<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
SCHEDULE 13D
Under the Securities Exchange Act of 1934
MEDICAL INNOVATIONS, INC.
-------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $.0075 PER SHARE
-------------------------------------------------------
(Title of Class of Securities)
58-458C108
(CUSIP Number)
Scot Sauder
Vice President Legal Affairs, General Counsel and Secretary
Horizon/CMS Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, NM 87110
(505) 881-4961
-------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
FEBRUARY 13, 1996
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box. / /
Check the following box if a fee is being paid with this statement. /X/
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Act"), or otherwise subject to the
liabilities of that Section of the Act but shall be subject to all other
provisions of the Act.
The total number of shares reported herein is 9,168,287 shares, which
constitutes 43% of the total number of shares outstanding. Ownership
percentages set forth herein assume that at February 13, 1996 there were
15,927,880 shares outstanding.
<PAGE>
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1 NAME OF REPORTING PERSON HORIZON/CMS HEALTHCARE
CORPORATION
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON 91-1346899
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
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3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
Not Applicable
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER 0
OF --------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 9,168,287
OWNED --------------------------------------------------
BY 9 SOLE DISPOSITIVE POWER
EACH 0
REPORTING --------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH: 0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,168,287
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
43%
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14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the common stock, par value $.0075 per
share ("MI Common Stock"), of Medical Innovations, Inc., a corporation
organized under the laws of the State of Delaware ("MI"). The principal
executive offices of MI are located at One Riverway, Suite 2300, Houston,
Texas 77056.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed by Horizon/CMS Healthcare Corporation,
a corporation organized under the laws of the State of Delaware ("Horizon").
Horizon provides specialty healthcare services and long-term nursing care.
The principal offices of Horizon are located at 6001 Indian School Road,
N.E., Suite 530, Albuquerque, New Mexico 87110.
Other than executive officers and directors, there are no persons or
corporations controlling or ultimately in control of Horizon.
During the last five years, to the best of Horizon's knowledge, neither
Horizon nor any of its executive officers or directors has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors)
or has been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which Horizon or such person
was or is subject to a judgment, decree, or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to such laws.
Each executive officer and each director of Horizon is a citizen of the
United States. The name, business address and present principal occupation of
each executive officer and director of Horizon are set forth in Exhibit A to
this Schedule 13D and are specifically incorporated herein by reference.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Not applicable.
ITEM 4. PURPOSE OF TRANSACTION.
Horizon, Horizon MI Corporation, a Delaware corporation and wholly
owned subsidiary of Horizon ("Merger Sub"), and MI entered into an Agreement
and Plan of Merger (the "Merger Agreement"), pursuant to which Merger Sub
would merge with and into MI (the "Merger"). Pursuant to the Merger
Agreement, each share of MI Common Stock issued and outstanding immediately
prior to the effective time of the Merger (the "Effective Time") will be
converted into .0645 of one fully paid and nonassessable share of common
stock, par value $.001 per share ("Horizon Common Stock"), of Horizon;
provided, however, that if the Horizon Common Stock Market Value is (i) less
than $24.787 per share, then such fractional share of Horizon Common Stock
shall be increased to that fraction, rounded to four decimal places that is
equal to $1.60 divided by the Horizon Common Stock Market Value or (ii)
more than $29.48 per share, then such fractional share of Horizon Common
Stock shall be decreased to that fraction, rounded to four decimal places,
that is equal to $1.90 divided by the Horizon Common Stock Market Value (the
"Common Stock Exchange Ratio"). The term "Horizon Common Stock Market Value"
means the average closing price per share of Horizon Common Stock on the New
York Stock
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<PAGE>
Exchange (the "NYSE") or, if the Horizon Common Stock is not then traded on
the NYSE, then The Nasdaq Stock Market or such other securities market in
which the Horizon Common Stock is then regularly traded for the twenty (20)
trading days ending with the trading day immediately preceding the date on
which the Merger is consummated. Notwithstanding the foregoing, if between
February 13, 1996 and the Effective Time the outstanding shares of Horizon
Common Stock or MI Common Stock have been changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Common Stock Exchange Ratio will be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares. A copy of the Merger Agreement is included
as Exhibit B to this Schedule 13D, and the Merger Agreement is specifically
incorporated by reference herein.
Consummation of the transactions contemplated by the Merger Agreement
is subject to the terms and conditions contained in the Merger Agreement,
including the receipt of approval of the Merger by the stockholders of MI,
the receipt of certain regulatory approvals, and the receipt of legal
opinions that the Merger will be tax-free transaction. The Merger Agreement
and the transactions contemplated thereby will be submitted for approval at a
meeting of the stockholders of MI that is expected to take place in the
second quarter of 1996.
Pursuant to a Voting Agreement, dated as of February 13, 1996 (the
"Voting Agreement"), between Horizon and certain stockholders of MI holding
in the aggregate 9,168,287 shares of MI Common Stock (or approximately 43% of
the number of shares outstanding on February 13, 1996) (collectively, the
"Stockholders"), the Stockholders have, among other things, agreed to vote
all MI Common Stock beneficially owned by them in favor of the Merger and
(subject to their agreement, if requested by Horizon, not (i) to attend, or
vote any MI Common Stock beneficially owned by them at, any annual or special
meeting of stockholders or (ii) to execute any written consent of
stockholders) against any combination proposal or other matter that may
interfere or be inconsistent with the Merger. A copy of the Voting Agreement
is included as Exhibit C to this Schedule 13D, and the Voting Agreement is
specifically incorporated by reference herein.
Except as set forth herein, Horizon presently does not have any plans
or proposals that relate to or would result in any of the actions specified
in clauses (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
Under the Voting Agreement, the Stockholders, as described above in Item
4, have agreed to vote all MI Common Stock beneficially owned by them in
favor of the Merger and (subject to their agreement, if requested by Horizon,
not (i) to attend, or vote any MI Common Stock beneficially owned by them at,
any annual or special meeting of stockholders or (ii) to execute any written
consent of stockholders) against any combination proposal or other matter
that may interfere of be inconsistent with the Merger. Consequently Horizon
shares voting, but not dispositive, power as to such 9,168,287 shares of MI
Common Stock.
No transactions in MI Common Stock were effected during the past sixty days
by Horizon or, to the best of Horizon's knowledge, by any executive officer or
director of Horizon. In addition, no other person is known by Horizon to have
the right to receive or the power to direct
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<PAGE>
the receipt of dividends from, or the proceeds from the sale of, the
securities covered by this Schedule 13D.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Contracts, arrangements, understandings or relationships with respect to
securities of MI consist of the Merger Agreement and the Voting Agreement.
The aforementioned documents are attached hereto as Exhibits B and C,
respectively, and are specifically incorporated herein by reference. See also
description of the aforementioned documents in Item 4 above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed as part of this Schedule 13D:
Exhibit A -- Name, Business Address, and Present Principal Occupation of
Each Executive Officer and Director of Horizon.
Exhibit B -- Agreement and Plan of Merger, dated as of February 13, 1996,
by and among Horizon, Merger Sub and MI.
Exhibit C -- Voting Agreement, dated as of February 13, 1996, between
Horizon and certain stockholders of MI named therein.
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Date: February 23, 1996 HORIZON/CMS HEALTHCARE CORPORATION
By: /s/ SCOT SAUDER
-----------------------------------
Scot Sauder
Vice President of Legal Affairs
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NUMBER
- ------- ----------- -------------
<C> <S> <C>
A Name, Business Address, and Present Principal
Occupation of Each Executive Officer and
Director of Horizon/CMS Healthcare Corporation.
B Agreement and Plan of Merger, dated as of
February 13, 1996, by and among Horizon/CMS
Healthcare Corporation, Horizon MI Corporation
and Medical Innovations, Inc.
C Voting Agreement, dated as of February 13, 1996,
between Horizon/CMS Healthcare Corporation and
certain stockholders of Medical Innovations, Inc.
named therein.
</TABLE>
<PAGE>
EXHIBIT A
NAME, BUSINESS ADDRESS AND PRESENT PRINCIPAL OCCUPATION OF
EACH EXECUTIVE OFFICER AND DIRECTOR OF HORIZON
I. EXECUTIVE OFFICERS OF HORIZON
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
NAME BUSINESS ADDRESS OCCUPATION
- ---- ---------------- -----------------
<S> <C> <C>
Neal M. Elliott 6001 Indian School Road, Chairman of the Board,
N.E., Suite 530 President and Chief
Albuquerque, NM 87110 Executive Officer
Robert A. Ortenzio 6001 Indian School Road, Executive Vice President
N.E., Suite 530 and Director
Albuquerque, NM 87110
Michael A. Jeffries 6001 Indian School Road, Senior Vice President of
N.E., Suite 530 Operations and Director
Albuquerque, NM 87110
Charles H. Gonzales 6001 Indian School Road, Senior Vice President of
N.E., Suite 530 Subsidiary Operations
Albuquerque, NM 87110 and Director
Ernest A. Schofield 6001 Indian School Road, Senior Vice President, Treasurer
N.E., Suite 530 and Chief Financial Officer
Albuquerque, NM 87110
Scot Sauder 6001 Indian School Road, Vice President of Legal
N.E., Suite 530 Affairs, Secretary and
Albuquerque, NM 87110 General Counsel
II. NON-EMPLOYEE DIRECTORS OF HORIZON
PRESENT PRINCIPAL
NAME BUSINESS ADDRESS OCCUPATION
- ---- ---------------- -----------------
Gerard M. Martin 600 Centre Street Consultant
Newton, MA 02158
Frank M. McCord 2828 Colby Avenue Chairman, Cascade
Everett, WA 98201 Savings Bank
Raymond N. Noveck 460 Totten Pond Road President, Strategic
Waltham, MA 02158 Systems, Inc.
Barry M. Portnoy One Post Office Square Attorney-at-Law,
Boston, MA 02109 Sullivan & Worcester
</TABLE>
<PAGE>
LeRoy S. Zimmerman Attorney-at-Law,
Eckert, Seamans,
Cherin & Mellott
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HORIZON/CMS HEALTHCARE CORPORATION,
HORIZON MI CORPORATION
AND
MEDICAL INNOVATIONS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I.
THE MERGER
SECTION 1.01. The Merger............................................. 1
SECTION 1.02. Effective Time......................................... 2
SECTION 1.03. Effect of the Merger................................... 2
SECTION 1.04. Certificate of Incorporation; Bylaws................... 2
SECTION 1.05. Directors and Officers................................. 2
ARTICLE II.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Merger Consideration; Conversion and Cancellation of
Securities............................................ 2
SECTION 2.02. Payment for Company Common Stock; Surrender of
Certificates.......................................... 4
SECTION 2.03. Stock Transfer Books................................... 6
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries........... 7
SECTION 3.02. Certificate of Incorporation and Bylaws................ 7
SECTION 3.03. Capitalization......................................... 7
SECTION 3.04. Authority.............................................. 9
SECTION 3.05. No Conflict; Required Filings and Consents............. 10
SECTION 3.06. Permits; Compliance.................................... 11
SECTION 3.07. Reports; Financial Statements.......................... 13
SECTION 3.08. Absence of Certain Changes or Events................... 14
SECTION 3.09. Absence of Litigation.................................. 14
SECTION 3.10. Employee Benefit Plans; Labor Matters.................. 15
SECTION 3.11. Taxes.................................................. 16
SECTION 3.12. Tax Matters; Pooling................................... 17
SECTION 3.13. Affiliates............................................. 18
SECTION 3.14. Certain Business Practices............................. 18
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SECTION 3.15. Vote Required.......................................... 18
SECTION 3.16. Brokers................................................ 18
SECTION 3.17. Insurance.............................................. 19
SECTION 3.18. Properties............................................. 19
SECTION 3.19. Management Contracts................................... 19
SECTION 3.20. Opinion of Financial Advisor........................... 19
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
SECTION 4.01. Organization and Qualification; Subsidiaries........... 20
SECTION 4.02. Certificate of Incorporation and Bylaws................ 20
SECTION 4.03. Capitalization......................................... 20
SECTION 4.04. Authority.............................................. 21
SECTION 4.05. No Conflict; Required Filings and Consents............. 22
SECTION 4.06. Permits; Compliance.................................... 23
SECTION 4.07. Reports; Financial Statements.......................... 24
SECTION 4.08. Absence of Certain Changes or Events................... 25
SECTION 4.09. Absence of Litigation.................................. 25
SECTION 4.10. Employee Benefit Plans; Labor Matters.................. 25
SECTION 4.11. Taxes.................................................. 27
SECTION 4.12. Tax Matters; Pooling................................... 28
SECTION 4.13. Vote Required.......................................... 28
SECTION 4.14. Brokers................................................ 28
SECTION 4.15. Insurance.............................................. 28
SECTION 4.16. Properties............................................. 28
ARTICLE V.
COVENANTS
SECTION 5.01. Affirmative Covenants of the Company................... 29
SECTION 5.03. Negative Covenants of the Company...................... 29
SECTION 5.04. Negative Covenants of Acquiror......................... 32
SECTION 5.05. Access and Information................................. 33
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<PAGE>
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.01. Presentation to Company Stockholders................... 34
SECTION 6.02. Registration Statement; Proxy Statement/Prospectus..... 34
SECTION 6.03. Appropriate Action; Consents; Filings.................. 36
SECTION 6.04. Affiliates; Pooling; Tax Treatment..................... 37
SECTION 6.05. Public Announcements................................... 38
SECTION 6.06. NYSE Listing........................................... 38
SECTION 6.07. State Takeover Statutes................................ 38
SECTION 6.08. Assumption of Obligations to Issue Stock............... 38
SECTION 6.09. Merger Sub............................................. 39
SECTION 6.10. Indemnification and Insurance.......................... 39
SECTION 6.11. Opinion of Financial Advisor........................... 41
ARTICLE VII.
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party Under This
Agreement............................................. 41
SECTION 7.02. Additional Conditions to Obligations of the Acquiror
Companies............................................. 42
SECTION 7.03. Additional Conditions to Obligations of the Company.... 43
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination............................................ 44
SECTION 8.02. Effect of Termination.................................. 45
SECTION 8.03. Amendment.............................................. 45
SECTION 8.04. Waiver................................................. 46
SECTION 8.05. Fees, Expenses and Other Payments...................... 46
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<PAGE>
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and
Agreements............................................ 47
SECTION 9.02. Notices................................................ 47
SECTION 9.03. Certain Definitions.................................... 48
SECTION 9.04. Headings............................................... 50
SECTION 9.05. Severability........................................... 50
SECTION 9.06. Entire Agreement....................................... 50
SECTION 9.07. Assignment............................................. 50
SECTION 9.08. Parties in Interest.................................... 50
SECTION 9.09. Failure or Indulgence Not Waiver; Remedies Cumulative.. 50
SECTION 9.10. Governing Law.......................................... 51
SECTION 9.11. Counterparts........................................... 51
SECTION 9.12. Specific Performance................................... 51
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<PAGE>
EXHIBITS
Exhibit A Form of Company Affiliate Letter
Exhibit B Form of Acquiror Affiliate Letter
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 13, 1996 (this
"Agreement"), is by and among HORIZON/CMS HEALTHCARE CORPORATION, a Delaware
corporation ("Acquiror"), HORIZON MI CORPORATION, a Delaware corporation and
wholly owned subsidiary of Acquiror ("Merger Sub"), and MEDICAL INNOVATIONS,
INC., a Delaware corporation (the "Company"). Acquiror and Merger Sub are
sometimes collectively referred to herein as the "Acquiror Companies."
