise, or
arising out of his status as such, whether or not the Company would have the
power to indemnify him against such liability under the provisions of Section 17
of his Employment Agreement including the provisions hereof.
SECTION 7. Definition of Company. For the purposes hereof, references to
---------------------
the "Company" include all constituent corporations absorbed in a consolidation
or merger as well as the resulting or surviving corporation so that if Employee
is or was a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions hereof with respect to the resulting or surviving corporation as
he would if he had served the resulting or surviving corporation in the same
capacity.
SECTION 8. Survival of Rights. The indemnification and advancement of
------------------
expenses provided by, or granted pursuant to Section 17 of the Employee's
Employment Agreement, including without limitation this Exhibit G shall continue
---------
even when Employee has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his heirs, executors and administrators.
G - 2
<PAGE>
EXHIBIT (c)(6)
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the
24th day of June, 1997 by and between SMT Health Services Inc., a Delaware
corporation (the "Company"), and David A. Zynn (the "Employee"). This Agreement
shall become effective (the "Effective Date") upon the closing of the offer, by
Three Rivers Acquisition Corp., a Delaware corporation ("Acquisition Corp."), to
purchase all of the issued and outstanding common stock, par value $.01 per
share (the "Common Stock") of the Company (the "Tender Offer"). If the Tender
Offer is not consummated, this Agreement shall become null and void and the
employment agreement with Employee dated October 1, 1996 shall remain in full
force and effect.
WITNESSETH:
----------
WHEREAS, Acquisition Corp. is a wholly-owned subsidiary of Three Rivers
Holding Corp. ("Parent");
WHEREAS, pursuant to an Agreement and Plan of Merger of even date by and
among Parent, Acquisition Corp. and the Company (the "Merger Agreement"),
Acquisition Corp. will commence the Tender Offer and following the consummation
of the Tender Offer, Acquisition Corp. will merge with and into the Company,
with the Company being the survivor, pursuant to the terms and conditions set
forth in the Merger Agreement (the "Merger");
WHEREAS, Parent and the Company desire to secure the continued
employment of Employee by the Company in an executive capacity following the
Tender Offer and Merger; and
WHEREAS, the Company and the Employee desire to enter into this
Agreement in order to set forth certain terms and conditions of Employee's
continued employment with the Company and to terminate the existing employment
agreement dated as of October 1, 1996;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
-----------
Employee and the Employee hereby agrees to continue to be employed by the
Company commencing on the Effective Date for the Term (as defined below) of the
Agreement, in the position and with the duties and responsibilities set forth in
Section 2 below, and upon the other terms and subject to the conditions
hereinafter stated.
<PAGE>
2. Position, Duties and Responsibilities.
--------------------------------------
(a) During the Term of the Agreement, the Employee shall serve as
Treasurer, Assistant Secretary and Chief Financial Officer of the Company. The
Employee shall have general executive supervision over the business and affairs
of the Company, subject to the policies and directions of, and the executive
responsibilities that may be assigned to him (which in each case shall be
consistent with his position and title) by the Board of Directors of the Company
(the "Board of Directors"). The Employee shall have general supervisory
authority over the financial affairs and reporting of the Company, reporting to
the Executive Vice President. The Employee shall be a signatory, at all times
during the term of this Agreement, on all bank accounts, of every nature and
kind, and all other banking arrangements, including safety deposit boxes,
lockbox accounts, and the like. Employee's duties shall be performed principally
at the Company's executive offices which are located in the Pittsburgh
Metropolitan Area and Employee shall not be required to perform duties outside
the Pittsburgh Metropolitan Area which would necessitate changing his present
residence, unless Employee otherwise agrees in writing. For purposes of this
Agreement, the term "Pittsburgh Metropolitan Area" shall encompass the City of
Pittsburgh, Pennsylvania, the Borough of Wexford, Pennsylvania, and the
territory within a fifteen (15) mile radius of such borough. The Company agrees
that it shall not relocate or transfer its principal executive offices to a
location outside the Pittsburgh Metropolitan Area.
(b) During the Term, the Employee shall devote such time and
attention to affairs of the Company as are necessary to faithfully annd
diligently perform his duties and responsibilities hereunder; provided, however,
that nothing contained herein shall prohibit the Employee from (a) serving as
consultant to and a member of the Board of Directors of any other for-profit
entity so long as Employee has obtained the prior consent of the President or
Executive Vice President, or (b) engaging in charitable and community affairs.
3. Term. The initial term of this Agreement shall be for a period of
-----
three (3) years, commencing on the Effective Date (the "Initial Term"). On each
quarterly anniversary of the Effective Date while Employee remains employed
hereunder, commencing one year and three months after the Effective Date, the
Initial Term shall be automatically extended by three months("Renewal Period"),
and this Agreement shall continue in effect until Employee's employment
hereunder is terminated pursuant to Section 5 hereof (the Initial Term of this
Agreement, as extended by each Renewal Period, is hereinafter defined as the
"Term").
4. Compensation. For the services rendered by Employee pursuant to
-------------
Section 2 during the Term, the Employee shall be paid the compensation and
receive the benefits as set forth on Exhibit A annexed hereto.
---------
5. Termination of Agreement. The Employee's employment hereunder may be
-------------------------
terminated only as follows:
2
<PAGE>
(a) By the Company Without Cause. The Company may at any time
-----------------------------
terminate the Employee's employment hereunder without Cause, by affirmative vote
of a majority of the entire Board of Directors, and upon no less than sixty (60)
days' prior written notice to the Employee.
(b) By the Employee Without Good Reason. The Employee may at any
------------------------------------
time terminate his employment hereunder for any reason upon no less than sixty
(60) days' prior written notice to the Company; provided; however; Section 5(d)
hereof shall apply in lieu of this Section 5(b) to any termination of employment
by the Employee for Good Reason (as defined therein).
(c) By the Company for Cause. The Company may at any time
-------------------------
terminate the Employee's employment hereunder for Cause. Prior to termination
for Cause, the Company by affirmative vote of a majority of the entire Board of
Directors shall give the Employee prompt written notice specifying in reasonable
detail the conduct which is believed to provide the basis for a termination of
Employee for Cause (the "Notice"). "Cause" shall mean only one or more of the
following:
(i) The material breach of this Agreement by Employee,
which breach shall not have been cured by Employee within twenty (20) days after
the Employee's receipt from the Company at the direction of a majority of the
entire Board of Directors of written notice specifying in reasonable detail the
nature of Employee's breach;
(ii) The Employee is charged with a crime involving
fraud, theft or dishonesty involving more than $1,000 or any felony; and
(iii) Any willful act or acts by Employee which is
materially injurious to the Company (excluding any act ratified or approved by
the Board of Directors of the Company and further excluding any act taken by
Employee in good faith with a reasonable belief that such act was in the best
interests of the Company).
Neither the Employee's participation in or presence at any meeting at which a
for Cause termination is discussed nor the Employee's efforts to cease or cure
any conduct purported to be sufficient basis for a for Cause termination, shall
be considered an admission, acknowledgment or agreement that such conduct does
in fact provide a sufficient basis for a for Cause termination.
(d) By the Employee for Good Reason. The Employee may terminate
--------------------------------
employment hereunder for Good Reason at any time by providing prompt written
notice to the Company within a reasonable time after the occurrence of the
event(s) constituting such Good Reason. For purposes of this Agreement, "Good
Reason" means only one or more of the following:
(i) The material breach of this Agreement by the
Company, which breach shall not have been cured by the Company within thirty
(30) days after the Company's
3
<PAGE>
receipt from the Employee or his agent of written notice specifying in
reasonable detail the nature of the Company's breach.