WHEREAS, Merger Sub, upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the
State of Delaware ("Delaware Law"), will merge with and into the Company (the
"Merger");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long-term business
strategy of the Company and is fair to, and in the best interests of, the
Company and its stockholders and has approved and adopted this Agreement and
the transactions contemplated hereby, and recommended approval and adoption
of this Agreement by the stockholders of the Company;
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger is consistent with and in furtherance of the long-term business
strategy of Acquiror and is fair to, and in the best interests of, Acquiror
and its stockholders and has approved and adopted this Agreement and the
transactions contemplated hereby;
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of
interests" for financial accounting purposes;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law, at the
Effective Time (as defined in Section 1.02 of this Agreement), Merger Sub
shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation"). The name of the Surviving Corporation shall be "Medical
Innovations, Inc."
<PAGE>
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in
Article VII of this Agreement, the parties hereto shall cause the Merger to
be consummated by filing a Certificate of Merger with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, Delaware Law (the date and time
of the completion of such filing being the "Effective Time").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of Merger Sub and the Company shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Merger Sub and the Company shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective
Time, the Certificate of Incorporation and the Bylaws of the Company, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE II.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF
SECURITIES. At the Effective Time, by virtue of the Merger and without any
action on the part of the Acquiror Companies, the Company or the holders of
any of the Company's securities:
(a) Subject to the other provisions of this Article II, each share of
common stock, par value $.0075 per share, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the Effective
Time (excluding any Company Common Stock described in Section 2.01(c) of
this Agreement) shall be converted into 0.0645 of one fully paid and
nonassessable share of common stock, par value $.001 per share
("Acquiror Common Stock"), of Acquiror; PROVIDED, HOWEVER, THAT, if the
Acquiror Common Stock Market Value is (i) less than $24.787 per share,
then such fractional share of Acquiror Common Stock shall be increased
to that fraction, rounded to four decimal places, that is equal to $1.60
divided by the Acquiror Common Stock Market Value and (ii) more than
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<PAGE>
$29.48 per share, then such fractional share of Acquiror Common Stock
shall be decreased to that fraction, rounded to four decimal places,
that is equal to $1.90 divided by the Acquiror Common Stock Market Value
(the "Common Stock Exchange Ratio"). The term "Acquiror Common Stock
Market Value" shall mean the average closing price per share of Acquiror
Common Stock on the New York Stock Exchange (the "NYSE") or, if the
Company Common Stock is not then traded on the NYSE, then The Nasdaq
Stock Market or such other securities market in which the Acquiror
Common Stock is then regularly traded for the twenty (20) Trading Days
(as such term is defined in Section 9.03 herein) ending with the the
Trading Day immediately preceding date on which the Effective Time
occurs. Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of Acquiror
Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Common Stock Exchange Ratio shall
be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares.
(b) As a result of their conversion pursuant to subsection 2.01(a),
all shares of Company Common Stock shall cease to be outstanding and
shall automatically be canceled and retired, and each certificate
("Certificate") previously evidencing Company Common Stock outstanding
immediately prior to the Effective Time (other than Company Common Stock
described in Section 2.01(c) of this Agreement) ("Converted Shares")
shall thereafter represent, subject to Section 2.02(d) of this
Agreement, that number of shares of Acquiror Common Stock determined
pursuant to the Common Stock Exchange Ratio and, if applicable, the
right to receive cash pursuant to Section 2.02(d) of this Agreement (the
"Merger Consideration"). The holders of Certificates previously
evidencing Converted Shares shall cease to have any rights with respect
to such Converted Shares except the right to receive the Merger
Consideration and as otherwise provided herein or by law. Such
Certificates previously evidencing Converted Shares shall be exchanged
for certificates evidencing whole shares of Acquiror Common Stock upon
the surrender of such Certificates in accordance with the provisions of
Section 2.02 of this Agreement. No fractional shares of Acquiror Common
Stock shall be issued and, in lieu thereof, a cash payment shall be made
pursuant to Section 2.02(d) of this Agreement.
(c) Notwithstanding any provision of this Agreement to the contrary,
each share of Company Common Stock held in the treasury of the Company
and each share of Company Common Stock owned by Acquiror or any direct
or indirect wholly owned subsidiary of Acquiror or of the Company
immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
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<PAGE>
(d) Each share of common stock, par value $.001 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one share of common stock, par value $.001 per share,
of the Surviving Corporation.
SECTION 2.02. PAYMENT FOR COMPANY COMMON STOCK; SURRENDER OF
CERTIFICATES.
(a) EXCHANGE FUND. At or prior to the Effective Time, Acquiror shall
deposit, or cause to be deposited, with a bank or trust company mutually
agreeable to the parties to this Agreement (the "Exchange Agent"), for
the benefit of the former holders of Converted Shares, for exchange in
accordance with this Article II, through the Exchange Agent,
certificates evidencing a number of shares of Acquiror Common Stock
equal to the product of the Common Stock Exchange Ratio multiplied by
the number of Converted Shares. Subject to the provisions of subsection
(e) of this Section 2.02, Acquiror shall, if and when a payment date has
occurred with respect to a dividend or distribution that has been
declared subsequent to the Effective Time, deposit with the Exchange
Agent an amount in cash (or property of like kind to that which is the
subject to such dividend or distribution) equal to the dividend or
distribution per share of Acquiror Common Stock times the number of
shares of Acquiror Common Stock evidenced by Certificates that have not
theretofore been surrendered for exchange in accordance with this
Section 2.02. The certificates and cash (and property, if any)
deposited with the Exchange Agent in accordance with this subsection
2.02(a) are hereinafter referred to as the "Exchange Fund." The
Exchange Agent shall, pursuant to irrevocable instructions, deliver
Acquiror Common Stock (and any dividends or distribution related
thereto) and/or cash, as described above, in exchange for surrendered
Certificates pursuant to the terms of this Agreement out of the Exchange
Fund. Except as contemplated by Section 2.02(d) of this Agreement, the
Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, Acquiror will cause the Exchange Agent to send to each record
holder of Company Common Stock at the Effective Time (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 Exchange Agent and shall be in such
form and contain such other provisions as the parties hereto may agree)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of
Acquiror Common Stock. Upon surrender of a Certificate for cancellation
to the Exchange Agent, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares
of Acquiror Common Stock which such holder has the right to receive
pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate evidencing the proper
number of shares of Acquiror Common Stock may be issued to the
transferee if the Certificate evidencing the Company Common Stock shall
be surrendered to the Exchange Agent, accompanied by all
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documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until
surrendered for exchange in accordance with the provisions of Section
2.02 of this Agreement, each Certificate theretofore representing
Converted Shares (other than shares of Company Common Stock to be
canceled pursuant to Section 2.01(c) of this Agreement) shall from and
after the Effective Time represent for all purposes only the right to
receive the Merger Consideration as set forth in this Agreement. If any
holder of Converted Shares shall be unable to surrender such holder's
Certificates because such Certificates have been lost or destroyed, such
holder may deliver in lieu thereof an affidavit and indemnity bond in
form and substance and with surety reasonably satisfactory to Acquiror.
No interest shall be paid on any Merger Consideration payable to former
holders of Converted Shares.
(c) DISTRIBUTIONS WITH RESPECT TO ACQUIROR COMMON STOCK. No
dividends or other distributions declared or made after the Effective
Time with respect to Acquiror Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Acquiror Common Stock
evidenced thereby, and no Merger Consideration shall be paid to any such
holder until the holder of such Certificate shall surrender such
Certificate. Subject to applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
evidencing whole shares of Acquiror Common Stock issued in exchange
therefor, without interest, (i) promptly following the surrender of such
Certificate and in addition to the amount of any cash payable with
respect to a fractional share of Acquiror Common Stock to which such
holder is entitled pursuant to Section 2.02(d) of this Agreement, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of
Acquiror Common Stock and (ii), at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender payable with respect to such whole shares of Acquiror Common
Stock.
(d) NO FRACTIONAL SHARES.
(i) Notwithstanding anything herein to the contrary, no
certificates or scrip evidencing fractional shares of Acquiror
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights as a stockholder of
Acquiror.
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (x) the number of
full shares of Acquiror Common Stock delivered to the Exchange
Agent by Acquiror pursuant to Section 2.02(a) over (y) the
aggregate number of full shares of Acquiror to be distributed to
holders of Company Common Stock pursuant to Section 2.02(b) (such
excess being herein called the "Excess Shares"). As soon as
practicable after the Effective Time, the Exchange Agent, as agent
for the holders of Company Common
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Stock, shall sell the Excess Shares at then prevailing prices on
the NYSE, all in the manner provided in clause (iii) of this
subsection.
(iii) The sale of the Excess Shares by the Exchange
Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have
been distributed to the holders of Company Common Stock, the
Exchange Agent will hold such proceeds in trust for the holders of
Company Common Stock (the "Common Shares Trust"). Acquiror shall
pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent incurred in connection with such sale of the Excess
Shares. The Exchange Agent shall determine the portion of the
Common Shares Trust to which each holder of Company Common Stock
shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Share Trust by a
fraction the numerator of which is the amount of the fractional
share interest to which such holder of Company Common Stock is
entitled and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Company Common
Stock are entitled.
(iv) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Company Common
Stock in lieu of any fractional share interests, the Exchange Agent
shall make available such amounts to such holders of Company Common
Stock in connection with the surrender by such holders of their
Certificates in accordance with Section 2.02(b).
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains unclaimed by the former holders of Converted Shares for one
year after the Effective Time shall be delivered to Acquiror, upon
demand, and any former holders of Converted Shares who have not
theretofore complied with this Article II shall thereafter look only to
Acquiror for the Merger Consideration and dividends or distributions to
which they are entitled, without any interest thereon. Neither Acquiror
nor the Company shall be liable to any holder of shares of Company Stock
for any Merger Consideration (or dividends or distributions with respect
thereto) or cash delivered to a public official pursuant to any
applicable abandoned property escheat or similar law.
(f) WITHHOLDING. Acquiror (or any affiliate thereof) shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any former holder of Converted Shares such
amounts as Acquiror (or any affiliate thereof) is required to deduct and
withhold with respect to the making of such payment under the Code (as
hereinafter defined), or any other provision of federal, state, local or
foreign tax law. To the extent that amounts are so withheld by
Acquiror, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the former holder of the Converted
Shares in respect of which such deduction and withholding was made by
Acquiror.
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SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company
is a corporation, and each of the Company's subsidiaries (as such term in
defined in Section 9.03 herein) is a corporation or partnership, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and each of the Company
and its subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted and, except as set forth in Section 3.01 of the Company Disclosure
Schedule (as defined below), is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted
by it or the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so duly qualified and in good
standing could not reasonably be expected to have a Company Material Adverse
Effect. The term "Company Material Adverse Effect" as used in this Agreement
shall mean any change or effect that would be materially adverse to the
financial condition, results of operations, business or prospects of the
Company and its subsidiaries, taken as a whole, at the time of such change or
effect. Section 3.01 of the Disclosure Schedule delivered by the Company to
the Acquiror Companies concurrently with the execution of this Agreement (the
"Company Disclosure Schedule") sets forth, as of the date of this Agreement,
a true and complete list of all the Company's directly or indirectly owned
subsidiaries, together with (A) the jurisdiction of incorporation or
organization of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another subsidiary of the Company and (B) an indication of whether each such
subsidiary is a "Significant Subsidiary" as defined in Section 9.03(h) of
this Agreement.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has
heretofore furnished or made available to Acquiror complete and correct
copies of the Certificate of Incorporation and the Bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of the Company and each of its subsidiaries. Neither the Company nor
any of its subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws (or equivalent organizational
documents).
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SECTION 3.03. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
75,000,000 shares of Company Common Stock and 3,000,000 shares of
preferred stock, par value $.01 per share ("Company Preferred Stock"),
of which the Company has agreed to designate 100 shares as Class A
Preferred Stock (the "Company Class A Preferred Stock") and the balance
of which are undesignated. At the close of business on January 31,
1996, 15,927,880 shares of Company Common Stock were issued and
outstanding, no shares of Company Common Stock were held by the Company
in its treasury or by the Company's subsidiaries and 4,890,002 shares of
Company Common Stock were reserved for issuance as follows: (i) 513,000
shares were reserved for issuance upon exercise of stock options
heretofore granted or available for grant pursuant to the Company's 1988
Stock Option Plan, (ii) 1,000,000 shares were reserved for issuance upon
exercise of stock options heretofore granted or available for grant
pursuant to the Company's 1993 Stock Option Plan, (iii) 500,000 shares
were reserved for issuance upon exercise of stock options heretofore
granted or available for grant pursuant to the Company's Executive
Security Stock Option Plan (the stock option plans referenced in clauses
(i), (ii) and (iii) of this Section being herein collectively called the
"Option Plans"), (iv) 2,877,002 shares were reserved for issuance upon
the exercise of the warrants and options (the "Common Stock Warrants")
listed and described in Section 3.03(a) of the Company Disclosure
Schedule. No shares of the Company Preferred Stock are issued or
outstanding and the Company has agreed to reserve 100 shares of Company
Class A Preferred Stock for issuance upon the exercise of a warrant (the
"Preferred Stock Warrant") described in Section 3.03(a) of the Company
Disclosure Schedule. Except as described in this Section 3.03 or in
Section 3.03(a) of the Company Disclosure Schedule, no shares of capital
stock of the Company are reserved for issuance for any other purpose.
Since January 31, 1996, no shares of capital stock have been issued by
the Company or any of its subsidiaries except pursuant to agreements for
which shares were adequately reserved at such date as described in this
subsection (a). Since January 31, 1996, neither the Company nor any of
its subsidiaries has granted any options for, or other rights to
purchase, any shares of capital stock of the Company or any of its
subsidiaries. Each of the issued shares of capital stock of, or other
equity interests in, each of the Company and its subsidiaries is duly
authorized, validly issued and, in the case of shares of capital stock,
fully paid and nonassessable, and has not been issued in violation of
(nor are any of the authorized shares of capital stock of, or other
equity interests in, the Company or any of its subsidiaries subject to)
any preemptive or similar rights created by statute, the Certificate of
Incorporation or Bylaws (or the equivalent organizational documents) of
the Company or any of its subsidiaries, or any agreement to which the
Company or any of its subsidiaries is a party or is bound, and, except
as set forth in Section 3.18 of the Company Disclosure Schedule, all
such issued shares or other equity interests owned by the Company or a
subsidiary of the Company are owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations on the
Company's or such subsidiaries' voting rights, charges or other
encumbrances of any nature whatsoever.
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<PAGE>
(b) No bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into or exchangeable or
exercisable for securities having the right to vote) on any matters on
which stockholders may vote ("Voting Debt") is issued or outstanding.
All shares of Company Common Stock which may be issued upon exercise of
stock options granted pursuant to the Option Plans will, when issued in
accordance with the terms of such stock options and the related Option
Plans, be validly issued, fully paid and nonassessable and not subject
to preemptive rights.
(c) Except as set forth in Section 3.03(a) above or in Section
3.03(c) of the Company Disclosure Schedule, there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or any
of its subsidiaries is a party relating to the issued or unissued
capital stock or other equity interests of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to
grant, issue or sell any shares of capital stock, Voting Debt or other
equity interests of the Company or any of its subsidiaries. Except as
set forth in Section 3.03(c) of the Company Disclosure Schedule, there
are no obligations, contingent or otherwise, of the Company or any of
its subsidiaries (i) to repurchase, redeem or otherwise acquire any
shares of Company Common Stock or other capital stock of the Company or
the capital stock or other equity interests of any subsidiary of the
Company or (ii) (other than advances to wholly owned subsidiaries in the
ordinary course of business) to provide material funds to, or to make
any material investment in (in the form of a loan, capital contribution
or otherwise), or to provide any guarantee with respect to the material
obligations of, any subsidiary of the Company or any other person.
Except (i) as set forth in Section 3.03(c) of the Company Disclosure
Schedule or (ii) for subsidiaries of the Company set forth in Section
3.01 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries (x) directly or indirectly owns, (y) has agreed to
purchase or otherwise acquire or (z) holds any interest convertible into
or exchangeable or exercisable for, 5% or more of the capital stock or
other equity interest of any corporation, partnership, joint venture or
other business association or entity. Except as set forth in Section
3.03(c) of the Company Disclosure Schedule or for any agreements,
arrangements or commitments between the Company and its wholly owned
subsidiaries or between such wholly owned subsidiaries, there are no
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any person is or may be entitled to receive
any payment based on, or calculated in accordance with, the revenues or
earnings of the Company or any of its subsidiaries. Except for the
Voting Agreement (as such term is defined in Section 9.03 herein) and as
set forth in Section 3.03(c) of the Company Disclosure Schedule, there
are no voting trusts, proxies or other agreements or understandings to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound with respect to the voting
of any shares of capital stock or other equity interests of the Company
or any of its subsidiaries.
(d) Section 3.03(d) of the Company Disclosure Schedule sets forth a
complete and correct list as of January 31, 1996, of (i) the number of
stock options outstanding, (ii)
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the exercise price of each outstanding stock option and (iii) the number
of stock options exercisable and includes complete and correct copies of
the Option Plans, all forms of stock options issued pursuant to the
Option Plans or otherwise, all Common Stock Warrants and the Preferred
Stock Warrant, including all amendments thereto.
SECTION 3.04. AUTHORITY. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby
(subject to, with respect to the Merger, the approval and adoption of this
Agreement by the stockholders of the Company as set forth in Section 3.15 of
this Agreement). The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby (subject
to, with respect to the Merger, the approval and adoption of this Agreement
by the stockholders of the Company as set forth in Section 3.15 of this
Agreement). This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
the Acquiror Companies, constitutes the legal, valid and binding obligation
of the Company.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits, waivers,
approvals, authorizations, orders, filings and notifications
contemplated by the exceptions to Section 3.05(b) are obtained or made
and except as disclosed in Section 3.05(a) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company
does not, and the performance by the Company of its obligations
hereunder, including consummation of the transactions contemplated
hereby, will not (i) conflict with or violate the Certificate of
Incorporation or Bylaws, or the equivalent organizational documents, in
each case as amended or restated, of the Company or any of its
subsidiaries, (ii) conflict with or violate any federal, state, foreign
or local law, statute, ordinance, rule or regulation (collectively,
"Laws") or any judgment, order or decree applicable to the Company or
any of its subsidiaries or by or to which any of their respective
properties is bound or subject or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a lien or encumbrance on any
of the properties or assets of the Company or any of its subsidiaries
pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or
by or to which the Company or any of its subsidiaries or any of their
respective properties is bound or subject. The Board of Directors of
the Company has taken all actions necessary under Delaware Law,
including approving the transactions contemplated by this Agreement, to
ensure that the prohibitions
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on business combinations set forth in Section 203 of Delaware Law do
not, and will not, apply to the transactions contemplated by this
Agreement or the Voting Agreement.
(b) The execution and delivery of this Agreement by the Company
does not, and the performance by the Company of its obligations
hereunder, including consummation of the transactions contemplated
hereby, will not, require the Company to obtain any consent, license,
permit, waiver, approval, authorization or order of, or to make any
filing with or notification to, any governmental or regulatory
authority, federal, state, local or foreign (collectively, "Governmental
Entities"), except (i) for applicable requirements, if any, of the
Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities or blue sky laws ("Blue Sky Laws"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
filing and recordation of appropriate merger documents as required by
Delaware Law, (ii) where the failure to obtain such consents, licenses,
permits, waivers, approvals, authorizations or orders, or to make such
filings or notifications could not reasonably be expected to cause a
Company Material Adverse Effect or to prevent the Company from
performing its obligations under this Agreement and (iii) as disclosed
in Section 3.05(b) of the Company Disclosure Schedule.
SECTION 3.06. PERMITS; COMPLIANCE.
(a) Except as disclosed in Section 3.06(a) of the Company
Disclosure Schedule, each of the Company and its subsidiaries is in
possession of all (i) franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates,
identification and registration numbers, approvals and orders necessary
to own, lease and operate its home health care, home medical equipment,
homemaker and intravenous therapy business (collectively, the
"Agencies") and its other properties and to carry on its business as it
is now being conducted and (ii) agreements, licenses and certificates or
determinations of need from all federal, state and local governmental
agencies and accrediting and certifying organizations (including without
limitation the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO")) having jurisdiction over such Agency or
Agencies that are required to operate the Agency or Agencies in the
manner in which it or they are currently operated and receive
reimbursement for care provided to patients covered under the federal
Medicare program and any applicable state Medicaid program, including
without limitation, Medicare and Medicaid provider numbers
(collectively, the "Company Permits"). Without limiting the generality
of the foregoing and except as disclosed in Section 3.06(a) of the
Company Disclosure Schedule, all of the Company's Agencies are certified
for participation or enrollment in the Medicare program and in the
Medicaid program of each state in which any such Agency operates, have a
current and valid provider contract with each such program and are in
substantial compliance with the conditions of participation in all such
programs. Section 3.06(a) of the Company Disclosure Schedule sets forth
a list of each of the Company Permits held by Company and the
jurisdiction issuing the same, all of which are now and as of the
Effective Time shall be in good standing and not subject to
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meritorious challenge. Section 3.06(a) of the Company Disclosure
Schedule also sets forth, as of the date of this Agreement, all actions,
proceedings, investigations or surveys pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries
that could reasonably be expected to result in (i) the loss or
revocation of a Company Permit necessary to operate one or more Agencies
or for an Agency to receive reimbursement under the Medicare or Medicaid
programs or (ii) the suspension or cancellation of any other Company
Permit. Except as set forth in Section 3.06(a) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is
in conflict with, in default under or in violation of, and none of them
has received, since December 31, 1994, from any Governmental Entity any
written notice with respect to any conflict with, default under or
violation of, (i) any Law applicable to the Company or any of its
subsidiaries or by or to which any of their respective properties is
bound or subject, (ii) any judgment, order of decree applicable to the
Company or any of its subsidiaries or (iii) any of the Company Permits.
The home health agencies owned by the Company or its subsidiaries have
not made claims for (i) visits not made, (ii) visits to beneficiaries
not homebound, (iii) visits to beneficiaries not requiring a qualifying
service or (iv) visits not properly authorized by a physician, except in
the cases of clauses (i) and (iv) of this subsection for claims that
could not reasonably be expected to result in a Company Material Adverse
Effect.
(b) Except as set forth in Section 3.06(b) of the Company
Disclosure Schedule, the Company and its subsidiaries, as appropriate,
are approved participating providers in and under all material third
party payment programs, including without limitation Medicare and
applicable state Medicaid programs, from which they have received
revenues since December 31, 1993 ("Payment Programs"). Except as set
forth in Section 3.06(b) of the Company Disclosure Schedule, no action,
survey or investigation is pending or, to the knowledge of the Company,
threatened to suspend, limit, terminate, condition, or revoke the status
of the Company or any of its subsidiaries as a provider in any such
program, and neither the Company nor any of its subsidiaries has been
provided notice by any third party payor of its intention to suspend,
limit, terminate, revoke, condition or fail to renew in whole or in part
or decrease the amounts payable under any arrangement with the Company
or such subsidiary as a provider.
(c) Except as set forth in Section 3.06(c) of the Company
Disclosure Schedule or specifically disclosed in the Company SEC Reports
(as hereinafter defined), the Company and its subsidiaries have filed on
a timely basis all claims, cost reports and annual filings required to
be filed to secure payments for services rendered by them under any
Payment Program from which they receive or expect to receive revenues
except where the failure to file such claim, report or other filing
would not have a Company Material Adverse Effect. Except as set forth
in Section 3.06(c) of the Company Disclosure Schedule, the Medicare and
Medicaid cost reports of the Company and its subsidiaries do not claim
and the Company and its subsidiaries have not received reimbursement in
excess of the amount provided by law, regulations promulgated thereunder
or any applicable agreement, other than any claims
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and reimbursements that, individually or in the aggregate, could not
reasonably be expected to result in a Company Material Adverse Effect.
Except as set forth in Section 3.06(c) of the Company Disclosure
Schedule, there are no claims, actions or appeals pending (and neither
the Company nor any of its subsidiaries has any knowledge of any claims
or reports that could result in any such claims, actions or appeals)
before any commission, board or agency, including, without limitation,
any intermediary, the Provider Reimbursement Review Board or the
Administrator of the Health Care Financing Administration ("HCFA"), with
respect to any state or federal Medicare or Medicaid cost reports or
claims filed by the Company or its subsidiaries on or before the date
hereof. Except as set forth in Section 3.06(c) of the Company
Disclosure Schedule, the Company or its subsidiaries, as applicable,
have paid, or caused to be paid, all refunds, discounts, adjustments, or
amounts owing that have become due to such third party payors pursuant
to such claims, reports or filings, and neither the Company nor any of
its subsidiaries has any knowledge or notice of any disallowances or
material changes required to be made to any cost reports, claims or
filings made by them for any period or of any deficiency in any such
claim, report, or filing, except for changes and deficiencies that in
the aggregate would not have a Company Material Adverse Effect.
SECTION 3.07. REPORTS; FINANCIAL STATEMENTS.
(a) Since December 31, 1993, the Company and its subsidiaries have
filed (i) all forms, reports, statements and other documents required to
be filed with (A) the Securities and Exchange Commission (the "SEC"),
including without limitation (1) all Annual Reports on Form 10-K, (2)
all Quarterly Reports on Form 10-Q, (3) all proxy statements relating to
meetings of stockholders (whether annual or special), (4) all Current
Reports on Form 8-K and (5) all other reports, schedules, registration
statements or other documents (collectively referred to as the "Company
SEC Reports"), and (B) any applicable state securities authorities and
(ii) all forms, reports, statements and other documents required to be
filed with any other Governmental Entities, including, without
limitation, state insurance and health regulatory authorities (all such
forms, reports, statements and other documents in clauses (i) and (ii)
of this Section 3.07(a) being referred to herein, collectively, as the
"Company Reports"), except where the failure to file any such forms,
reports, statements or other documents required to be filed with any
other Governmental Entities could not reasonably be expected to have a
Company Material Adverse Effect. The Company Reports were prepared in
all material respects in accordance with the requirements of applicable
Law (including, with respect to the Company SEC Reports, the Securities
Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC
Reports) and the Company SEC Reports did not at the time they were filed
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC
Reports (i) have been prepared in
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accordance with the published rules and regulations of the SEC and
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except (A) to the extent disclosed
therein or required by changes in generally accepted accounting
principles, (B), with respect to Company SEC Reports filed prior to the
date of this Agreement, as may be indicated in the notes thereto and (C)
in the case of the unaudited financial statements, as permitted by the
rules and regulations of the SEC) and (ii) fairly present the
consolidated financial position of the Company and its subsidiaries as
of the respective dates thereof and the consolidated results of
operations and cash flows for the periods indicated (subject, in the
case of unaudited consolidated financial statements for interim periods,
to adjustments, consisting only of normal, recurring accruals, necessary
to present fairly such results of operations and cash flows), except
that any pro forma financial statements contained in such consolidated
financial statements are not necessarily indicative of the consolidated
financial position of the Company and its subsidiaries as of the
respective dates thereof and the consolidated results of operations and
cash flows for the periods indicated.
(c) Set forth in Section 3.07(c) of the Company Disclosure Schedule
is a schedule of the total visits (a "visit" is defined as a patient
visit meeting the participation conditions and medical necessity
requirements of the Medicare program) of each of the home health
agencies owned by the Company and its subsidiaries for each of the
calendar months in the 12 month period ending December 31, 1995.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement or as
contemplated in this Agreement or as set forth in Section 3.08 of the Company
Disclosure Schedule, since December 31, 1994 the Company and its subsidiaries
have conducted their respective businesses only in the ordinary course and in
a manner consistent with past practice and there has not been: (i) any
damage, destruction or loss with respect to any assets of the Company or any
of its subsidiaries that, whether or not covered by insurance, would
constitute a Company Material Adverse Effect; (ii) any change by the Company
or its subsidiaries in their significant accounting policies; (iii) except
for dividends by a subsidiary of the Company to the Company or another wholly
owned subsidiary of the Company, any declaration, setting aside or payment of
any dividends or distributions in respect of shares of Company Common Stock
or the shares of stock of, or other equity interests in, any subsidiary of
the Company or any redemption, purchase or other acquisition of any of the
Company's securities or any of the securities of any subsidiary of the
Company; (iv) any material increase in the benefits under, or the
establishment or amendment of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, performance awards
(including, without limitation, the granting of stock appreciation rights or
restricted stock awards), stock purchase or other employee benefit plan, or
any increase in the compensation payable or to become payable to any of the
directors or officers of the Company or the employees of the Company or its
subsidiaries as a group, except for (A) increase in salaries or wages payable
or to become payable in the ordinary course of business and consistent with
past practice or (B) the granting of stock options in the
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ordinary course of business to employees of the Company or its subsidiaries
who are not directors or executive officers of the Company; or (v) any other
Company Material Adverse Effect.
SECTION 3.09. ABSENCE OF LITIGATION. Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement or as set forth in
Section 3.09 of the Company Disclosure Schedule, there is no claim, action,
suit, litigation, proceeding, arbitration or, to the knowledge of the
Company, investigation of any kind, at law or in equity (including actions or
proceedings seeking injunctive relief), pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries or any
properties or rights of the Company or any of its subsidiaries (except for
claims, actions, suits, litigation, proceedings, arbitrations, or
investigations that could not reasonably be expected to have a Company
Material Adverse Effect), and neither the Company nor any of its subsidiaries
is subject to any executory judgment, order, writ, injunction, decree or
award of any Governmental Entity, including without limitation any cease and
desist order and any consent decree, settlement agreement or other similar
written agreement with any Governmental Entity, except for matters that could
not reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by the Company or any of its subsidiaries, or with
respect to which the Company or any of its subsidiaries could incur
liability under Section 4069, 4212(c) or 4204 of ERISA (the "Benefit
Plans"), the Company has delivered or made available to Acquiror a true
and correct copy of (i) the most recent annual report (Form 5500) filed
with the Internal Revenue Service (the "IRS") for each Benefit Plan for
which a Form 5500 is required to be filed, (ii) such Benefit Plan, (iii)
each trust agreement, if any, relating to such Benefit Plan, (iv) the
most recent summary plan description for each Benefit Plan for which a
summary plan description is required, (v) the most recent actuarial
report or valuation relating to a Benefit Plan subject to Title IV of
ERISA and (vi) the most recent determination letter, if any, issued by
the IRS with respect to any Benefit Plan qualified under Section 401 of
the Code.
(b) With respect to the Benefit Plans, no event has occurred and,
to the knowledge of the Company, there exists no condition or set of
circumstances, in connection with which the Company or any of its
subsidiaries could be subject to any liability under the terms of such
Benefit Plans, ERISA, the Code or any other applicable Law that could
reasonably be expected to have a Company Material Adverse Effect.
(c) There are no collective bargaining or other labor union
contracts to which the Company or its subsidiaries is a party applicable
to persons employed by the Company or its subsidiaries and no collective
bargaining agreement is being negotiated by the Company
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or any of its subsidiaries. There is no pending or, to the knowledge of
the Company, threatened labor dispute, strike or work stoppage against
the Company or any of its subsidiaries that could materially interfere
with the respective business activities of the Company or any of its
subsidiaries. To the knowledge of the Company, none of the Company, any
of its subsidiaries or any of their respective representatives or
employees has committed any unfair labor practices in connection with
the operation of the respective businesses of the Company or its
subsidiaries that could reasonably be expected to have a Company
Material Adverse Effect, and there is no pending or, to the knowledge of
the Company, threatened charge or complaint against the Company or any
of its subsidiaries by the National Labor Relations Board or any
comparable state agency that, if not covered by insurance, would
constitute a Company Material Adverse Effect.