(ii) The required relocation of the Employee out of the
Company's principal executive offices or the Pittsburgh Metropolitan Area
without his specific prior written consent.
(iii) The assignment to the Employee of any duties
inconsistent in any material respect with the Employee's position (including
status and reporting requirements), authority, duties, powers or
responsibilities as contemplated by Section 2 of this Agreement, or any other
diminution of such authority, duties, position or responsibilities, excluding
for this purpose any isolated, insubstantial action by the Company not taken in
bad faith and which is remedied by the Company within thirty (30) days after
receipt of written notice from the Employee to the Company that such action will
be considered a Good Reason hereunder unless timely remedied.
(iv) A material increase in Employee's responsibilities,
workload, required hours or travel from that required hereunder, not remedied by
the Company within thirty (30) days after receipt of written notice from
Employee to the Company that such increase will be considered a Good Reason
hereunder unless timely remedied.
(e) Death. The Employee's employment for all purposes under this
------
Agreement shall terminate upon his death.
(f) Disability. In the event that the Employee is determined by a
-----------
physician's written evaluation delivered to the Company (i) to be "permanently
and totally disabled" as defined in ss. 22(e)(3) of the Internal Revenue Code of
1986, as amended, the Company may, at its discretion, upon sixty (60) days
notice to the Employee or his guardian, as the case may be, terminate the
Employee's employment hereunder.
(g) Mutual Written Agreement. This Agreement and the Employee's
-------------------------
employment hereunder may be terminated at any time by the mutual written
agreement of the Employee and the Company.
6. Compensation in Event of Termination.
-------------------------------------
(a) Termination by Employee for Good Reason; by Company Without
-----------------------------------------------------------
Cause. In the event that the Employee's employment hereunder is terminated: (i)
- ------
by the Company without Cause pursuant to Section 5(a) hereof; or (ii) by the
Employee for Good Reason pursuant to Section 5(d) hereof, then the Company shall
pay or provide in the same manner as before termination, as applicable, the
following compensation and benefits to the Employee:
(i) Immediate payment of full salary, bonuses (average of
the two (2) years first preceding such termination), and benefits to which he is
entitled as of the date of such termination (including Automobile Allowance)
during the time period equal to the remaining
4
<PAGE>
Term of the Agreement immediately prior to the Employee's termination (without
regard to any future renewals that would have occurred absent such termination)
(the "Termination Period");
(ii) Any other amounts, awards, benefits or other
compensation to which the Employee is or, prior to his termination of
employment, was entitled during the Termination Period under any of the
Company's other cash compensation or bonus plans which to the extent of any
vesting dates occurring during the Termination Period, shall be considered to
vest on such date notwithstanding such termination; and
(iii) Continuing coverage, to the extent not prohibited
by law, during the Termination Period or until comparable benefits are made
available to him in connection with subsequent employment, whichever period is
shorter, for the Employee and his eligible dependents under all of the Company
benefit plans in effect and applicable to Employee and his eligible dependents
as of the date of termination. In the event that the Employee and/or his
eligible dependents, because of the Employee's terminated status, cannot be
covered or fully covered under any or all of the Company benefit plans, the
Company shall continue to provide the Employee and/or his eligible dependents
with the same level of such coverage in effect prior to termination, on an
unfunded basis if necessary.
(b) Termination for Cause by the Company. In the event that the
-------------------------------------
Company shall terminate the Employee's employment hereunder for Cause pursuant
to Section 5(c), this Agreement shall forthwith terminate and the obligations of
the parties hereto shall be as set forth in Section 9 hereof.
(c) Termination by Employee Without Good Reason. In the event
--------------------------------------------
that the Employee shall terminate employment hereunder (other than for Good
Reason) pursuant to Section 5(b) hereof, this Agreement shall forthwith
terminate and the obligations of the parties hereto shall be as set forth in
Section 9 hereof.
(d) Death. In the event of the death of the Employee, then the
------
Company shall pay (or cause to be paid), within thirty (30) days of such death,
or provide in the same manner as before the Employee's death, as applicable, the
following compensation and benefits to the estate of the Employee, or the
Employee's personal representative, or to those individuals designated in a
writing delivered to the Company by the Employee prior to his death;
(i) A lump sum payment equal to the sum of (A) the
Employee's highest annual Base Salary; (B) the Employee's highest annualized
Automobile Allowance; and (C) the Employee's highest award under the Company's
Profit Sharing Plan, in each case, for any of the three years preceding the date
of such termination (the "Lump Sum Amount"); and
(ii) Continuing coverage, to the extent not prohibited
by law, for a period of twelve (12) months from the date of Employee's death for
the Employee's eligible dependents under all of the Company Benefit Plans in
effect and applicable to Employee and his eligible dependents as of the date of
death. In the event that such eligible dependents, cannot be covered or fully
covered under any or all of the Company benefit plans, the Company shall
5
<PAGE>
continue to provide the Employee and/or his eligible dependents with the same
level of such coverage in effect prior to termination, on an unfunded basis if
necessary.
(e) Disability. In the event that the Company elects to terminate
-----------
the Employee's employment hereunder pursuant to Section 5(f), then the Company
shall pay (or cause to be paid) within thirty (30) days of the such termination
or provide in the same manner as before termination, as applicable, the
following compensation and benefits to the Employee or his personal
representative:
(i) All amounts as the Employee is entitled to under
the Company's disability policy and program applicable to Employee;
(ii) The Lump Sum Amount; and
(iii) Continuing coverage, to the extent not prohibited
by law, for a period of twelve (12) months from the date of Employee's
termination or until comparable benefits are made available to him in connection
with subsequent employment, whichever period is shorter, for the Employee and
his eligible dependents under all of the Company Benefit Plans in effect and
applicable to Employee and his eligible dependents as of the date of
termination. In the event that the Employee and his eligible dependents, because
of the Employee's terminated status, cannot be covered or fully covered under
any or all of the Company benefit plans, the Company shall continue to provide
the Employee and/or his eligible dependents with the same level of such coverage
in effect prior to termination, on the unfunded basis if necessary.
(f) Mutual Written Consent. In the event that the Employee and
-----------------------
the Company shall terminate the Employer's employment by mutual written
agreement, the Company shall pay such compensation and provide such benefits, if
any, as the parties may mutually agree upon in writing.
The Employee shall not be required to mitigate the amount of any payment
provided for in this Section 6 by seeking employment or otherwise, nor shall any
amounts received from employment, insurance or otherwise by the Employee offset
or reduce in any manner the obligations of the Company hereunder.
7. Representations. The Employee hereby represents and warrants that he
----------------
has provided the Company with properly executed IRS Forms 4669 for each tax year
in which he has exercised a Company Option or Warrant which certifies that such
Employee has paid in full all income and other taxes attributable to the
compensation income he was required to recognize for federal income tax purposes
in such year and such Employee hereby acknowledges that the statements made in
such Forms 4669 are true, complete and correct.
8. Expenses. Employee will be reimbursed all reasonable, ordinary and
---------
necessary business expenses, including expenses for entertainment, travel and
similar items that are approved by the Company. The Company will reimburse
Employee for all expenses upon a presentation of Employee of itemized accounts
of such expenditures in accordance and in the
6
<PAGE>
manner in a form reasonably described by the Company which will include
reimbursement for reasonable expenses, including costs for CPE credits,
necessary to maintain an active CPA license.
9. Effect of Termination. Upon the termination of the Employee's
----------------------
employment hereunder, neither the Company nor the Employee shall have any
remaining duties or obligations hereunder except that:
(a) the Company shall:
(i) Pay the employee's accrued salary and any other
accrued benefits for all periods ending on or prior to the date of termination
under Sections 4, 5 or 6 hereof and Exhibit A annexed hereto;
---------
(ii) Reimburse the Employee for expenses incurred in
accordance with Section 8 hereof for all periods ending on or prior to the date
of termination;
(iii) Pay or otherwise provide for any benefits, payments
or continuation or conversion rights in accordance with the provisions of any
Company benefit plan of which the Employee or any of his dependents is or was a
participant and to which Employee or his dependents are entitled through date of
termination or as otherwise required by law;
(iv) Pay all compensation previously deferred by
Employee and not yet paid by Company (together with interest, if any, thereon)
and any other accrued benefits, including accrued vacation pay through the date
of termination not yet paid by the Company;
(v) Pay the Employee and his beneficiaries any
compensation or provide the Employee or his eligible dependents any benefits due
pursuant to Section 4, 5 or 6 hereof or Exhibit A annexed hereto.
---------
(b) Employee shall remain bound by the terms of Section 10
hereof.
(c) The Company shall be authorized to withhold from any payment
to the Employee, his estate or his beneficiaries hereunder all such amounts, if
any, that the Company may reasonably determine it is required to withhold
pursuant to any applicable law or regulation.
10. Restrictions. The Company has invested and will continue to invest
-------------
considerable resources in the development of its business and in the research,
development and design of its activities and their delivery, which investment
has or will result in the generation of proprietary, confidential and/or trade
secret data, information, techniques and materials, both tangible and
intangible, which are owned by the Company.
(a) The Employee agrees that during the Term and for a period of
two (2) years from the last day for which the Employee receives any payment
either as a consultant or an employee (the "Restriction Period") (e.g., if
Employee receives two years "severance" upon
7
<PAGE>
termination, then the Restriction Period is four (4) years from the date of
termination), he will not directly or indirectly (i) engage in the imaging
business (the "Company Business") within the United States; (ii) compete or
participate as agent, employee, consultant, advisor, representative or otherwise
in any enterprise engaged in a business which has any material operations
engaged in the Company Business within the United States; or (iii) compete or
participate as a stockholder, partner or joint venturer, or have any direct or
indirect financial interest, in any enterprise which has any material operations
engaged in the Company Business within the United States; provided, however,
that nothing contained herein shall prohibit the Employee from (A) owning,
operating or managing any business, or acting upon any business opportunity
after obtaining approval of a majority of the Board of Directors of the Company
and a majority of the independent members of the Board of Directors of the
Company (if any); or (B) owning no more than five percent (5%) of the equity of
any entity with respect to which Employee does not serve as an officer,
director, employee, consultant or in any other capacity other than as an
investor.
(b) The Employee shall abide by and be bound as part of the
employment relationship created by this Agreement to comply with the provisions
regarding confidential information, attached as Exhibit B annexed hereto.
---------
(c) To the extent the Employee develops, makes, conceives,
contributes to or reduces to practice any intellectual property related to the
duties of the Employee hereunder or which results in any way from the Employee
using the resources of the Company, such intellectual property is and shall be
the sole and exclusive property of the Company. Accordingly, the Employee shall
abide by and be bound to comply with the provisions regarding ownership of
intellectual property, attached as Exhibit C annexed hereto.
---------
(d) During the Term and the Restriction Period, the Employee
shall abide by and be bound to comply with the additional restrictive covenants
of the Company attached as Exhibit D annexed hereto.
---------
(e) Employee agrees and acknowledges that the compensation due to
him hereunder shall be full and adequate consideration for the Employee's
agreement to the foregoing restrictions.
Nothing in this Section 10 is intended to enhance or increase the rights
otherwise available to the Employee in respect of an unlawful act or omission by
the Company.
11. Acknowledgment. The Employee acknowledges that the restrictions set
---------------
forth in Section 10 hereto are reasonable in scope and essential to the
preservation of the Company's business and proprietary properties and that the
compensation paid to him pursuant to paragraph 10(e) fully compensates him for
accepting such restrictions. The Company acknowledges that the compensation paid
to the Employee pursuant to paragraph 10(e) is a reasonable payment for his
acceptance of the restrictions in Section 10.
8
<PAGE>
12. Severability of Covenants. The covenants of the Employee contained
--------------------------
in Section 10 hereto shall be construed as an agreement independent of any other
provision in this Agreement and the existence of any claim or cause of action of
the Employee against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
such covenants. If, at the time of enforcement, any sentence, paragraph, clause,
or combination of the same of such independent agreement in Section 10 is in
violation of the law of any state where applicable, such sentence, paragraph,
clause, or combination of the same shall be void in the jurisdictions where it
is unlawful, and the remainder of such paragraph in Section 10 shall remain
binding on the parties. In the event that any part of any covenant of Section 10
is determined by a court of law to be overly broad thereby making the covenant
unenforceable, the parties agree that such court shall substitute a judicially
enforceable limitation in its place, and that as so modified, the covenants
shall be binding upon the parties as if originally set forth in this Agreement.
13. Notices. All notices and other communications hereunder shall be in
--------
writing and shall be deemed to have been given if delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid, or
by telecopy (immediately followed by telephone confirmation of delivery of such
telecopy with the intended recipient of such notice and by notice in writing
sent promptly by registered or certified mail as provided above) to the parties
to this Agreement at the following addresses or at such other address for a
party as shall be specified by like notice:
To the Company:
Josh Harris
SMT Health Services Inc.
c/o Parent
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
(212) 261-4000
(212) 261-4102 (facsimile)
With a copy to:
John J. Suydam, Esquire
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
(212) 408-2400
(212) 408-2420 (facsimile)
9
<PAGE>
To the Employee:
David A. Zynn
5011 Karrington Drive
Gibsonia, Pennsylvania 15004
With a copy to:
Ronald Basso, Esquire
Buchanan Ingersoll Professional Corporation
One Oxford Centre
20th Floor, 301 Grant Street
Pittsburgh, Pennsylvania 15219
(412) 562-3943
(412) 562-1041 (facsimile)
All such notices and communications shall be deemed to have been received on the
date of personal delivery, on the date that the telecopy is confirmed as having
been received or on the third business day after the mailing thereof, as the
case may be.
14. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its choice of law provisions.
15. Severability. If any provision of this Agreement is held to be
-------------
illegal, invalid or unenforceable under present or future laws effective during
the Term, such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be effected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of illegal, invalid or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to the
illegal, invalid or unenforceable provision as may be possible and still be
legal, valid or enforceable. The lack of deductibility or recharacterization for
tax or accounting purposes, or the imposition of any excise taxes or penalties,
fines or other charges, or imposition of any injunction or similar restraint
against the Company with respect to the payment of any amount or provision of
any benefit hereunder, shall not be construed to make the provisions of this
Agreement providing for such payment or provision "illegal, invalid or
unenforceable", nor in any manner reduce the entitlement of the Employee, or his
successor or assign to receive such payment or benefit.