(d) Section 3.10(d) of the Company Disclosure Schedule contain true
and correct (i) copies of all employment agreements with officers of the
Company; (ii) listings of all officers of the Company who have executed
a non-competition agreement with the Company; (iii) copies of all
severance agreements, programs and policies of the Company with or
relating to its employees; and (iv) summary descriptions of all plans,
programs, agreements and other arrangements of the Company with or
relating to its employees. Except as set forth in Section 3.10(d) of
the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries will owe a severance payment or similar obligation to any
of their respective employees, officers or directors as a result of the
Merger or the transactions contemplated by this Agreement, and none of
such persons will be entitled to an increase in severance payments or
other benefits as a result of the Merger or the transactions
contemplated by this Agreement in the event of the subsequent
termination of their employment.
(e) No Benefit Plan provides retiree medical or retiree life
insurance benefits that could reasonably be expected to have a Company
Material Adverse Effect and (y) neither the Company nor any of its
subsidiaries is contractually or otherwise obligated (whether or not in
writing) to provide life insurance and medical benefits upon retirement
or termination of employment of employees that could reasonably be
expected to have a Company Material Adverse Effect.
(f) Neither the Company nor any of its subsidiaries contributes to
or has an obligation to contribute to, and has not within six years
prior to the date of this Agreement contributed to or had an obligation
to contribute to, a multiemployer plan within the meaning of Section
3(37) of ERISA.
(g) The Company has not taken any of the following or other similar
actions since December 31, 1993: the acceleration of vesting, waiving
of performance criteria or the adjustment of awards or any other actions
permitted upon a change in control of the Company (or a filing under
Sections 13(d) or 14(d) of the Exchange Act with respect to the
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Company) with respect to any of the Benefit Plans or any of the plans,
programs, agreements, policies or other arrangements described in
Section 3.10(d) of this Agreement.
SECTION 3.11. TAXES. Except as set forth in Section 3.11 of the Company
Disclosure Statement,
(a) (i) all material returns and reports ("Tax Returns") of or
with respect to any Tax which is required to be filed on or before the
Effective Time by or with respect to the Company or any its subsidiaries
have been or will be duly and timely filed, (ii) all items of income,
gain, loss, deduction and credit or other items required to be included
in each such Tax Return have been or will be so included and all
information provided in each such Tax Return is true, correct and
complete in all material respects, (iii) all Taxes which have become or
will become due with respect to the period covered by each such Tax
Return have been or will be timely paid in full, (iv) all withholding
Tax requirements imposed on or with respect to Company or any of its
subsidiaries have been or will be satisfied in all material respects,
and (v) no material penalty, interest or other charge is or will become
due with respect to the late filing of any such Tax Return or late
payment of any such Tax.
(b) There is no claim against Company or any of its subsidiaries
for any material amount of Taxes, and no material assessment, deficiency
or adjustment has been asserted or proposed with respect to any Tax
Return of or with respect to the Company or any of its subsidiaries
other than those disclosed (and to which are attached true and complete
copies of all audit or similar reports) in Section 3.11 of the Company
Disclosure Schedule.
(c) The total amounts set up as liabilities for current and
deferred Taxes in the financial statements referred to in Section 3.07
of this Agreement are sufficient to cover the payment of all Taxes,
whether or not assessed or disputed, which are, or are hereafter found
to be, or to have been, due by or with respect to the Company and any of
its subsidiaries up to and through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due, no
material liens for Taxes exist upon the assets of any of the Company or
any of its subsidiaries.
(e) None of the transactions contemplated by this Agreement will
result in any Tax liability or the recognition of any item of income or
gain to the Company or any of its subsidiaries.
(f) Neither the Company nor any of its subsidiaries has made an
election under section 341(f) of the Code.
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SECTION 3.12. TAX MATTERS; POOLING.
(a) Neither the Company nor, to the knowledge of the Company, any
of its affiliates has taken or agreed to take any action that would
prevent the Merger from (i) constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code or (ii) being treated
for financial accounting purposes as a "pooling of interests" in
accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the SEC (a "Pooling Transaction").
(b) There is no plan or intention by any stockholder of the Company
who owns five percent or more of Company Common Stock, and to the
knowledge of Company there is no plan or intention on the part of any
other stockholder of Company Common Stock, to sell, exchange or
otherwise dispose of a number of shares of Acquiror Common Stock to be
received in the Merger that would reduce the ownership of Acquiror
Common Stock by such holders to a number of shares having a value, as of
the Effective Time, of less than 50 percent of the value of all of the
Company Common Stock (including shares of Company Common Stock exchanged
for cash in lieu of fractional shares of Acquiror Common Stock)
outstanding immediately prior to the Effective Time.
(c) Immediately following the Merger, the Company will hold at
least 90 percent of the fair market value of its net assets and at least
70 percent of the fair market value of its gross assets held immediately
prior to the Merger. For purposes of this representation, amounts used
by the Company to pay Merger expenses and all redemptions and
distributions (except for regular, normal dividends) made by Company
will be included as assets of Company immediately prior to the Merger.
(d) There is no intercorporate indebtedness existing between the
Company and Acquiror or between the Company and Merger Sub that was
issued, acquired or will be settled at a discount.
(e) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(f) The Company is not under the jurisdiction of a court in a title
11 or similar case within the meaning of section 368(a)(3)(A) of the
Code.
(g) The total amount of cash to be received by stockholders of the
Company in lieu of fractional shares of Acquiror Common Stock will not
exceed one percent of the total fair market value of the Acquiror Common
Stock (as of the Effective Time) to be issued in the Merger.
SECTION 3.13. AFFILIATES. Section 3.13 of the Company Disclosure
Schedule identifies all persons who, to the knowledge of the Company, may be
deemed to be affiliates of the
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Company within the meaning of that term as used in Rule 145 promulgated
pursuant to the Securities Act, including, without limitation, all directors
and executive officers of the Company.
SECTION 3.14. CERTAIN BUSINESS PRACTICES. To the Company's knowledge,
except as set forth in Section 3.14 of the Company Disclosure Schedule, none
of the Company, any of its subsidiaries or any directors, officers, agents or
employees of the Company or any of its subsidiaries (in their capacities as
such) has (i) used any funds for unlawful contributions, gifts, entertainment
or other unlawful purposes relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment.
SECTION 3.15. VOTE REQUIRED. The only votes of the holders of any
class or series of Company capital stock necessary to approve the Merger and
this Agreement are the affirmative votes of the holders of a majority of the
outstanding shares of the Company Common Stock.
SECTION 3.16. BROKERS. No broker, finder or investment banker (other
than Institutions Investors Consulting Company, Inc. and Montgomery
Securities) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. Prior to the date of this
Agreement, the Company has made available to Acquiror a complete and correct
copy of all agreements between the Company and Institutions Investors
Consulting Company, Inc. and Montgomery Securities pursuant to which such
firm will be entitled to any payment relating to the transactions
contemplated by this Agreement.
SECTION 3.17. INSURANCE. Except as set forth in Section 3.17 of the
Company Disclosure Schedule, the Company and each of its subsidiaries are
presently insured, and during each of the past five calendar years have been
insured, against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. Except as
set forth in Section 3.17 of the Company Disclosure Schedule, the policies of
general liability, malpractice liability, fire, theft and other insurance
maintained with respect to the operations, assets or businesses of the
Company and its subsidiaries provide adequate coverage against loss.
SECTION 3.18. PROPERTIES. Except as set forth in Section 3.18 of the
Company Disclosure Schedule or specifically described in the Company SEC
Reports, the Company and its subsidiaries have good and marketable title,
free and clear of all liens, the existence of which could reasonably be
expected to have a Company Material Adverse Effect, to all their material
properties and assets whether tangible or intangible, real, personal or
mixed, reflected in the Company's consolidated financial statements contained
in the Company's most recent SEC Report on Form 10-Q as being owned by the
Company and its subsidiaries as of the date thereof, other than (i) any
properties or assets that have been sold or otherwise disposed of in the
ordinary course of business
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since the date of such financial statements, (ii) liens disclosed in the
notes to such financial statements and (iii) liens arising in the ordinary
course of business after the date of such financial statements. All
buildings, and all fixtures, equipment and other property and assets that are
material to its business on a consolidated basis, held under leases or
sub-leases by the Company or any of its subsidiaries are held under valid
instruments enforceable in accordance with their respective terms, subject to
applicable laws of bankruptcy, insolvency or similar laws relating to
creditors' rights generally and to general principles of equity (whether
applied in a proceeding in law or equity). All of the Company's and its
subsidiaries' equipment in regular use has been reasonably maintained and is
in serviceable condition, reasonable wear and tear excepted.
SECTION 3.19. MANAGEMENT CONTRACTS. Section 3.19 of the Company
Disclosure Schedule sets forth a list of each of the management contracts and
consulting agreements relating to home health care services to be provided by
the Company or any of its subsidiaries (the "Management Contracts"), true,
correct and complete copies of which have been provided or made available to
Acquiror. Each of the Management Contracts is in full force and effect
without default thereunder by any party thereto. Neither the Company nor any
of its subsidiaries is or may be obligated to return any fees received under
the Management Contracts to any provider thereunder. To the knowledge of the
Company, neither the Company nor any of its subsidiaries has made any claims
as a provider under the Management Contracts for (i) visits not made, (ii)
visits to beneficiaries not homebound, (iii) visits to beneficiaries not
requiring a qualifying service or (iv) visits not properly authorized by a
physician, except for any claims described in clauses (ii) and (iii) which
could not reasonably be expected to result in a Company Material Adverse
Effect.
SECTION 3.20. OPINION OF FINANCIAL ADVISOR. The Company has received
the oral opinion of Montgomery Securities to the effect that, as of the date
of this Agreement, the Common Stock Exchange Ratio is fair, from a financial
point of view, to the holders of Company Common Stock.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
The Acquiror Companies hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Acquiror Companies is a corporation, and each of Acquiror's other
subsidiaries is a corporation or partnership, duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization and each of the Acquiror Companies and each of
Acquiror's other subsidiaries has all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary,
other than where the failure of either Acquiror
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Company to be so duly qualified and in good standing could not reasonably be
expected to have an Acquiror Material Adverse Effect and where the failure,
individually or in the aggregate, of any such other subsidiary to comply with
this Section 4.01 could not reasonably be expected to have an Acquiror
Material Adverse Effect. The term "Acquiror Material Adverse Effect" as used
in this Agreement shall mean any change or effect that would be materially
adverse to the financial condition, results of operations, business or
prospects of Acquiror and its subsidiaries, taken as a whole, at the time of
such change or effect.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS. Acquiror has
heretofore furnished or made available to the Company complete and correct
copies of the Certificate of Incorporation and Bylaws, in each case as
amended or restated to the date hereof, of Acquiror.
SECTION 4.03. CAPITALIZATION.
(a) The authorized capital stock of Acquiror consists of (i)
150,000,000 shares of Acquiror Common Stock, of which, as of January 31,
1996: (A) 51,995,694 were issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights created by
statute, Acquiror's Certificate of Incorporation or Bylaws or any
agreement to which Acquiror is a party or is bound; (B) 641,713 were
held in the treasury of Acquiror and (C) a number of shares aggregating
no more than 15% of the number of shares issued and outstanding as of
January 31, 1996 were reserved for future issuance and (ii) 500,000
shares of preferred stock, par value $.001 per share ("Acquiror
Preferred Stock"), of which, as of January 31, 1996, 150,000 shares had
been designated as Series A Junior Participating Preferred Stock. No
shares of Acquiror Preferred Stock are issued and outstanding. Except
(1) as disclosed in the Acquiror SEC Reports (as hereinafter defined) or
otherwise as set forth in this Section 4.03 and (2) pursuant to the
terms of that certain Rights Agreement dated as of September 15, 1994 by
and between Acquiror and Chemical Trust Company of California (the
"Acquiror Rights Agreement"), there are no options, warrants or other
rights (including registration rights), agreements, arrangements or
commitments of any character to which Acquiror is a party relating to
the issued or unissued capital stock of, or other equity interests in,
Acquiror or obligating Acquiror to grant, issue or sell any shares of
the capital stock of, or other equity interests in, Acquiror. Except
pursuant to the terms of the Acquiror Rights Agreement, there are no
obligations, contingent or otherwise, of Acquiror to repurchase, redeem
or otherwise acquire any shares of Acquiror Common Stock. Each of the
issued shares of capital stock of, or other equity interests in, each of
Acquiror's subsidiaries is duly authorized, validly issued and, in the
case of shares of capital stock, fully paid and nonassessable, and has
not been issued in violation of (nor are any of the authorized shares of
capital stock of the Acquiror Companies subject to) any preemptive or
similar rights created by statute, the Certificate of Incorporation or
Bylaws (or the equivalent organizational documents) of any of Acquiror's
subsidiaries or any agreement to which Acquiror or any of its
subsidiaries is a party or is bound.
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(b) The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, par value $.001 per share ("Merger Sub Common
Stock"). An aggregate of 100 shares of Merger Sub Common Stock are
issued and outstanding and held by Acquiror, all of which are duly
authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights created by statute, Merger Sub's Certificate of
Incorporation or Bylaws or any agreement to which Merger Sub is a party
or is bound.
(c) The shares of Acquiror Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute,
Acquiror's Certificate of Incorporation or Bylaws or any agreement to
which Acquiror is a party or is bound. The offering, sale and delivery
of such shares of Acquiror Common Stock will, prior to the date of the
Company Stockholders' Meeting, have been registered under the Securities
Act and will have been qualified or registered or exempt therefrom under
applicable Blue Sky Laws. In addition, the Acquiror Common Stock will,
prior to the Effective Time, have been registered under the Exchange Act
and listed on the NYSE, subject to official notice of issuance.
SECTION 4.04. AUTHORITY. Each of the Acquiror Companies has all
requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by each of the Acquiror Companies and the performance by each of
the Acquiror Companies of its obligations hereunder, including the
consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action and no other corporate
proceedings on the part of either of the Acquiror Companies are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of the
Acquiror Companies and, assuming the due authorization, execution and
delivery hereof by the Company, constitutes the legal, valid and binding
obligation of each of the Acquiror Companies.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that all consents, licenses, permits, waivers,
approvals, authorizations, orders, filings and notifications
contemplated by the exceptions to Section 4.05(b) are obtained or made
and except as otherwise disclosed in Section 4.05(a) of the Disclosure
Schedule delivered by the Acquiring Companies to the Company
contemporaneously with the execution and delivery of this Agreement (the
"Acquiror Disclosure Schedule"), the execution and delivery of this
Agreement by each of the Acquiror Companies does not, and performance by
each of them of its obligations hereunder, including the consummation of
the transactions contemplated hereby, will not (i) conflict with or
violate the Certificate of Incorporation or Bylaws, or the equivalent
organizational documents, in each case as amended or restated, of
Acquiror or any of Acquiror's subsidiaries, (ii) conflict with or
violate any Laws in effect as of the date of this Agreement applicable
to Acquiror or any of Acquiror's subsidiaries or by or to which any of
their
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properties is bound or subject or (iii) result in any breach of or
constitute a default (or an event that with or without notice or lapse
of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of a lien or
encumbrance on any of the properties or assets of Acquiror or any of
Acquiror's subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Acquiror or any of Acquiror's
subsidiaries is a party or by or to which Acquiror or any of Acquiror's
subsidiaries or any of their respective properties is bound or subject,
except for any such conflicts, violations, breaches, defaults, events,
rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or encumbrances that could not reasonably be
expected to have an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by each of the
Acquiror Companies does not, and the performance of this Agreement by
each of the Acquiror Companies will not, including the consummation of
the transactions contemplated hereby, require any of the Acquiror
Companies to obtain any consent, license, permit, waiver approval,
authorization or order of, or to make any filing with or notification
to, any Governmental Entities, except (i) for applicable requirements,
if any, of the Securities Act, the Exchange Act, Blue Sky Laws and the
HSR Act and the filing and recordation of appropriate merger documents
as required by Delaware Law and (ii) where the failure to obtain such
consents, licenses, permits, waivers, approvals, authorizations or
orders, or to make such filings or notifications could not reasonably be
expected to prevent any of the Acquiror Companies from performing their
obligations under this Agreement and (iii) as disclosed in Section
4.05(b) of the Acquiror Disclosure Schedule,
SECTION 4.06. PERMITS; COMPLIANCE.
(a) Each of Acquiror and its subsidiaries is in possession of all
(i) franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, identification and
registration numbers, approvals and orders necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted and (ii) agreements, licenses and certificates of need or
determination, including without limitation Medicare and Medicaid
provider numbers, from all Governmental Entities and accrediting and
certifying organizations having jurisdiction over any of the facilities
operated by Acquiror or such subsidiary that are required to operate
such facility or facilities in the manner in which it or they are
currently operated and to receive reimbursement for care provided to
patients covered under the federal Medicare program and any applicable
state Medicaid program (collectively, the "Acquiror Permits"), except
where the failure to possess such Acquiror Permits could not reasonably
be expected to have an Acquiror Material Adverse Effect. As of the date
of this Agreement, there are no actions, proceedings, investigations or
surveys pending or, to the knowledge of Acquiror, threatened against
Acquiror or any of its subsidiaries that could reasonably be expected to
result in the
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suspension, loss or revocation of (i) an Acquiror Permit necessary to
operate one or more facilities or for a facility to receive
reimbursement under the Medicare or Medicaid programs or (ii) any other
Acquiror Permit, except for any suspension, loss or revocation that
could not reasonably be expected to have an Acquiror Material Adverse
Effect. Neither Acquiror nor any of its subsidiaries is in conflict
with, or in default under or violation of, nor has it received, since
December 31, 1994, from any Governmental Entity any written notice with
respect to possible conflicts with, defaults under or violations of (1)
any Law applicable to Acquiror or any of its subsidiaries or by or to
which any of their respective properties is bound or subject or (2) any
Acquiror Permits, except for any such conflicts, defaults or violations
that could not reasonably be expected to have an Acquiror Material
Adverse Effect.
(b) Acquiror and its subsidiaries, as appropriate, are approved
participating providers in and under all third party payment programs
from which they receive revenues. No action or investigation is pending
or, to Acquiror's knowledge, threatened to suspend, limit, terminate,
condition, or revoke the status of Acquiror or any of its subsidiaries
as a provider in any such program, and neither Acquiror nor any of its
subsidiaries has been provided notice by any third party payor of its
intention to suspend, limit, terminate, revoke, condition or fail to
renew in whole or in part or decrease the amounts payable under any
arrangement with Acquiror or such subsidiary as a provider, which
action, investigation or proceeding could reasonably be expected to have
an Acquiror Material Adverse Effect.
(c) Except as indicated in its financial statements included in the
Acquiror SEC Reports (as hereinafter defined) and except for matters
that could not reasonably be expected to have an Acquiror Material
Adverse Effect, Acquiror and its subsidiaries (i) have filed on a timely
basis all claims, cost reports and annual filings required to be filed
to secure payments for services rendered by them under any third-party
payment program from which they receive or expect to receive revenues,
have paid, or caused to be paid, all refunds, discounts, adjustments, or
amounts owing that have become due to such third party payors pursuant
to such claims, reports or filings and (iii) have not received notice of
any material changes required to be made to any cost reports, claims or
filings made by them for any period included in such financial
statements or of any deficiency in any such claim, report, or filing.
SECTION 4.07. REPORTS; FINANCIAL STATEMENTS.
(a) Since May 31, 1993, Acquiror and its subsidiaries have filed
all forms, reports, statements and other documents required to be filed
with (i) the SEC, including without limitation (A) all Annual Reports on
Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C) all proxy
statements relating to meetings of stockholders (whether annual or
special), (D) all Current Reports on Form 8-K and (E) all other reports,
schedules, registration statements or other documents (collectively
referred to as the "Acquiror SEC Reports"), (ii) any state securities
authorities and (iii) any other Governmental Entities,
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including, without limitation, state insurance and health regulatory
authorities, except where the failure to file any such forms, reports,
statements or other documents could not reasonably be expected to have
an Acquiror Material Adverse Effect (all such forms, reports, statements
and other documents being referred to herein as the "Acquiror Reports").
The Acquiror Reports were prepared in all material respects in
accordance with the requirements of applicable Law (including, with
respect to the Acquiror SEC Reports, the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to the Acquiror SEC Reports) and the Acquiror SEC
Reports did not at the time they were filed contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Acquiror SEC
Reports (i) have been prepared in accordance with the published rules
and regulations of the SEC and generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except
(A) to the extent disclosed therein or required by changes in generally
accepted accounting principles, (B), with respect to the Acquiror SEC
Reports filed prior to the date of this Agreement, as may be indicated
in the notes thereto and (C) in the case of the unaudited financial
statements, as permitted by the rules and regulations of the SEC) and
(ii) fairly present the consolidated financial position of Acquiror and
its subsidiaries as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated (subject,
in the case of unaudited consolidated financial statements for interim
periods, to adjustments, consisting only of normal, recurring accruals,
necessary to present fairly such results of operations and cash flows),
except that any pro forma financial statements contained in such
consolidated financial statements are not necessarily indicative of the
consolidated financial position of Acquiror and its subsidiaries as of
the respective dates thereof and the consolidated results of operations
and cash flows for the periods indicated.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Acquiror SEC Reports filed prior to the date of this Agreement or as
contemplated by this Agreement, since May 31, 1995, Acquiror and its
subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and there has not been:
(i) any damage, destruction or loss with respect to any assets of Acquiror or
any of its subsidiaries that, whether or not covered by insurance, would
constitute an Acquiror Material Adverse Effect; (ii) any change by Acquiror
or its subsidiaries in their significant accounting policies; or (iii) any
other Acquiror Material Adverse Effect.
SECTION 4.09. ABSENCE OF LITIGATION. Except as disclosed in Acquiror
SEC Reports filed prior to the date of this Agreement, there is no claim,
action, suit, litigation, proceeding, arbitration or, to the knowledge of
Acquiror, investigation of any kind, at law or in equity (including actions
or proceedings seeking injunctive relief), pending or, to the knowledge of
Acquiror,
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threatened against Acquiror or any of its subsidiaries or any properties or
rights of Acquiror or any of its subsidiaries (except for claims, actions,
suits, litigation, proceedings, arbitrations, or investigations that could
not reasonably be expected to have an Acquiror Material Adverse Effect), and
neither Acquiror nor any of its subsidiaries is subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with, or, to the knowledge of Acquiror, continuing investigation
by, any Governmental Entity, or any judgment, order, writ, injunction, decree
or award of any Governmental Entity or arbitrator, including without
limitation cease-and-desist or other orders, except for matters that could
not reasonably be expected to have an Acquiror Material Adverse Effect.
SECTION 4.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee
benefit plan", as defined in Section 3(3) of ERISA), maintained or
contributed to by Acquiror or any of its subsidiaries, or with respect
to which Acquiror or any of its subsidiaries could incur liability under
Section 4069, 4212(c) or 4204 of ERISA (the "Acquiror Benefit Plans"),
Acquiror has delivered or made available to the Company a true and
correct copy of (i) the most recent annual report (Form 5500) filed with
the IRS for each Acquiror Benefit Plan for which a Form 5500 is required
to be filed, (ii) such Acquiror Benefit Plan, (iii) each trust
agreement, if any, relating to such Acquiror Benefit Plan, (iv) the most
recent summary plan description for each Acquiror Benefit Plan for which
a summary plan description is required, (v) the most recent actuarial
report or valuation relating to an Acquiror Benefit Plan subject to
Title IV of ERISA and (vi) the most recent determination letter, if any,
issued by the IRS with respect to any Acquiror Benefit Plan qualified
under Section 401 of the Code.
(b) With respect to the Acquiror Benefit Plans, no event has
occurred and, to the knowledge of Acquiror, there exists no condition or
set of circumstances, in connection with which Acquiror or any of its
subsidiaries could be subject to any liability under the terms of such
Acquiror Benefit Plans, ERISA, the Code or any other applicable Law that
could reasonably be expected to have an Acquiror Material Adverse Effect.
(c) Acquiror has delivered or made available to the Company all
collective bargaining or other labor union contracts to which Acquiror
or its subsidiaries is a party applicable to persons employed by
Acquiror or its subsidiaries and, except as set forth in Section 4.10(c)
of the Acquiror Disclosure Schedule, no collective bargaining agreement
is being negotiated by Acquiror or any of its subsidiaries. There is no
pending or, to the knowledge of Acquiror, threatened labor dispute,
strike or work stoppage against Acquiror or any of its subsidiaries that
may interfere with the respective business activities of Acquiror or any
of its subsidiaries and could reasonably be expected to have an Acquiror
Material Adverse Effect. To the knowledge of Acquiror, none of
Acquiror, any of its subsidiaries or any of their respective
representatives or employees has committed any unfair labor practices in
connection with the operation of the respective businesses of Acquiror
or its subsidiaries
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that could reasonably be expected to have an Acquiror Material Adverse
Effect, and there is no pending or, to the knowledge of Acquiror,
threatened charge or complaint against Acquiror or any of its
subsidiaries by the National Labor Relations Board or any comparable
state agency that, if not covered by insurance, would constitute an
Acquiror Material Adverse Effect.
(d) Acquiror has delivered or made available to the Company (i)
copies of all severance agreements, programs and policies of Acquiror
with or relating to its employees; and (ii) copies of all plans,
programs, agreements and other arrangements of Acquiror with or relating
to its employees. Neither Acquiror nor any of its subsidiaries will owe
a severance payment or similar obligation to any of their respective
employees, officers or directors as a result of the Merger or the
transactions contemplated by this Agreement, and none of such persons
will be entitled to an increase in severance payments or other benefits
as a result of the Merger or the transactions contemplated by this
Agreement in the event of the subsequent termination of their employment.
(e) No Acquiror Benefit Plan provides retiree medical or retiree
life insurance benefits that could reasonably be expected to have an
Acquiror Material Adverse Effect and (y) neither Acquiror nor any of its
subsidiaries is contractually or otherwise obligated (whether or not in
writing) to provide life insurance and medical benefits upon retirement
or termination of employment of employees that could reasonably be
expected to have an Acquiror Material Adverse Effect.
(f) Acquiror has not taken any of the following or other similar
actions since May 31, 1994: the acceleration of vesting, waiving of
performance criteria or the adjustment of awards or any other actions
permitted upon a change in control of Acquiror or a filing under
Sections 13(d) or 14(d) of the Exchange Act with respect to Acquiror)
with respect to any of the Acquiror Benefit Plans or any of the plans,
programs, agreements, policies or other arrangements described in
Section 4.10(d) of this Agreement
SECTION 4.11. TAXES.
(a) Except for matters that could not be expected to have an
Acquiror Material Adverse Effect, (i) all returns and reports ("Tax
Returns") of or with respect to any Tax which is required to be filed on
or before the Closing Date by or with respect to Acquiror or any its
subsidiaries have been or will be duly and timely filed, (ii) all items
of income, gain, loss, deduction and credit or other items required to
be included in each such Tax Return have been or will be so included and
all information provided in each such Tax Return is true, correct and
complete, (iii) all Taxes which have become or will become due with
respect to the period covered by each such Tax Return have been or will
be timely paid in full, (iv) all withholding Tax requirements imposed on
or with respect to Acquiror or any of its subsidiaries have been or will
be satisfied in full in all respects, and (v) no penalty,
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interest or other charge is or will become due with respect to the
late filing of any such Tax Return or late payment of any such Tax.
(b) Except for matters that could not be expected to have an
Acquiror Material Adverse Effect, there is no claim against Acquiror or
any of its subsidiaries for any Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return
of or with respect to Acquiror or any of its subsidiaries.
(c) The total amounts set up as liabilities for current and
deferred Taxes in the financial statements referred to in Section 4.07
of this Agreement are sufficient to cover the payment of all Taxes,
whether or not assessed or disputed, which are, or are hereafter found
to be, or to have been, due by or with respect to Acquiror and any of
its subsidiaries up to and through the periods covered thereby.
(d) Except for statutory liens for current Taxes not yet due, no
material liens for Taxes exist upon the assets of any of Acquiror or its
subsidiaries.
(e) None of the transactions contemplated by this Agreement will
result in any Tax liability or the recognition of any item of income or
gain to Acquiror or any of its subsidiaries.
(f) Neither Acquiror nor any of its subsidiaries has made an
election under section 341(f) of the Code.
SECTION 4.12. TAX MATTERS; POOLING. Neither Acquiror nor, to the
knowledge of Acquiror, any of its affiliates has taken or agreed to take any
action that would prevent the Merger from (a) constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a Pooling Transaction. Acquiror
does not own, nor has it owned during the past five years, any shares of
Company Common Stock. There is no intercorporate indebtedness existing
between the Company and Acquiror, or between the Company and Merger Sub, that
was issued, acquired or will be settled at a discount.
SECTION 4.13. VOTE REQUIRED. No vote of the holders of any class or
series of Acquiror capital stock is necessary to approve the Merger or the
other transactions contemplated by this Agreement.
SECTION 4.14. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Acquiror.
SECTION 4.15. INSURANCE. Acquiror and each of its subsidiaries are
presently insured, and during each of the past five calendar years have been
insured, against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be
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insured. The policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of Acquiror and its
subsidiaries provide adequate coverage against loss.
SECTION 4.16. PROPERTIES. Acquiror and its subsidiaries have good and
marketable title, free and clear of all liens, the existence of which could
reasonably be expected to have an Acquiror Material Adverse Effect, to all
their material properties and assets whether tangible or intangible, real,
personal or mixed, reflected in Acquiror's consolidated financial statements
contained in Acquiror's most recent SEC Report on Form 10-K as being owned by
Acquiror and its subsidiaries as of the date thereof, except (i) as
specifically described in Acquiror SEC Reports, (ii) any properties or assets
that have been sold or otherwise disposed of since the date of such financial
statements, (iii) liens disclosed in the notes to such financial statements
and (iv) liens arising in the ordinary course of business after the date of
such financial statements. All buildings, and all fixtures, equipment and
other property and assets that are material to its business on a consolidated
basis and are held under leases or sub-leases by Acquiror or any of its
subsidiaries are held under valid instruments enforceable in accordance with
their respective terms, subject to applicable laws of bankruptcy, insolvency
or similar laws relating to creditors' rights generally and to general
principles of equity (whether applied in a proceeding in law or equity).
ARTICLE V.