16. Recharacterization of Payments. To the extent that, but for this
-------------------------------
Section 16, any payment or benefit hereunder is determined by the Company's
outside auditors, Internal Revenue Service, or by any court of component
jurisdiction to be an "Excess Parachute Payment" as
10
<PAGE>
defined in Section 280G (b)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"), such amount as may be necessary to preclude any such payment or
benefit from being considered an "Excess Parachute Payment" shall be
recharacterized and shall constitute an unsecured, long-term loan from the
Company to the Employee, his personal representative, his successors or assigns,
as the case may be, payable together with accrued interest on the tenth
anniversary of the payment of such recharacterized payment or the receipt of
such recharacterized benefit, with interest at the Applicable Federal Rate for
loans in excess of nine years, as defined in Section 1274 of the Code, on such
principal amount. Such loan shall be evidenced by a promissory note in the form
attached hereto as Exhibit E.
----------
17. Indemnification. The Company agrees to indemnify the Employee to the
----------------
fullest extent permitted by law for his services to, or on behalf of the
Company, as an Employee hereunder, as a director and in any and every other
capacity in which he may serve the Company or its interests. In furtherance of
such agreement to indemnify, but not by way of limitation, from and after the
Merger, the terms of the Company's Certificate of Incorporation and By-Laws
shall provide for such indemnification and payment of expenses substantially the
same as contained in Exhibit F, such provisions are hereby incorporated by
---------
reference as if fully stated herein. Additionally, the provisions of Exhibit G
---------
shall supplement such provisions. For the purpose of this Agreement, any
amendment to said Certificate of Incorporation or By-Laws shall not be effective
to reduce, qualify or otherwise limit the scope, benefit or enforceability of
this provision; provided, however, if any such amendment extends or improves the
-------- -------
scope, benefit or enforceability of the indemnification and payment of expenses
contained in such By-Laws for any officer, director, employee or agent, such
extended or improved provisions shall be deemed to be incorporated by reference
herein for the benefit of the Employee without any further action by the Company
or the Employee.
18. Arbitration. Except as otherwise provided herein, in the event of
------------
any controversy, dispute or claim arising out of, or relating to, this
Agreement, or the breach thereof, or arising out of any other matter relating to
the Employee's employment with the Company or the termination of such
employment, the parties may seek recourse only for temporary or preliminary
injunctive relief to the courts having jurisdiction thereof and if any relief
other than injunctive relief is sought, the Company and the Employee agree that
such underlying controversy, dispute or claim shall be settled by arbitration
conducted in Pittsburgh, Pennsylvania, in accordance with this Section 18 of the
Agreement and the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). The matter shall be heard and decided, and awards rendered,
by a panel of three (3) arbitrators (the "Arbitration Panel") each of which
shall have at least ten (10) years' experience in executive compensation and
employment matters. The Company and the Employee shall each select one qualified
arbitrator from the AAA National Panel of Commercial Arbitrators (the
"Commercial Panel") and AAA shall select a third qualified arbitrator from the
Commercial Panel. The award rendered by the Arbitration Panel shall be final and
binding as between the parties hereto and their heirs, executors,
administrators, successors and assigns, and judgment on the award may be entered
by any court having jurisdiction thereof.
19. Entire Agreement. This Agreement sets forth the entire understanding
-----------------
of the parties with respect to the matters specified herein. No other terms or
conditions and no
11
<PAGE>
amendments or modifications shall be binding unless made in writing and signed
by the parties hereto. Upon the Effective Date, the parties agree that the
Employee Agreement dated as of October 1, 1996, shall terminate without further
obligation to either party.
20. Binding Effect. This Agreement shall be binding upon the parties
---------------
hereto and shall inure to the benefit of such parties, their respective heirs,
representatives, successors and permitted assigns. This Agreement may not be
assigned by the Employee nor may it be assigned by the Company without the
Employee's consent.
21. Expenses. The Company shall bear the costs of all expenses
---------
associated with the creation, negotiation and execution of this Agreement,
including the fees of its counsel, the Employee's counsel and of any consultant
retained by the Company to advise the Employee and/or the Board of Directors
with respect to the terms and conditions of this Agreement. The Company shall
bear the full cost of each arbitrator selected pursuant to Section 18 hereof
with respect to any dispute hereunder. Otherwise, each party shall pay their
individual expenses with respect to this Agreement. In the event of any
litigation or arbitration, the party that ultimately prevails shall be
reimbursed all of its reasonable expenses.
* * * SIGNATURES APPEAR ON THE FOLLOWING PAGE * * *
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
THREE RIVERS HOLDING CORP.
By: /s/ JOSHUA HARRIS
--------------------------
Name: Joshua Harris
------------------------
Title:
-----------------------
THREE RIVERS ACQUISITION CORP.
By: /s/ JOSHUA HARRIS
--------------------------
Name: Joshua Harris
------------------------
Title:
-----------------------
SMT HEALTH SERVICES INC.
By: /s/ JEFF D. BERGMAN
--------------------------
Name: Jeff D. Bergman
------------------------
Title: CHAIRMAN, PRESIDENT & CEO
---------------------------
EMPLOYEE:
/s/ DAVID A. ZYNN
--------------------------
David A. Zynn
13
<PAGE>
EXHIBIT A
COMPENSATION AND BENEFITS OF DAVID A. ZYNN
------------------------------------------
1. Compensation. (a) Base Salary. The Employee's base salary (the "Base
-------------
Salary"), payable in accordance with the Company's payroll policies, shall be at
least $125,000 per year, adjusted upward every January 1 (commencing January 1,
1998) to reflect the increase in the cost of living, if any, between the date of
this Agreement and the date of each such adjustment. Such adjustments shall be
based upon the Consumer Price Index, by Major Groups, for Wage Earners and
Clerical Workers (1967=100) For All Items United States (the "CPI") (or if that
index is discontinued during the Term, a similar index (the "Alternative Index")
prepared by a department or agency of the United Stated Government, to be agreed
upon by the Employee and the Company.)
(b) Bonus. The Company shall make available and the Employee
------
shall participate in a bonus pool (the "Bonus Pool" or the "Profit Sharing
Plan") equal to fifteen percent (15%) of the Company's pre-tax income (excluding
the effect of the Bonus Pool and adjusted for any non-recurring gains and
losses) for the twelve (12) month period ended on June 30, 1997, but in no event
resulting in a Bonus Pool greater than $1,240,000, of the Company and its
consolidated subsidiaries as determined by the Company's independent public
accountants for financial reporting purposes in accordance with generally
accepted accounting principles, practices and methods, consistently applied. The
Bonus Pool shall be a fixed annual amount. The payment of the Employee's portion
of the Bonus Pool shall be conditioned on achievement by the Company of
reasonably achievable performance objectives established by the Compensation
Committee and occur following each June 30 and December 31, with the December 31
payment adjusting for any excess/shortfall in the June 30 payment. The Board of
Directors may, but need not, consider the recommendation of any committee of the
Board in determining such participants and allocations. The Profit Sharing Plan
shall provide that it may not be terminated suspended, revoked or the like, or
amended, except by resolution of a majority of the directors then in office.
2. Car Allowance. The Company shall pay to the Employee, on the first
--------------
day of each month during the Term, a monthly automobile allowance (the
"Automobile Allowance") of not less than $450, to help defray the costs
associated with Employee's acquisition or maintenance (by lease or otherwise) of
an automobile and the related insurance and maintenance therefor. The Automobile
Allowance shall be adjusted upward every January 1 (commencing January 1, 1998)
to reflect the increase in the cost of living, if any, between the date of this
Agreement and the date of each such adjustment. Such adjustments shall be based
upon the CPI (or if that index is discontinued during the Term, the Alternate
Index).
3. Vacation. The Employee shall be entitled to all legal holidays, and
---------
six (6) weeks paid vacation per annum, with the option to accrue any unused
vacation time to subsequent periods or to collect payment for any unused
vacation at the end of each fiscal year at the Employee's then applicable Base
Salary.