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by
Acquiror, the Company will and will cause its subsidiaries to:
(a) operate its business in the usual and ordinary course
consistent with past practices;
(b) use all reasonable efforts to preserve substantially intact its
business organization, maintain its rights and franchises, retain the
services of its respective officers and key employees and maintain its
relationships with its respective customers and suppliers;
(c) maintain and keep its properties and assets in as good repair
and condition as at present, ordinary wear and tear excepted, and
maintain supplies and inventories in quantities consistent with its
customary business practice; and
(d) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
SECTION 5.02. AFFIRMATIVE COVENANTS OF ACQUIROR. Acquiror hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement
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or consented to in writing by the Company, Acquiror will and will cause its
Significant Subsidiaries to:
(a) use all reasonable efforts to preserve substantially intact its
business organization;
(b) maintain and keep its properties and assets in as good repair
and condition as at present, ordinary wear and tear excepted, and
maintain supplies and inventories in quantities consistent with its
customary business practice; and
(c) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
SECTION 5.03. NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by
Acquiror, from the date of this Agreement until the Effective Time, the
Company will not do, and will not permit any of its subsidiaries to do, any
of the following:
(a) (i) increase the compensation payable to or to become payable
to any director or executive officer; (ii) increase the compensation
payable or pay bonuses to employees of the Company (excluding payments
made pursuant to agreements disclosed in Section 3.10(d) of the Company
Disclosure Schedule) other than in the ordinary course of business,
(iii) grant any severance or termination pay (other than pursuant to the
normal severance practices of the Company or its subsidiaries as in
effect on the date of this Agreement) to, or enter into any employment
or severance agreement with, any director, officer or employee; (iv)
except as set forth in Section 3.10(d) of the Company Disclosure
Schedule, establish, adopt or enter into any employee benefit plan or
arrangement or (v) except as may be required by applicable law, as set
forth in Section 3.10(d) of the Company Disclosure Schedule and for
actions that are required to comply with the provisions of Section 6.08
of this Agreement, amend, or take any other actions (including, without
limitation, the acceleration of vesting, waiving of performance criteria
or the adjustment of awards or any other actions permitted upon a
"change in control" (as defined in the respective plans) of the Company
or a filing under Section 13(d) or 14(d) of the Exchange Act with
respect to the Company) with respect to any of the Benefit Plans or any
of the plans, programs, agreements, policies or other arrangements
described in Section 3.10(d) of this Agreement;
(b) declare or pay any dividend on, or make any other distribution
in respect of, outstanding shares of capital stock or other equity
interests, except dividends by a wholly owned subsidiary of the Company
to the Company or another wholly owned subsidiary of the Company;
(c) (i) except as described in Section 3.03(c) of the Company
Disclosure Schedule, redeem, purchase or otherwise acquire any shares of
its or any of its subsidiaries'
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capital stock or any securities or obligations convertible into or
exchangeable for any shares of its or its subsidiaries' capital stock
(other than any such acquisition directly from any wholly owned
subsidiary of the Company in exchange for capital contributions or loans
to such subsidiary), or any options, warrants or conversion or other
rights to acquire any shares of its or its subsidiaries' capital stock
or any such securities or obligations (except in connection with the
exercise of outstanding stock options in accordance with their terms);
(ii) effect any reorganization or recapitalization of the Company or any
of its subsidiaries; or (iii) split, combine or reclassify any of its or
its subsidiaries' capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its or its subsidiaries' capital stock;
(d) (i) except as set forth in Section 3.03(a) herein or as
described in Section 3.03(c) of the Company Disclosure Schedule, issue
(whether upon original issue or out of treasury), sell, grant, award,
deliver or limit the voting rights of any shares of any class of its or
its subsidiaries' capital stock, any securities convertible into or
exercisable or exchangeable for any such shares, or any rights, warrants
or options to acquire, any such shares (except for the issuance of
shares upon the exercise of outstanding stock options in accordance with
their terms); (ii) amend or otherwise modify the terms of any such
rights, warrants or options the effect of which shall be to make such
terms materially more favorable to the holders thereof; or (iii) take
any action to accelerate the vesting of any of the stock options;
(e) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets of any other person
(other than the purchase of assets from suppliers or vendors in the
ordinary course of business and consistent with past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets or any assets of any
of its subsidiaries, except for pledges or dispositions of assets in the
ordinary course of business and consistent with past practice;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may
reasonably be expected to lead to, any Competing Transaction, or enter
into discussions or negotiate with any person or entity in furtherance
of such inquiries or to obtain a Competing Transaction, or agree to, or
endorse, any Competing Transaction, or authorize or permit any of the
officers, directors, employees or agents of the Company or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of the
Company's subsidiaries to take any such action, and the Company shall
promptly notify Acquiror of all relevant terms of any
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such inquiries or proposals received by the Company or any of its
subsidiaries or by any such officer, director, employee, agent,
investment banker, financial advisor, attorney, accountant or other
representative relating to any of such matters and if such inquiry or
proposal is in writing, the Company shall promptly deliver or cause to
be delivered to Acquiror a copy of such inquiry or proposal; PROVIDED,
HOWEVER, that nothing contained in this subsection (g) shall prohibit
the Board of Directors of the Company from (i) authorizing its
representatives to furnish information to, or to enter into discussions
or negotiations with, any persons or entity in connection with an
unsolicited bona fide proposal in writing by such person or entity
relating to a Competing Transaction if, and only to the extent that (A)
such unsolicited bona fide proposal is a bona fide written proposal made
by a third party relating to a Competing Transaction on terms that the
Board of Directors of the Company determines it cannot then reject in
favor of the Merger, based on applicable fiduciary duties and the advice
of counsel and (except with respect to furnishing information) for which
financing, to the extent required, is then committed, (B) the Board of
Directors of the Company, after duly considering the written advice of
outside legal counsel to the Company, determines in good faith that such
action is required for the Board of Directors of the Company to comply
with its fiduciary duties to stockholders imposed by Delaware Law and
(C), prior to such authorization by the Board of Directors with respect
to the furnishing of information to, or the entering into discussions or
negotiations with, such person or entity, the Company has provided
written notice to Acquiror to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person or entity; or (ii) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a Competing Transaction. For purposes of
this Agreement, "Competing Transaction" shall mean any merger,
consolidation, share exchange, business combination or similar
transaction involving the Company or any of its Significant Subsidiaries
or the acquisition in any manner, directly or indirectly, of a material
interest in any voting securities of, or a material equity interest in a
substantial portion of the assets of, the Company or any of its
Significant Subsidiaries, other than the transactions contemplated by
this Agreement;
(h) release any third party from its obligations under any existing
standstill agreement or arrangement relating to a Competing Transaction
or otherwise under any confidentiality or other similar agreement
relating to information material to the Company or any of its
subsidiaries;
(i) propose to adopt any amendments to its Certificate of
Incorporation or its Bylaws that would have an adverse effect on the
consummation of the transactions contemplated by this Agreement;
(j) (i) change any of its significant accounting policies or (ii)
make or rescind any express or deemed election relating to taxes, settle
or compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or
change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the
federal income tax returns for the
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taxable year ending December 31, 1994, except, in the case of clause (i)
or clause (ii), as may be required by Law or generally accepted
accounting principles;
(k) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument or under any financing lease, whether pursuant to a
sale-and-leaseback transaction or otherwise, except in the ordinary
course of business consistent with past practice, or pursuant to the
terms in effect on the date of this Agreement of any revolving credit
agreements disclosed in the Company SEC Reports or in Section 5.03(k) of
the Company Disclosure Schedule (or extensions or renewals of such
agreements on terms substantially similar to such agreements, including
an aggregate increase in the actual or potential borrowings under such
agreements, or a new agreement on terms substantially similar to such
agreements, not to exceed $1 million);
(l) enter into any material arrangement, agreement or contract with
any third party (other than customers in the ordinary course of
business) that provides for an exclusive arrangement with that third
party or is substantially more restrictive on the Company or
substantially less advantageous to the Company than arrangements,
agreements or contracts existing on the date hereof; or
(m) agree in writing or otherwise to do any of the foregoing.
SECTION 5.04. NEGATIVE COVENANTS OF ACQUIROR. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the date of this Agreement until the Effective Time, Acquiror
will not do, and will not permit any of its subsidiaries to do, any of the
following:
(a) amend any of the material terms or provisions of the Acquiror
Common Stock;
(b) knowingly take any action that would result in a failure to
maintain the listing of the Acquiror Common Stock on the NYSE;
(c) propose to adopt any amendments to its Certificate of
Incorporation or its Bylaws that would have an adverse effect on the
consummation of the transactions contemplated by this Agreement;
(d) (i) change any of its significant accounting policies or (ii)
make or rescind any express or deemed election relating to taxes, settle
or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes
(except where the amount of such settlements or controversies,
individually or in the aggregate, does not exceed $25 million), except
as may be required by Law or generally accepted accounting principles; or
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(e) agree in writing or otherwise to do any of the foregoing.
SECTION 5.05. ACCESS AND INFORMATION.
(a) The Company shall, and shall cause its subsidiaries to, (i)
afford to Acquiror and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives
(collectively, the "Acquiror Representatives") access during ordinary
business hours and at other reasonable times, upon reasonable prior
notice, to the officers, employees, accountants, agents, properties,
offices and other facilities of the Company and its subsidiaries and to
the books and records thereof and (ii) furnish promptly to Acquiror and
the Acquiror Representatives such information concerning the business,
properties, contracts, records and personnel of the Company and its
subsidiaries (including, without limitation, financial, operating and
other data and information) as may be reasonably requested, from time to
time, by Acquiror.
(b) Acquiror shall, and shall cause its subsidiaries to, (i) afford
to the Company and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives
(collectively, the "Company Representatives") access during ordinary
business hours, upon reasonable prior notice, to the officers,
employees, accountants, agents, properties, offices and other facilities
of Acquiror and its subsidiaries and to the books and records thereof
and (ii) furnish promptly to the Company and the Company Representatives
such information concerning the business, properties, contracts, records
and personnel of Acquiror and its subsidiaries (including, without
limitation, financial, operating and other data and information) as may
be reasonably requested, from time to time, by the Company.
(c) Notwithstanding the foregoing provisions of this Section 5.04,
neither party shall be required to grant access or furnish information
to the other party to the extent that such access or the furnishing of
such information is prohibited by law or contract. No investigation by
the parties hereto made heretofore or hereafter shall affect the
representations and warranties of the parties that are contained herein
and each such representation and warranty shall survive such
investigation.
(d) Each party to this Agreement (the Acquiror Companies being
considered one party for purposes of this Section 5.05(c)) shall hold in
confidence all nonpublic information received from the other party to
this Agreement until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will deliver
to the other party all documents, work papers and other materials
(including copies) obtained by such party or on its behalf from the
other party as a result of this Agreement or in connection herewith,
whether so obtained before or after the execution hereof.
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ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.01. PRESENTATION TO COMPANY STOCKHOLDERS. The Company shall,
promptly after the date of this Agreement, take all actions necessary in
accordance with Delaware Law and its Certificate of Incorporation and Bylaws
to present the Merger and this Agreement to the holders of Company Common
Stock for their consideration and approval either pursuant to the consent of
the requisite percentage of holders of Company Common Stock or by the vote
thereof at a meeting of the Company's stockholders duly called and convened
to act on the Merger and this Agreement (the "Company Stockholders'
Meeting"), and the Company shall consult with Acquiror in connection
therewith. Unless its Board of Directors in the good faith exercise of its
fiduciary duties, after consultation with legal counsel and its financial
advisors, determines not to recommend, or to withdraw its recommendation,
that such matters be approved by the Company's stockholders, the Company
shall, if a Company Stockholders' Meeting is required to be convened, use
all reasonable efforts to solicit from stockholders of the Company proxies in
favor of the approval and adoption of this Agreement and to secure the vote
or consent of stockholders required by Delaware Law and its Certificate of
Incorporation and Bylaws to approve and adopt the Merger and this Agreement.
SECTION 6.02. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
(a) As promptly as practicable after the execution of this
Agreement, Acquiror shall prepare and file with the SEC the Registration
Statement containing a Proxy Statement/Prospectus for stockholders of
the Company in connection with (i) the registration under the Securities
Act of the offer, sale and delivery of Acquiror Common Stock to be
issued in the Merger and the other transactions contemplated by this
Agreement and (ii) the vote of the requisite percentage of the Company's
stockholders with respect to the Merger and this Agreement. Acquiror
and the Company will each use all reasonable efforts to cause the
Registration Statement to become effective as promptly as practicable,
and shall take any action required to be taken in order to comply with
any applicable federal or state securities laws in connection with the
issuance of shares of Acquiror Common Stock in the Merger. Acquiror and
the Company shall each furnish all information concerning itself, its
subsidiaries and the holders of its capital stock as the other may
reasonably request in connection with such actions. As promptly as
practicable after the Registration Statement shall have become
effective, the Company shall mail (the "Mailing Date") the Proxy
Statement/Prospectus to the holders of Company Common Stock of record at
least 20 calendar days prior to the Company Stockholders' Meeting. The
Proxy Statement/Prospectus shall, to the extent consistent with their
fiduciary duties, include the recommendation of the Company's Board of
Directors in favor of the Merger.
(b) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the
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Securities Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements made therein not misleading and (ii) the Proxy
Statement/Prospectus will, at the Mailing Date and at the time of the
Company Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading. If at any
time prior to the Company Stockholders' Meeting any event or
circumstance relating to the Company or any of its affiliates, or its or
their respective officers or directors, should be discovered by the
Company that should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement/Prospectus, the Company
shall promptly inform Acquiror. All documents that the Company is
responsible for filing with any Governmental Entity in connection with
the transactions contemplated hereby, including without limitation the
Proxy Statement/Prospectus to the extent that the information contained
therein relates to the Company and its subsidiaries or the transactions
contemplated hereby, will comply as to form in all material respects
with the provisions of applicable law, including applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations
thereunder, and each such document required to be filed with any
Governmental Entity other than the SEC will comply with the provisions
of applicable law as to the information required to be contained therein.
(c) None of the information supplied or to be supplied by Acquiror
for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement is filed with
the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy
Statement/Prospectus will, at the Mailing Date and at the time of the
Company Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading. If at any
time prior to the Company Stockholders' Meeting any event or
circumstance relating to Acquiror or any of its affiliates, or its or
their respective officers or directors, should be discovered by Acquiror
that should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement/Prospectus, Acquiror shall
promptly inform the Company. All documents that Acquiror is responsible
for filing with any Governmental Entity in connection with the
transactions contemplated hereby, including without limitation the
Registration Statement to the extent that the information contained
therein relates to Acquiror and its subsidiaries or the transactions
contemplated hereby, will comply as to form in all material respects
with the provisions of applicable law, including applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations
thereunder, and each such document required to be filed with any
Governmental Entity other than the SEC will comply with the provisions
of applicable law as to the information required to be contained therein.
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SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company and Acquiror shall each use, and shall cause each
of their respective subsidiaries to use, all reasonable efforts promptly
(i) to take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement, (ii) to obtain from any
Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained by the
Company or Acquiror, respectively, or any of their respective
subsidiaries in connection with the authorization, execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the
Merger, (iii) to make all necessary filings, and thereafter make any
other required submissions, with respect to this Agreement and the
Merger required under (A) the Securities Act and the Exchange Act and
the rules and regulations thereunder, and any other applicable federal
or state securities laws, (B) the HSR Act and (C) any other applicable
Law; provided that Acquiror and the Company shall cooperate with each
other in connection with the making of all such filings, including
providing copies of all such documents to the nonfiling party and its
advisors prior to filing and, if requested, shall accept all reasonable
additions, deletions or changes suggested in connection therewith. The
Company and Acquiror shall furnish all information required for any
application or other filing to be made pursuant to the rules and
regulations of any applicable Law in connection with the transactions
contemplated by this Agreement.
(b) Acquiror and the Company agree, and shall cause each of their
respective subsidiaries, to cooperate and to use all reasonable efforts
to contest and resist any action, including legislative, administrative
or judicial action, and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "Order") that is in effect and that
restricts, prevents or prohibits the consummation of the Merger or any
other transactions contemplated by this Agreement, including, without
limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative action.
Acquiror and the Company also agree to take any and all reasonable
actions, including, without limitation, the disposition of assets or the
withdrawal from doing business in particular jurisdictions, required by
regulatory authorities as a condition to the granting of any approvals
required in order to permit the consummation of the Merger or as may be
required to avoid, lift, vacate or reverse any legislative or judicial
action that would otherwise cause any condition to Closing not to be
satisfied; PROVIDED, HOWEVER, that in no event shall either party take,
or be required to take, any action that could reasonably be expected to
have a Company Material Adverse Effect or an Acquiror Material Adverse
Effect.
(c) The Company and Acquiror shall each promptly give (or shall
cause their respective subsidiaries to give) any notices regarding the
Merger, this Agreement or the transactions contemplated hereby to third
parties required by Law or by any contract, license,
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lease or other agreement to which it is a party or by which it is bound,
and use, and cause its subsidiaries to use, all reasonable efforts to
obtain any third party consents (A) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, (B)
otherwise required under any contracts, licenses, leases or other
agreements in connection with the consummation of the transactions
contemplated by this Agreement or (C) required to prevent a Company
Material Adverse Effect or an Acquiror Material Adverse Effect,
respectively, from occurring after the Effective Time.
(d) If any party shall fail to obtain any third party consent
described in subsection (c)(i) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably requested
by the other parties, to limit the adverse effect upon the Company and
Acquiror, their respective subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
SECTION 6.04. AFFILIATES; POOLING; TAX TREATMENT.
(a) The Company shall use all reasonable efforts to obtain and
deliver to Acquiror an executed letter agreement, substantially in the
form of EXHIBIT A hereto, from (i) each person identified as an
affiliate of the Company in Section 3.13 of the Company Disclosure
Schedule by February 20, 1996, (ii) any person who may be deemed to have
become an affiliate of the Company after the date of this Agreement and
on or prior to the Effective Time as soon as practicable after such
person attains such status and (iii) any person whose agreement thereto
may be deemed reasonably necessary by Acquiror to sustain the Merger's
status as a Pooling Transaction on or prior to the Effective Time.
(b) The Acquiror Companies shall not be required to maintain the
effectiveness of the Registration Statement for the purpose of resale by
stockholders of Acquiror who may be affiliates of the Company or
Acquiror pursuant to Rule 145 under the Securities Act.
(c) Each party hereto shall use all reasonable efforts to cause the
Merger to qualify, and shall not take, and shall use all reasonable
efforts to prevent any affiliate of such party from taking, any actions
which could prevent the Merger from qualifying, as a reorganization
under the provisions of Section 368(a) of the Code.
SECTION 6.05. PUBLIC ANNOUNCEMENTS. The initial press release relating
to this Agreement shall be a joint press release and thereafter, to the
extent practicable, Acquiror and the Company shall consult with each other
before issuing any press release or otherwise making any public statements
with respect to this Agreement or the Merger and shall not issue any such
press release or make any such public statement prior to such consultation.
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SECTION 6.06. NYSE LISTING. Acquiror shall use all reasonable efforts
to cause the shares of Acquiror Common Stock to be issued in the Merger to be
approved for listing (subject to official notice of issuance) on the NYSE
prior to the Effective Time.
SECTION 6.07. STATE TAKEOVER STATUTES. The Company will take all steps
necessary to exempt the transactions contemplated by this Agreement and the
Voting Agreement from, and if necessary challenge the validity of, any
applicable state takeover law, including, without limitation, Section 203 of
Delaware Law. The Company shall take all actions necessary under Delaware
Law, including approving the transactions contemplated by this Agreement and
the Voting Agreement, to ensure that the prohibitions on business
combinations set forth in Section 203 of Delaware Law do not, or will not,
apply to the transactions contemplated by this Agreement and the Voting
Agreement.
SECTION 6.08. ASSUMPTION OF OBLIGATIONS TO ISSUE STOCK.
(a) At the Effective Time, automatically and without any action on
the part of the holder thereof, each then outstanding stock option the
existence of which shall have been disclosed in Section 3.03(d) of the
Company Disclosure Schedule shall be assumed by Acquiror and shall
become an option to purchase that number of shares of Acquiror Common
Stock obtained by multiplying the number of shares of Company Common
Stock issuable upon the exercise of such option by the Common Stock
Exchange Ratio at an exercise price per share equal to the per share
exercise price of such option divided by the Common Stock Exchange Ratio
and otherwise upon the same terms and conditions as such outstanding
options to purchase Company Common Stock; provided, however, that in the
case of any option to which Section 421 of the Code applies by reason of
the qualifications under Section 422 or 423 of such Code, the exercise
price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code.
(b) Acquiror shall take all corporate actions necessary to reserve
for issuance a sufficient number of shares of Acquiror Common Stock for
delivery upon exercise of (i) the stock options assumed by Acquiror
pursuant to Section 6.08(a) above (the "Assumed Stock Options") and
(ii) any warrants issued by Acquiror pursuant to Section 7.02(e).
(c) As promptly as practicable after the Effective Time, but in no
event later than 30 days after the Effective Time, Acquiror shall file a
Registration Statement on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Acquiror Common Stock
subject to the Assumed Stock Options and shall use its best efforts to
maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such
Assumed Stock Options remain outstanding.
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(d) Except as provided herein or as otherwise agreed to by the
parties, each of the Stock Option Plans providing for the issuance or
grant of Assumed Stock Options shall be assumed as of the Effective Time
by Acquiror with such amendments thereto as may be required to reflect
the Merger.
(e) The Company shall take all actions necessary so that each stock
option granted pursuant to any of the Option Plans and outstanding
immediately prior to the Effective Time shall no longer be exercisable
for Company Common Stock and shall become an option to purchase that
number of shares of Acquiror Common Stock obtained by multiplying the
number of shares of Company Common Stock issuable upon the exercise of
such option by the Common Stock Exchange Ratio at an exercise price per
share equal to the per share exercise price of such option divided by
the Common Stock Exchange Ratio and otherwise upon the same terms and
conditions as such outstanding options to purchase Company Common Stock;
provided, however, that in the case of any option to which Section 421
of the Internal Revenue Code applies by reason of the qualifications
under Section 422 or 423 of such Code, the exercise price, the number of
shares purchasable pursuant to such option and the terms and conditions
of exercise of such option shall be determined in order to comply with
Section 424(a) of the Code.
SECTION 6.09. MERGER SUB. Prior to the Effective Time, Merger Sub shall
not conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a DE
MINIMIS amount of cash paid to Merger Sub for the issuance of its stock to
Acquiror) or liabilities.
SECTION 6.10. INDEMNIFICATION AND INSURANCE.
(a) The Company hereby indemnifies and holds harmless Acquiror and
its directors and officers who sign the Registration Statement, from and
against any loss, claim, damage, cost, liability, obligation or expense
(including reasonable attorney's fees and costs of investigation) to
which any indemnified party may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such loss, claim, damage,
cost, liability, obligation or expense or actions in respect thereof
arises out or is based upon any untrue statement or alleged untrue
statement of a material fact relating to such indemnifying party and
contained in the Registration Statement or Proxy Statement/Prospectus or
arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein with respect to such indemnifying party
not misleading or, in the case of the Proxy Statement/Prospectus,
necessary to make the statements therein with respect to such
indemnifying party, in light of the circumstances under which they were
made, not misleading.
(b) Acquiror hereby indemnifies and holds harmless the Company and
its directors and officers from and against any loss, claim, damage,
cost, liability, obligation or expense (including reasonable attorney's
fees and costs of investigation) to which any
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indemnified party may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such loss, claim, damage, cost,
liability, obligation or expense or actions in respect thereof arises
out or is based upon any untrue statement or alleged untrue statement of
a material fact relating to such indemnifying party and contained in the
Registration Statement or the Proxy Statement/Prospectus or arises out
of or is based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein with respect to such indemnifying party not
misleading or, in the case of the Proxy Statement/Prospectus, necessary
to make the statements therein with respect to such indemnifying party,
in light of the circumstances under which they were made, not misleading.
(c) The Company and Acquiror agree that:
(i) Subject to consummation of the Merger and until five years
from the Effective Time, the Certificate of Incorporation and
Bylaws of the Company as in effect at the Effective Time shall not
be amended to reduce or limit the rights of indemnity afforded to
the present and former directors and officers of the Company
thereunder or as to the ability of the Company to indemnify such
persons, or to hinder, delay or make more difficult the exercise of
such rights of indemnity or the ability to indemnify;
(ii) the Company, as the surviving corporation of the Merger,
will at all times exercise the powers granted to it by its
Certificate of Incorporation, its Bylaws and by applicable law to
indemnify to the fullest extent possible the present or former
directors, officers, employees and agents of the Company against
claims made against them arising from their service in such
capacities;
(iii) should any claim or claims be made against any present
or former director, officer, employee or agent of the Company
arising from his services as such, within five years of the
Effective Time, the provisions of this Section 6.10(c) respecting
the Certificate of Incorporation and Bylaws of the Company shall
continue in effect until the final disposition of all such claims;
(iv) notwithstanding anything to the contrary in this Section
6.10, the Company shall not be liable for any settlement effected
without its written consent, which shall not be unreasonably
withheld; and
(v) the provisions of this Section 6.10(c) are intended to be
for the benefit of, and shall be enforceable by, each party
entitled to indemnification hereunder, his heirs and his
representatives.
(c) Acquiror hereby agrees after the Effective Time to guarantee the
payment of the Company's indemnification obligations pursuant to Section
6.10(b)(ii) up to an amount determined
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as of the Effective Time equal to (i) the fair market value of any assets of
the Company or any of its subsidiaries distributed to Acquiror or any of its
subsidiaries (other than the Company and its subsidiaries), minus (ii) any
liabilities of the Company or any of its subsidiaries assumed by Acquiror or
any of its subsidiaries (other than the Company and its subsidiaries), minus
(iii) the fair market value of any assets of Acquiror or any of its
subsidiaries (other than the Company and its subsidiaries) contributed to the
Company or any of its subsidiaries and (iv) plus any liabilities of Acquiror
or any of its subsidiaries (other than the Company and its subsidiaries)
assumed by the Company or any of its subsidiaries.
SECTION 6.11. OPINION OF FINANCIAL ADVISOR. The Company agrees to use
all reasonable efforts to obtain a written opinion of Montgomery Securities
to the effect that as of the date of the Company's Board of Directors meeting
approving the Merger, the Merger Consideration to be received by the holders
of the Company Common Stock pursuant to the Merger is fair to such
stockholders from a financial point of view, to obtain the consent of such
firm to include such opinion and the name of such firm in the Proxy
Statement/Prospectus, to obtain a reasonable description of such opinion from
such firm for inclusion in the Proxy Statement/Prospectus and to provide a
copy of such opinion to to Acquiror.
ARTICLE VII.
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions
(any or all of which may be waived by the parties hereto in writing, in whole
or in part, to the extent permitted by applicable Law):
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated by the SEC.
(b) STOCKHOLDER APPROVAL. The Merger and this Agreement shall have
been approved and adopted by the requisite vote of the stockholders of
the Company.
(c) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger.
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(d) HSR ACT. The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
(e) ACQUIROR TAX OPINION. Acquiror shall have received from Vinson
& Elkins L.L.P. a written opinion dated as of the date (the "Mailing
Date") the Proxy Statement/Prospectus is mailed to the stockholders of
the Company to the effect that the Merger, when effected in accordance
with this Agreement, will qualify as a reorganization under Section
368(a) of the Code and Acquiror, Merger Sub and the Company will
constitute parties to such reorganization, and a copy of such opinion
shall have been delivered to the Company.
(f) COMPANY TAX OPINION. The Company shall have received from
Boyer, Ewing & Harris Incorporated a written opinion dated as of the
Mailing Date to the effect that the Merger, when effected in accordance
with this Agreement, will qualify as a reorganization under Section
368(a) of the Code and Acquiror, Merger Sub and the Company will
constitute parties to such reorganization and that the receipt of the
Merger Consideration by the stockholders of the Company will be
nontaxable to such stockholders, and a copy of such opinion shall have
been delivered to Acquiror.
(g) ABSENCE OF REGULATORY CONDITIONS. There shall not have been
any action taken or condition, restriction or limitation imposed by any
Governmental Entity in connection with the grant of a regulatory
approval necessary to the consummation of the Merger and the
transactions contemplated hereby that would, with respect to the
continuing business, operations or future prospects of the Company,
constitute a Company Material Adverse Effect or an Acquiror Material
Adverse Effect.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE ACQUIROR
COMPANIES. The obligations of the Acquiror Companies to effect the Merger
and the other transactions contemplated by this Agreement are also subject to
the following conditions (any or all of which may be waived by Acquiror in
writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of the Company contained in this Agreement shall be true
and correct in all material respects as of the Effective Time as though
made on and as of the Effective Time. The Acquiror Companies shall have
received a certificate of the President and the Chief Financial Officer
of the Company, in their capacities as such, dated as of the Effective
Time, to such effect; provided that the Chief Financial Officer of the
Company shall only certify as to the representations and warranties
contained in Section 3.07.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. The Acquiror
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Companies shall have received a certificate of the President of the
Company, in his capacity as such, dated the date of the Effective Time,
to that effect.
(c) BLUE SKY. The Acquiror Companies shall have received all "blue
sky" permits and other authorizations necessary to consummate the
transactions contemplated by this Agreement.
(d) POOLABLE ENTITY OPINION. The Acquiror Companies shall have
received a written opinion from Price Waterhouse LLP dated the date of
the Effective Time to the effect that the Company is a "poolable entity"
for financial accounting purposes.
(e) COMMON STOCK WARRANTS. All of the Common Stock Warrants (i)
shall have been exercised by the holders thereof in accordance with
their terms, (ii) shall have terminated in accordance with their terms
or (iii) shall have been surrendered in exchange for other warrants
issued by Acquiror exercisable for a number of shares of Acquiror Common
Stock determined by multiplying the number of shares subject to the
Common Stock Warrant or Warrants by the Common Stock Exchange Ratio but
otherwise on the same terms and provisions as are contained in the
Common Stock Warrants, and the Preferred Stock Warrant shall not have
been exercised.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby are also subject to the following conditions (any or all
of which may be waived by the Company in writing, in whole or in part):
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of the Acquiror Companies contained in this Agreement
shall be true and correct in all material respects as of the Effective
Time as though made on and as of the Effective Time. The Company shall
have received a certificate of the President and the Chief Financial
Officer of each of the Acquiror Companies, in their capacities as such,
dated as of the Effective Time, to such effect.
(b) AGREEMENTS AND COVENANTS. The Acquiror Companies shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time. The Company shall have received
a certificate of the President and the Chief Financial Officer of each
of the Acquiror Companies, in their capacities as such, dated the date
of the Effective Time, to that effect.
(c) NYSE LISTING. The shares of Acquiror Common Stock to be issued
in the Merger shall be approved for listing (subject to official notice
of issuance) on the NYSE.