4. Insurance and Benefits. The Employee and his "dependents," to the
-----------------------
extent eligible thereunder, shall be entitled to participate in all employee and
executive benefit plans,
A - 1
<PAGE>
programs and policies currently available to other Company employees of
comparable status, title and experience, as well as any plans, programs and
policies adopted by the Company during the Term of this Agreement.
5. Life Insurance. Assuming the Employee is insurable at ordinary rates,
---------------
the Company shall pay for the entire premium on a life insurance contract, in
the amount of $500,000 on the life of the Employee, which shall be subject to a
"split dollar" plan pursuant to which the Employee shall have the exclusive
right to designate the beneficiary, and shall have the right to have the policy
transferred to his name upon his termination of employment without additional
cost. Pursuant to such "split dollar" plan, Employee is expected to recognize
income with respect to the PS58 cost of such insurance. The Employee shall
cooperate in any effort by the Company to secure additional key man life
insurance on his life, in such amount as may be determined by the Board of
Directors, with the beneficiaries designated by the Company.
6. 401k Plan. The Company shall maintain a 401k Plan similar to the
----------
401k Plan which the Company maintained prior to the Merger.
A - 2
<PAGE>
EXHIBIT B
PROVISIONS RELATED TO CONFIDENTIAL INFORMATION
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof. As used herein the term "Confidential
Information" means any and all information in any way related to the products or
business of the Company which is communicated to, developed in whole or in part
by, or access to which is obtained by the Employee. Such information may be in
tangible or intangible form and shall include, but shall not be limited to, any
such information embodied in or consisting of drawings, data, blueprints,
memoranda, correspondence, flow charts, production and operating manuals,
engineering technology, instrumentation, specifications, operating know-how,
identity and involvement of research personnel, customer lists, sales and market
information, business plans, process designs, documents, source codes, object
codes, formulas, algorithms, trade secrets, information received in confidence
from customers or others having dealings with the Company and any other
information relating to the business of the Company, whether existing as of or
developed or acquired after the date hereof.
Restrictions. During the term of employment of the Employee by the
-------------
Company and thereafter, the Employee (i) shall maintain the Confidential
Information in strict confidence; (ii) shall not disclose any Confidential
Information to any person or other entity; (iii) shall not use any Confidential
Information to the detriment of the Company or for the benefit of the Employee
or any other person or entity; (iv) shall not authorize or permit such use or
disclosure; and (v) shall comply with the policies and procedures of the Company
regarding use and disclosure of Confidential Information.
Protection and Return. The Employee shall take measures reasonably
----------------------
necessary to safeguard the Confidential Information and to prevent its
unauthorized use or disclosure and shall surrender to the Company at any time
upon request, and in any event upon termination of the employment of the
Employee by the Company, all Confidential Information, equipment, documents and
records of any nature related to the business of the Company and all copies
thereof in the possession or control of the Employee.
Exceptions. The restrictions on disclosure and use of Confidential
-----------
Information shall not prevent the Employee from: (i) using information in the
proper performance of the Employee's duties; (ii) disclosing information to
another employee or consultant to whom disclosure is required to properly
perform the duties of either; (iii) disclosing information to another person or
entity pursuant to a binding confidentiality agreement in a Company-approved
form as part of the proper performance of the duties of the Employee or as
authorized in writing by the Board of Directors; (iv) using or disclosing
information to the extent such information is or may be, through no fault or
disclosure of the Employee, generally made known to the public or throughout the
industry in which the Company is engaged; or (v) using or disclosing information
which is disclosed to the Employee after termination of the Employee's
employment with the Company by a third-party who is under no duty or obligation
not to disclose such information.
B - 1
<PAGE>
EXHIBIT C
PROVISIONS RELATED
TO OWNERSHIP OF INTELLECTUAL PROPERTY
-------------------------------------
(a) Definitions. The term the "Company" means SMT Health Services Inc.,
------------
or any subsidiary thereof. The term "Intellectual Property" means any
information, invention, data, discovery, product, process, trade secret, source
code, object code, computer program, data base, data file, copyright, trademark,
service mark or other intellectual property (whether or not such property can be
protected by copyright, patent or otherwise and whether or not reduced to
writing or to practice) developed, made, conceived, contributed to or reduced to
practice by any Company employee, officer, director, representative or agent or
by any person or entity under contract with or pursuant to any other arrangement
with the Company, which is in any way related to the business, operations or
proposed operations of the Company or which is in any way the result of any
person or entity having used the Company's resources, whether laboratory
equipment, personnel, computers, communications facilities, programs,
information, data bases, office facilities, process designs or otherwise.
(b) Ownership. The Employee acknowledges that any and all Intellectual
----------
Property is and shall be owned solely and exclusively by the Company and the
Employee shall have no ownership or other rights with respect thereto.
(c) Disclosure and Assignment. Any and all Intellectual Property
--------------------------
developed, made, conceived, contributed to or reduced to practice by the
Employee, alone or with others, during the period of the Employee's employment
or other association with the Company, whether or not during working hours, (i)
which is within the scope of the duties, projects or technologies to which the
Employee was assigned or became involved during the period of the Employee's
employment or other association with the Company; (ii) which is related to any
area for which the Employee was assigned responsibility during the Employee's
employment or association with the Company; or (iii) which is in any way the
result of the Employee having used the Company's resources, whether laboratory
equipment, personnel, computers, communications facilities, programs,
information, data bases, office facilities, process designs or otherwise, is and
shall be owned solely and exclusively by the Company. To the extent any such
Intellectual Property can be protected by copyright, and is deemed in anyway to
fall within the definition of "work made for hire" as such term is defined in 17
U.S.C. ss.101, such Intellectual Property shall be considered to have been
produced under contract for the Company as a work made for hire. In any event,
and regardless of whether such Intellectual Property is deemed to be a "work
made for hire", the Employee shall disclose any and all such Intellectual
Property to the Company and does hereby assign to the Company any and all right,
title and interest the Employee may have in such Intellectual Property
including, but not limited to, any and all copyright, patent and other
intellectual property and proprietary rights the Employee otherwise may have had
in such Intellectual Property, such as the right to secure copyright
registrations, renewals, reissues and extensions and to file for and obtain
patent and other property and proprietary right protection with respect thereto.
Upon the Company's request at any time and from time to time, including
C - 1
<PAGE>
any time after termination of the Employee's employment with the Company, the
Employee shall execute and assign to the Company applications to domestic and
foreign governmental agencies for copyrights and letters patent covering such
Intellectual Property and the Employee shall execute and deliver to the Company
such other instruments as the Company deems necessary to vest in the Company the
sole ownership of and exclusive worldwide rights in and to, all of such
Intellectual Property.
C - 2
<PAGE>
EXHIBIT D
ADDITIONAL RESTRICTIVE COVENANTS
--------------------------------
Definitions. As used herein the term the "Company" means SMT Health
------------
Services Inc., or any subsidiary thereof
No Customer Contact. The Employee shall not directly or indirectly
--------------------
contact any Customer (as defined in the next sentence) for the purpose of
introducing, offering, or selling to such Customer any products or services that
compete with the products and services offered by the Company. For purposes of
this paragraph, "Customer" shall mean anyone (i) with whom the Employee or any
person reporting to the Employee has had contact or has had negotiations on
behalf of the Company during the term of the Employee's employment with the
Company, (ii) with whom any other person has had contact or has had negotiations
on behalf of the Company during the year immediately preceding termination of
the Employee's employment with the Company, of which contact or negotiations the
Employee had knowledge while the Employee was employed by the Company, or (iii)
whom the Employee knew (while the Employee was employed by the Company) the
Company intended to contact during the year immediately preceding or the year
immediately following termination of the Employee's employment.
No Solicitation. The Employee shall not directly or indirectly solicit
----------------
an employee or consultant of the Company to terminate his or her employment or
contractual relationship with the Company and become employed or engaged by the
Employee or any other person or entity in substantially the same or a similar
business as that engaged in by the Company if such employment would involve the
performance of services and duties substantially the same or similar to those
the employee or consultant performed for the Company.
D - 1
<PAGE>
EXHIBIT E
PROMISSORY NOTE
---------------
$ Dated as of
-------------- ---------------
FOR VALUE RECEIVED, intending to be legally bound, the undersigned
("Maker") hereby promises to pay to the order of SMT Health Services Inc., its
successors and assigns (hereinafter referred to as "Payee") upon the schedule
set forth below, the principal sum of Dollars ($ ),
---------- -------------
together with interest on the unpaid principal amount of this Promissory Note
from time to time outstanding. The unpaid principal amount of this Promissory
Note shall bear interest at the rate of [APPLICABLE LONG TERM FEDERAL RATE] per
annum. Maker shall pay to Payee the entire principal amount and all accrued
interest on [THE TENTH ANNIVERSARY OF THE DATE OF THE NOTE].
Payments shall be made to Payee at the principal office of the Payee or
such other place as Payee may designate in writing to Maker, in lawful money of
the United States of America in immediately available funds without set-off,
counterclaim or other deduction of any nature.
Maker may prepay this Promissory Note at any time in whole or in part
without payment of penalty; provided, however, that any such prepayment of
principal shall be accompanied by the payment of interest accrued to the date of
such prepayment and all costs, expenses or charges then owed to Payee pursuant
to this Promissory Note.
Upon the occurrence of any one of the following events ("Events of
Default"), the entire principal amount outstanding and all accrued interest
thereunder shall at the option of Payee, without any prior notice, presentment
or demand, become immediately due and payable in full:
(i) Failure of the Maker to perform or observe any of the Maker's
covenants or agreements under this Promissory Note; or
(ii) An assignment by the Maker for the benefit of the Maker's
creditors, or the commencement by or against the Maker of any
bankruptcy, insolvency, liquidation, receivership or similar
proceedings.
Payee may, without notice and without releasing the liability of Maker,
grant extensions and/or renewals hereof from time to time or for any term or
terms. No delay by Payee or their assignee in exercising any power or right
hereunder, and no partial exercise of such power or right, shall operate in any
way as a waiver of any subsequent exercise thereof. Payee shall not be liable
for or prejudiced by failure to collect or lack of diligence in bringing suit on
this Promissory Note or any renewal or extension hereof. This Promissory Note
shall be governed and construed under the laws of the Commonwealth of
Pennsylvania. Demand, presentment, protest, notice of dishonor and notice of
default are hereby waived. If any provision of this
E - 1
<PAGE>
Promissory Note shall for any reason be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision of this
Promissory Note, but this Promissory Note shall be construed as if this
Promissory Note had never contained the invalid or unenforceable provision.
Maker agrees that his liability hereunder shall be binding upon his personal
representatives, heirs assigns; provided, however, that Maker may not assign or
transfer his obligation hereunder without the prior written consent of Payee.
This Promissory Note may be assigned by Payee without the consent of Maker.
MAKER:
------------------------------
DAVID A. ZYNN
E - 2
<PAGE>
EXHIBIT F
The Company's certificate of incorporation shall provide as follows:
- --------------------------------------------------------------------
1. Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, incorporator, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise shall be entitled to be indemnified by the Corporation to the full
extent then permitted by law or to the extent that a court of competent
jurisdiction shall deem proper or permissible under the circumstances, whichever
is greater against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred by him in connection with such action, suit
or proceeding. Such right of indemnification shall inure whether or not the
claim asserted is based on matters which antedate the adoption of this Article
Seventh. Such right of indemnification shall continue as to a person who has
ceased to be a director, officer, incorporator, employee, or agent and shall
inure to the benefit of the heirs and personal representatives of such person.
2. The personal liability of directors of the Corporation is hereby eliminated
to the fullest extent permitted by paragraph 7 of Subsection (b) of Section 102
of the General Corporation Law of the State of Delaware as the same may be
amended and supplemented.
The Company's By-laws shall provide as follows:
- -----------------------------------------------
1. The Corporation shall, to the fullest extent permitted by the laws of the
state of incorporation, indemnify any and all persons whom it shall have power
to indemnify against any and all of the costs, expenses, liabilities or other
matters incurred by them by reason of having been officers or directors of the
Corporation, any subsidiary of the Corporation or of any other corporation for
which he acted as officer or director at the request of the Corporation.
F - 1
<PAGE>
EXHIBIT G
SECTION 1. General. The Company shall indemnify Employee if he is a
--------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding ("Payments") if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, including without
limitation, those resulting from actual or alleged breach or neglect of duty,
error, misstatement or misleading statement, gross negligence, negligence or act
giving rise to strict or products liability, whether occurring prior to or after
the date of the Employee's current Employment Agreement. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that Employee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Company shall indemnify Employee if
-------------------
he is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against Payments if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, including without limitation,
those resulting from actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, gross negligence, negligence or act giving
rise to strict or products liability, whether occurring prior to or after the
date of the Employee's current Employment Agreement; provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which Employee shall have been adjudged to be liable to the Company unless and
only to the extent that the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, Employee is fairly and reasonably entitled to indemnity for
Payments which the Court of Chancery or such other court shall deem proper.
SECTION 3. Indemnification in Certain Cases. If Employee is entitled to
---------------------------------
indemnification in respect to a portion, but not all, of any matter pursuant to
Section 1 or Section 2 hereof, the Company shall indemnify Employee to the
maximum extent for such portion. To
G - 1
<PAGE>
the extent that Employee has been successful in whole or in part on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2 hereof, or in defense of any claim, issue or matter therein, or
shall otherwise be determined to be entitled to indemnification in whole or in
part, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with such matter.
SECTION 4. Advances for Expenses. Expenses (including attorneys' fees)
----------------------
incurred in defending a civil or criminal action, suit or proceeding shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of Employee to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Company as authorized herein or otherwise.
SECTION 5. Rights Not-Exclusive. The indemnification and advancement of
---------------------
expenses provided by, or granted pursuant to, the other subsections hereof shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any law,
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
SECTION 6. Insurance. The Company shall purchase and maintain insurance
----------
on behalf of Employee against any liability asserted against him and incurred by
him in the capacity of a director, officer, employee agent, of the Company or of
another corporation, partnership, joint venture, trust or other enterprise, or
arising out of his status as such, whether or not the Company would have the
power to indemnify him against such liability under the provisions of Section 17
of his Employment Agreement including the provisions hereof.
SECTION 7. Definition of Company. For the purposes hereof, references to
----------------------
the "Company" include all constituent corporations absorbed in a consolidation
or merger as well as the resulting or surviving corporation so that if Employee
is or was a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions hereof with respect to the resulting or surviving corporation as
he would if he had served the resulting or surviving corporation in the same
capacity.
SECTION 8. Survival of Rights. The indemnification and advancement of
-------------------
expenses provided by, or granted pursuant to Section 17 of the Employee's
Employment Agreement, including without limitation this Exhibit G shall continue
---------
even when Employee has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his heirs, executors and administrators.
G - 2
<PAGE>
EXHIBIT (C)(7)
CERTIFICATE OF INCORPORATION, AS AMENDED
OF
SMT HEALTH SERVICES INC.
FIRST: The name of the corporation is SMT Health Services Inc.
SECOND: The registered office of the Corporation is to be located at 32
Loockerman Square, Suite L-100 in the City of Dover, in the County of Kent, in
the State of Delaware. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall be authorized to issue is 21,000,000 shares, of which
20,000,000 shall be designated Common Stock, having a par value of $.01 per
share (hereinafter called "Common Stock") and 1,000,000 shall be designated
Preferred Stock, having a par value of $.01 per share (hereinafter called
"Preferred Stock").
Shares of the Preferred Stock shall be designated as the Board of Directors
may determine and may be issued in series by the Board of Directors as
hereinafter provided in paragraph (c) below. The relative rights and
preferences of the shares of capital stock of the Corporation shall be as
follows:
(a) Each holder of Common Stock shall, at every meeting of stockholders
of the Corporation, be entitled to one vote in person or by proxy for each
share of Common Stock held by such holder and each holder of Preferred
Stock with voting rights shall, at every meeting of stockholders of the
Corporation, be entitled to one vote in person or by proxy for each share
of Preferred Stock with voting rights held by such holder to the extent of
such rights as specified pursuant to paragraph (c)(vii) below.
(b) Subject to the rights, if any, of the holders of the Preferred Stock,
or any series thereof, the holders of the Common Stock are entitled to the
entire voting power, all dividends declared and paid by the Corporation and
all assets of the Corporation in the event of any liquidation, dissolution,
or winding up of the Corporation.
(c) The Preferred Stock may be divided into and issued from time to time
in one or more series. All shares of the Preferred Stock shall be of equal
rank and shall be identical, except with respect to the particulars that
may be fixed by the Board of Directors as hereinafter provided
<PAGE>
pursuant to authority that is hereby expressly vested in the Board of
Directors; provided, however, that each share of a given series of the
Preferred Stock shall be identical in all respects with the other shares of
such series. Before any shares of the Preferred Stock of any particular
series shall be issued, the Board of Directors shall fix and determine, in
the manner provided by law, the following particulars with respect to the
shares of such series:
(i) the distinctive designation of such series and the number of
shares of Preferred Stock that shall constitute such series, which
number may be increased (except where otherwise provided by the Board
of Directors in creating such series) or decreased (but not below the
number of shares of such series then issued) from time to time by the
Board of Directors by resolution;
(ii) the dividend or rate of dividend payable with respect to shares
of Preferred Stock of such series, the time of payment of any dividend,
whether dividends shall be cumulative and, if so, the conditions under
which and the date from which dividends shall be accumulated; the
redemption provisions applicable to the shares of Preferred Stock of
such series, if any, and if applicable, the time or times when, the
price or prices at which, and the other terms and conditions under
which the shares of Preferred Stock of such series shall be redeemable;
(iii) the redemption provisions applicable to the shares of Preferred
Stock of such series, if any, and if applicable, the time or times
when, the price or prices at which, and the other terms and conditions
under which the shares of Preferred Stock of such series shall be
redeemable;
(iv) the amount payable on shares of Preferred Stock of such series
in the event of any voluntary or involuntary dissolution, liquidation
or winding-up of the affairs of the Corporation, which shall not be
deemed to include the merger or consolidation of the Corporation or a
sale, lease or conveyance of all or part of the assets of the
Corporation;
(v) the purchase, retirement or sinking fund provisions, if any, for
the redemption or purchase of shares of Preferred Stock of such series;
(vi) the rights, if any, of the holders of shares of Preferred Stock
of such series to convert such shares into or exchange such shares for
shares of the Common Stock or shares of any other series of the
Preferred Stock and the terms and conditions of such conversion or
exchange;
(vii) subject to paragraph (a) above, the extent of voting rights of
the shares of Preferred Stock of such series or the absence thereof;
and
(viii) such other terms, limitations, rights and preferences, if any,
of such series as the Board of Directors may lawfully fix under the
laws of the State of Delaware as in effect at the time of creation of
such series.
FIFTH: The name and address of the incorporator is as follows:
NAME ADDRESS
Sherri Rosen 380 Madison Avenue
New York, New York 10017
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
(1) The number of directors of the Corporation shall be such as from time to
time shall be fixed by, or in the manner provided, in the by-laws. Election of
directors need not be ballot unless the by-laws to provide.
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(2) The Board of Directors shall have power without the assent or vote of
the stockholders:
(a) to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation; to fix and vary the amount to be reserved for any proper
purpose; to authorize and cause to be executed mortgages and liens upon all
or any part of the property of the Corporation; to determine the use and
disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends; and
(b) to determine from time to time whether, and to what extent, and at
what times and places, and under what conditions and regulations, the
accounts and books of the Corporation (other than the stock ledger) or any
of them, shall be open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person
or by proxy) shall be as valid and as binding upon the Corporation and upon
all the stockholders as though it had been approved or ratified by every
stockholder of the Corporation, whether or not the contract or act would
otherwise be open to legal attack because of directors' interest, or for any
other reason.
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<PAGE>
(4) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation; subject, nevertheless, to the provisions of the statutes of
Delaware, of this Certificate, and to any By-Laws from time to time made by
the stockholders; provided, however, that no By-Laws so made shall invalidate
any prior act of the directors which would have been valid if such By-Laws had
not been made.
SEVENTH: Any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (whether or not by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, incorporator, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
incorporator, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall be entitled to be indemnified by the
Corporation to the full extent then permitted by law or to the extent that a
court of competent jurisdiction shall deem proper or permissible under the
circumstances, whichever is greater against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred by him in
connection with such action, suit or proceeding. Such right of indemnification
shall inure whether or not the claim asserted is based on matters which
antedate the adoption of this Article SEVENTH. Such right of indemnification
shall continue as to a person who has ceased to be a director, officer,
incorporator, employee or agent and shall inure to the benefit of the heirs
and personal representatives of such person.
EIGHT: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or a class of stockholders of the Corporation, as
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
NINTH: The personal liability of directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph 7 of Subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware as the
same may be amended and supplemented.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
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<PAGE>
EXHIBIT (C)(10)
AGREEMENT
This Agreement is made as of June 22, 1997 by and between SMT Health
Services Inc., a Delaware corporation (the "Corporation"), and the undersigned
director of the Corporation (the "Indemnitee");
WHEREAS, Indemnitee is a member of the Corporation's Board of Directors and
in that capacity is performing a valuable service for the Corporation and its
stockholders and the Corporation desires to retain the continued service of
Indemnitee in that capacity; and
WHEREAS, pursuant to Article Seventh of the Corporation's Certificate of
Incorporation and Article V of the Corporation's Bylaws, Indemnitee is
entitled to be indemnified by the Corporation to the full extent permitted by
law or a court, whichever is greater, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred by him in
connection with any threatened, pending, or completed action, suit or
proceeding to which the Indemnitee was, is or is threatened to be made a party
by reason of the fact that he is or was a director, officer, incorporator,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, incorporator, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise
(the "Indemnification Provisions"); and
WHEREAS, consistent with the Indemnification Provisions of the Corporation's
Certificate of Incorporation and Bylaws, and as permitted by Section 145(e) of
the Delaware General Corporation Law, as amended ("DGCL"), and in order to
retain the continued service of the Indemnitee as a director of the
Corporation, the Corporation desires to agree to pay the expenses (including
attorneys' fees) incurred by Indemnitee in defending any civil, criminal,
administrative or investigative action, suit or proceeding for which he may be
indemnified pursuant to the Indemnification Provisions in advance of the final
disposition of such action, suit or proceeding; and
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
director after the date of this Agreement, and intending to be legally bound,
the parties agree as follows:
1. ADVANCEMENT OF EXPENSES.
(a) The Corporation shall pay the expenses (including attorneys' fees)
incurred or estimated to be incurred by Indemnitee in connection with any
civil, criminal, administrative or investigative action, suit or proceeding
for which he would be entitled to be indemnified pursuant to the
Indemnification Provisions or otherwise (in any capacity and not solely in his
capacity as a director of the Corporation) in advance of the final disposition
thereof promptly after receipt by the Corporation of a request therefor
stating in reasonable detail the expenses incurred or to be incurred by him.
(b) If a claim under subsection (a) is not paid in full by the Corporation
within thirty (30) days after a written claim has been received by the
Corporation, the Indemnitee may, at any time thereafter, bring suit against
the Corporation to recover the unpaid amount of the claim. The burden of
proving that advancement of expenses is not appropriate shall be on the
Corporation. The Corporation shall pay such fees and expenses in advance of
the final disposition of such action upon receipt of a written request
therefor.
2. UNDERTAKING TO REPAY EXPENSES.
In the event it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified for the expenses paid by the Corporation pursuant
to Section 1 hereof or otherwise or was not entitled to be fully indemnified,
the Indemnitee shall repay to the Corporation such amount of the expenses or
the appropriate portion thereof, so paid or advanced. This provision shall
constitute the undertaking contemplated by Section 145(e) of the DGCL and no
further assurances shall be required of Indemnitee before any expenses are
advanced.
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<PAGE>
3. NOTICE.
Any notice to the Corporation shall be directed to SMT Health Services Inc.,
10521 Perry Highway, Wexford, Pennsylvania 15650, Attention: President (or
such other address as the Corporation shall designate in writing to the
Indemnitee).
4. INDEMNIFICATION UNDER THIS AGREEMENT NOT EXCLUSIVE.
The rights provided to Indemnitee by this Agreement shall not be exclusive
of any other rights to which Indemnitee may be entitled under the
Corporation's Certificate of Incorporation, its By-laws, any other agreement,
any vote of stockholders or directors, or otherwise, as to action in any
capacity.
5. MISCELLANEOUS.
(a) This Agreement shall be interpreted and enforced in accordance with the
laws of the State of Delaware.
(b) This Agreement shall be binding upon Indemnitee and upon the
Corporation, its successors and assigns, and shall inure to the benefit of
Indemnitee, his heirs, executors, personal representatives and assigns and to
the benefit of the Corporation, its successors and assigns. If the Corporation
shall merge or consolidate with another corporation or shall sell, lease,
transfer or otherwise dispose of all or substantially all of its assets to one
or more persons or groups (in one transaction or series of transactions), (i)
the Corporation shall cause the successor in the merger or consolidation or
the transferee of the assets that is receiving the greatest portion of the
assets or earning power transferred pursuant to the transfer of the assets, by
agreement in form and substance satisfactory to the Indemnitee, to expressly
assume all of the Corporation's obligations under and agree to perform this
Agreement, and (ii) the term "Corporation" whenever used in this Agreement
shall mean and include any such successor or transferee.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both of the parties
hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
SMT HEALTH SERVICES INC.
By: ________________________________
Title: ______________________________
Director, Indemnitee
Name: _______________________________
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<PAGE>
EXHIBIT (c)(11)
AMENDMENT dated as of June 23, 1997, to the Rights
Agreement dated as of November 8, 1995 (the "Rights Agreement"),
among SMT HEALTH SERVICES INC., a Delaware corporation (the
"Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY (the
"Rights Agent");
Pursuant to Section 26 of the Rights Agreement, the Company and the
Rights Agent may from time to time supplement or amend the Rights Agreement. All
acts and things necessary to make this Amendment a valid agreement, enforceable
according to its terms, have been done and performed, and the execution and
delivery of this Amendment by the Company and the Rights Agent have been in all
respects duly authorized by the Company and the Rights Agent.
In consideration of the foregoing and the mutual agreement set forth
herein, the parties hereto have agreed as follows:
1. Amendments to Rights Agreement. The Rights Agreement is hereby
------------------------------
amended as follows:
(a) Section 1(a) is amended by inserting the following sentence at the
end of such section:
"Notwithstanding anything in this Agreement to the contrary, neither
Apollo Management, L.P., a Delaware limited partnership and its
respective Associates and Affiliates (collectively, "Apollo"), nor Three
Rivers Holding Corp., a Delaware corporation ("Holding Corp.") nor Three
Rivers Acquisition Corp., a Delaware corporation ("Acquisition Corp.")
shall become an Acquiring Person as a result of (i) the approval or
delivery of the Agreement and Plan of Merger dated as of June 24, 1997,
by and among the Company, Holding Corp. and Acquisition Corp., as it may
be amended, supplemented or restated from time to time (the "Merger
Agreement"), or the Stockholder Agreement (as defined in the Merger
Agreement) or (ii) the making or consummation of the Offer, the Merger
(as such terms are defined in the Merger Agreement) or the other
transactions contemplated or permitted by the Merger Agreement or the
Stockholder Agreement."
(b) A new Section 34 is added to read in its entirety as follows:
"Section 34. Merger with Acquisition Corp. Notwithstanding any provision
herein to the contrary, neither Apollo, Holding Corp. nor Acquisition
Corp. shall be considered an Acquiring Person under this Rights
Agreement, no Distribution Date shall occur and no Rights shall be
exercisable pursuant to Section 7, Section 11 or any other provision
hereof, as a result of (i) the approval, execution
<PAGE>
or delivery of the Merger Agreement or (ii) the making or consummation
of the Offer, the Merger or the other transactions contemplated or
permitted by the Merger Agreement or the Stockholder Agreement."
(c) A Section 11 is amended to correct the provisions thereof by
inserting, immediately after the first paragraph of subparagraph (c) and
immediately prior to subparagraph (i) on page 17 thereof, a subparagraph
heading "(d)" and thereafter changing the letter sequencing on page 19 through
page 22 so that current subparagraph (d) shall become subparagraph (e), current
subparagraph (e) shall become subparagraph (f), and so on through current
subparagraph (p) which shall become subparagraph (q). Additionally,
cross-referencing errors within the newly lettered subparagraphs shall be
appropriately adjusted
(d) Section 1(i) is amended by inserting the following sentence at the
end of such section:
"Notwithstanding anything in this Agreement to the contrary, the term
"Qualifying Offer" shall include the Offer pursuant to the Merger
Agreement."
2. Full Force and Effect. This Amendment shall be deemed effective as of
----------------------
the date hereof. Except as expressly amended hereby, the Rights Agreement
shall continue in full force and effect in accordance with the provisions
thereof on the date hereof.
3. Governing Law. This Amendment shall be governed by and construed in
--------------
accordance with the law of the State of Delaware applicable to contracts made
and performed entirely within such state.
IN WITNESS WHEREOF, the Company and the Rights Agent have caused this
Amendment to be duly executed as of the day and year first above written.
SMT HEALTH SERVICES INC.
By: /s/ Jeff D. Bergman
----------------------------------
Name: Jeff D. Bergman
Title: Chairman, CEO & President
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Rights Agent
By: /s/ Herbert J. Lemmer
----------------------------------
Name: Herbert J. Lemmer
Title: Vice President
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