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ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this
Agreement and the Merger by the stockholders of the Company:
(a) by mutual consent of Acquiror and the Company;
(b) by Acquiror, upon a breach of any material representation,
warranty, covenant or agreement on the part of the Company set forth in
this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case such that the conditions set
forth in Section 7.02(a) or Section 7.02(b) of this Agreement would not
be satisfied (a "Terminating Company Breach"); PROVIDED THAT, if such
Terminating Company Breach is curable by the Company through the
exercise of reasonable efforts and for so long as the Company continues
to exercise such reasonable efforts (or, if shorter, for 30 days),
Acquiror may not terminate this Agreement under this Section 8.01(b);
(c) by the Company, upon breach of any material representation,
warranty, covenant or agreement on the part of the Acquiror Companies
set forth in this Agreement, or if any representation or warranty of the
Acquiror Companies shall have become untrue, in either case such that
the conditions set forth in Section 7.03(a) or Section 7.03(b) of this
Agreement would not be satisfied (a "Terminating Acquiror Breach");
PROVIDED THAT, if such Terminating Acquiror Breach is curable by the
Acquiror Companies through the exercise of their reasonable efforts and
for so long as the Acquiror Companies continue to exercise such
reasonable efforts (or, if shorter, for 30 days), the Company may not
terminate this Agreement under this Section 8.01(c);
(d) by either Acquiror or the Company, if there shall be any Order
which is final and nonappealable preventing the consummation of the
Merger, unless the party seeking to terminate this Agreement has not
complied with its obligations under Section 6.03(b) of this Agreement;
(e) by either Acquiror or the Company, if the Merger shall not have
been consummated before July 1, 1996; PROVIDED, HOWEVER, that this
Agreement may be extended by written notice of either Acquiror or the
Company to a date not later than September 30, 1996, if the Merger shall
not have been consummated as a result of the Company or the Acquiror
Companies having failed by July 1, 1996 to receive all required
regulatory approvals or consents with respect to the Merger or as a
result of the entering of an Order;
(f) by either Acquiror or the Company, if the Merger and this
Agreement, when presented to the holders of Company Common Stock for
their consideration, whether by vote
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or by consent, shall fail to receive the requisite vote or consent for
approval and adoption by the stockholders of the Company;
(g) by Acquiror, if (i) the Board of Directors of the Company
withdraws, modifies or changes its recommendation of this Agreement or
the Merger in a manner adverse to the Acquiror Companies or shall have
resolved to do any of the foregoing or the Board of Directors of the
Company shall have recommended to the stockholders of the Company any
Competing Transaction or resolved to do so; (ii) a tender offer or
exchange offer for outstanding shares of capital stock of the Company
then representing more of the combined power to vote generally for the
election of directors than is subject to the Voting Agreement as of the
date of this Agreement is commenced, and the Board of Directors of the
Company does not recommend that stockholders not tender their shares
into such tender or exchange offer or; (iii) any person shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations promulgated
hereunder), shall have been formed which beneficially owns, or has the
right to acquire beneficial ownership of, outstanding shares of capital
stock of the Company then representing more of the combined power to
vote generally for the election of directors than is subject to the
Voting Agreement as of the date of this Agreement; or
(h) by the Company or Acquiror, if the Company accepts a Superior
Proposal and makes payment as required pursuant to Section 8.05(c)(i) of
this Agreement and of the Expenses for which the Company is responsible
under Section 8.05(a) of this Agreement. For purposes of this
Agreement, "Superior Proposal" means a bona fide written proposal made
by a third party relating to a Competing Transaction on terms that the
Board of Directors of the Company determines it cannot reject in favor
of the Merger, based on applicable fiduciary duties and the advice of
counsel and for which financing, to the extent required, is then
committed.
The right of any party hereto to terminate this Agreement pursuant to
this Section 8.01 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers,
directors, employees, accountants, consultants, legal counsel, agents or
other representatives whether prior to or after the execution of this
Agreement.
SECTION 8.02. EFFECT OF TERMINATION. Except as provided in Section
5.05(d), Section 8.05 and Section 9.01 of this Agreement, in the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, there shall be no liability on the part of the
Acquiror Companies or the Company or any of their respective officers or
directors to the other and all rights and obligations of any party hereto
shall cease, except that nothing herein shall relieve any party from its
obligations with respect to any breach of this Agreement.
-46-
<PAGE>
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
after approval of the Merger by the stockholders of the Company, no amendment
may be made that would reduce the amount or change the type of consideration
into which each share of Company Common Stock shall be converted pursuant to
this Agreement upon consummation of the Merger. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other party with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party or parties to be bound
thereby. For purposes of this Section 8.04, the Acquiror Companies as a
group shall be deemed to be one party.
SECTION 8.05. FEES, EXPENSES AND OTHER PAYMENTS.
(a) All Expenses (as defined in paragraph (b) of this Section 8.05)
incurred by the parties hereto shall be borne solely and entirely by the
party which has incurred such Expenses; PROVIDED, HOWEVER, that the
allocable share of the Acquiror Companies as a group and the Company for
all Expenses related to printing, filing and mailing the Registration
Statement, the Proxy Statement/Prospectus and all SEC and other
regulatory filing fees incurred in connection with the Registration
Statement and the Proxy Statement/Prospectus (other than fees and
disbursements of counsel, accountants and investment bankers) shall be
one-half each; AND PROVIDED FURTHER that Acquiror may, at its option,
pay any Expenses of the Company.
(b) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including, without limitation, all
reasonable fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates)
incurred by a party or on its behalf in connection with or related to
the authorization, preparation, negotiation, execution and performance
of this Agreement, the preparation, printing, filing and mailing of the
Registration Statement and the Proxy Statement/Prospectus, the
solicitation of stockholder approvals and all other matters related to
the consummation of the transactions contemplated hereby.
(c) The Company agrees that, if (i) this Agreement is terminated
pursuant to Section 8.01(f) and, prior to the presentment of the Merger
and this Agreement to the holders of Company Common Stock pursuant to
Section 6.01 herein, the Company shall have furnished information to, or
entered into discussions or negotiations with, any person or entity with
respect to a Competing Transaction involving the Company or any of its
-47-
<PAGE>
subsidiaries and the Board of Directors of the Company shall not have
reaffirmed its recommendation to the stockholders of the Company with
respect to the transactions contemplated by this Agreement by the time
of such presentment; (ii) Acquiror terminates this Agreement pursuant to
Section 8.01(g); (iii) the Company or Acquiror terminates this Agreement
pursuant to Section 8.01(h) or (iv)(A) Acquiror or the Company
terminates this Agreement pursuant to Section 8.01(b) or 8.01(e) at a
time that a Terminating Company Breach exists (except solely for
purposes of this subsection 8.05(c) a breach of a representation shall
not be deemed to be a Terminating Company Breach if the representation
was true and correct as of the date hereof), and (B) within nine months
after such termination (1) a Competing Transaction (other than sale by
the Company of newly issued securities (x) to the public in general or
(y) in one or more private placements, so long as the securities sold in
such private placements do not represent more of the combined power to
vote generally for the election of directors (including, for this
purpose, such additional power, if any, of the maximum number of
securities that the holders of the securities sold in such private
placements may acquire upon conversion or exercise of such securities or
otherwise) than is subject to the Voting Agreement as of the date of
this Agreement or (2) any person shall have acquired beneficial
ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder), shall have been
formed which beneficially owns, or has the right to acquire beneficial
ownership of, outstanding shares of capital stock of the Company then
representing more of the combined power to vote generally for the
election of directors than is subject to the Voting Agreement as of the
date of this Agreement, then in any such case the Company shall pay to
Acquiror $1,000,000.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth in Section 9.01(b) of this Agreement, the
representations, warranties, covenants and agreements of each party
hereto shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any other party hereto, any
person controlling any such party or any of their officers, directors,
representatives or agents whether prior to or after the execution of
this Agreement.
(b) The representations, warranties, covenants and agreements in
this Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Article VIII, except that the
agreements set forth in Articles I and II and Sections 6.08 and 6.10
shall survive the Effective Time and those set forth in Sections
5.05(d), 8.02 and 8.05 and Article IX hereof shall survive termination.
-48-
<PAGE>
SECTION 9.02. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses ( or at such other address for a party as shall be
specified by like changes of address) or sent by electronic transmission to
the telecopier number specified below:
(a) If to any of the Acquiror Companies, to:
HORIZON/CMS HEALTHCARE CORPORATION
6001 Indian School Road
Suite 500
Albuquerque, New Mexico 87110
Attention: General Counsel
Telecopier No.: (505) 881- 4961
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: William E. Joor III
Telecopier No.: (713) 758-2346
(b) If to the Company, to:
MEDICAL INNOVATIONS, INC.
One Riverway
Suite 2300
Houston, Texas 77056
Attention: General Counsel
Telecopier No.: (713) 688-6600
with a copy to:
Boyer, Ewing & Harris Incorporated
The Coastal Tower
Nine Greenway Plaza
Suite 3100
Houston, TX 77046
Attention: John R. Boyer, Jr., Esq.
Telecopier No.: (713) 871-2024
-49-
<PAGE>
SECTION 9.03. CERTAIN DEFINITIONS. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in the
State of New York are authorized or obligated to be closed;
(c) "control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause
the direction of the management or policies of a person, whether through
the ownership of stock or as trustee or executor, by contract or credit
arrangement or otherwise;
(d) "knowledge" or "known" shall mean, with respect to any matter in
question, if an executive officer of the Company or Acquiror, as the
case may be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d) of the Exchange Act);
(f) "Proxy Statement/Prospectus" shall mean a proxy
statement/prospectus included in the Registration Statement at the time
the Registration Statement is declared effective under the Securities
Act and meeting the requirements of Schedule 14A of the SEC's Proxy
Rules promulgated pursuant to the Exchange Act:
(g) "Registration Statement" shall mean a registration statement of
Acquiror on Form S-4 filed with the SEC pursuant to the Securities Act
for the purpose of registering thereunder the offering, sale and
delivery of the Acquiror Common Stock to be issued pursuant to the
Merger;
(h) "Significant Subsidiary" means any subsidiary of the Company or
Acquiror, as the case may be, that would constitute a Significant
Subsidiary of such party within the meaning of Rule 1-02 of Regulation
S-X of the SEC;
(i) "subsidiary" or "subsidiaries" of the Company, Acquiror, the
Surviving Corporation or any other person, means any corporation,
partnership, joint venture or other legal entity of which the Company,
Acquiror, the Surviving Corporation or an such other person, as the case
may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
-50-
<PAGE>
interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity; and
(j) "Tax" or "Taxes" shall mean any and all taxes, charges, fees,
levies, assessments, duties or other amounts payable to any federal,
state, local or foreign taxing authority or agency, including, without
limitation, (i) income, franchise, profits, gross receipts, minimum,
alternative minimum, estimated, ad valorem, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, transfer and gains taxes, (ii) customs, duties,
imposts, charges, levies or other similar assessments of any kind, and
(iii) interest, penalties and additions to tax imposed with respect
thereto.
(k) "Trading Day" shall mean each business day on which the NYSE is
open for trading.
(l) "Voting Agreement" shall mean the Voting Agreement dated as of
even date herewith by and between Acquiror and the stockholders of the
Company named therein.
SECTION 9.04. HEADINGS . 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.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 9.06. ENTIRE AGREEMENT. This Agreement (together with the
Exhibits, the Company Disclosure Schedule and the Acquiror Disclosure
Schedule), constitute the entire agreement of the parties, and supersede all
prior agreements and undertakings, both written and oral, among the parties,
with respect to the subject matter of this Agreement.
SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise.
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<PAGE>
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and the beneficiaries of
the provisions of Section 6.11 herein, and nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.09. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 9.10. 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.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
SECTION 9.12. SPECIFIC PERFORMANCE. The parties hereby acknowledge and
agree that the failure of any party to this Agreement to perform its
agreement and covenants hereunder, including its failure to take all actions
as are necessary on its part to the consummation of the Merger, will cause
irreparable injury to the other parties to this Agreement for which damages,
even if available, will not be an adequate remedy. Accordingly, each of the
parties hereto hereby consents to the issuance of injunctive relief by any
court of competent jurisdiction to compel performance of any party's
obligations and to the granting by any such court of the remedy of specific
performance of such party's obligations hereunder.
-52-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first written above by their respective
officers thereunto duly authorized.
HORIZON/CMS HEALTHCARE CORPORATION
By: /s/ Neal M. Elliott
--------------------------------------
Neal M. Elliott
Chairman of the Board, Chief Executive
Officer and President
HORIZON MI CORPORATION
By: /s/ Neal M. Elliott
--------------------------------------
Neal M. Elliott
President
MEDICAL INNOVATIONS, INC.
By: /s/ Mark H. Fisher
--------------------------------------
Mark H. Fisher
Chairman of the Board and
Chief Executive Officer
-53-
<PAGE>
EXHIBIT C
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of February 13,
1996 and is by and among Horizon/CMS Healthcare Corporation, a Delaware
corporation ("Acquiror"), and the undersigned stockholders (collectively, the
"Stockholders") of Medical Innovations, Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, as of the date hereof, the Stockholders own beneficially an
aggregate of 9,168,287 shares (the "Shares") of Common Stock, par value
$.0075 per share ("Company Common Stock"), of the Company, comprised of (i)
6,855,285 shares of Company Common Stock that are currently outstanding,
(ii) 1,713,002 shares of Company Common Stock that may be issued upon
exercise of Common Stock Purchase Warrants ("Warrant Shares") and (iii)
600,000 shares of Company Common Stock that may be issued upon exercise of
stock options ("Option Shares");
WHEREAS, Acquiror is prepared to enter into an Agreement and Plan of
Merger with the Company (the "Merger Agreement") providing for the merger of
a wholly owned subsidiary of Acquiror into the Company and the conversion in
such merger of each share of Company Common Stock into the number of shares
of the Common Stock, par value $.001 per share, of Acquiror set forth in the
Merger Agreement (the "Merger");
WHEREAS, the Stockholders fully support the Merger and, in order to
encourage Acquiror to enter into the Merger Agreement with the Company, the
Stockholders are willing to enter into certain arrangements with respect to
the Shares;
NOW THEREFORE, in consideration of the premises set forth above, the
mutual promises set forth below, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES. Each of the Stockholders hereby
represents and warrants to Acquiror as follows:
(a) Annex I hereto sets forth opposite the name of such
Stockholder the number of outstanding Shares, Warrant Shares and Option
Shares beneficially owned by such Stockholder.
(b) Such Stockholder has full power and authority to enter into
this Agreement.
<PAGE>
(c) Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) conflict with
or result in a breach, default or violation of (A) any of the terms,
provisions or conditions of the organizational or similar documents, if
any, of such Stockholder or (B) to the knowledge of such Stockholder, any
statute or other law, any rule or regulation of, or any license or permit
granted by, any governmental agency or authority, any judgment, order or
decree of any court, governmental agency or authority or arbitration
tribunal or any contract, agreement, proxy or other document or instrument
to which such Stockholder is a party or by which it is bound or to which it
is subject, (ii) result in the creation of any lien, charge or other
encumbrance on any of the Shares beneficially owned by such Stockholder or
(iii) require the Stockholder to obtain the consent of any private
nongovernmental third party.
(d) No consent, action, approval or authorization of, or
registration, declaration or filing with, any governmental agency or
authority or any other person or entity is required to authorize, or is
otherwise required in connection with, the execution and delivery of this
Agreement by such Stockholder or such Stockholder's performance of the
terms of this Agreement or the validity or enforceability of this
Agreement.
2. STOCKHOLDERS' SUPPORT OF THE MERGER. From the date hereof until September
1, 1996, or, if earlier, termination of the Merger Agreement:
(a) No Stockholder will, directly or indirectly, sell, transfer,
pledge or otherwise dispose of, or grant a proxy with respect to, any of
the Shares to any person other than Acquiror or its designee, or grant an
option with respect to any of the foregoing, or enter into any other
agreement or arrangement with respect to any of the foregoing.
(b) No Stockholder will initiate, solicit or encourage (including
by way of furnishing information or assistance), or take any other action
to facilitate, any inquiries or the making of any proposal relating to, or
that may reasonably be expected to lead to, any merger, consolidation,
share exchange, business combination or similar transaction involving the
Company or any of its subsidiaries or the acquisition in any manner,
directly or indirectly, of a material equity interest in any voting
securities of, or a substantial portion of the assets of, the Company or
any of its Significant Subsidiaries, other than the transactions
contemplated by the Merger Agreement (a "Competing Transaction"), or
enter into discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Competing Transaction, or
agree to, or endorse, any Competing Transaction, or authorize or permit
any employee, investment banker, financial advisor, attorney,
accountant or other representative retained by any Stockholder to take
any such action. Each Stockholder shall promptly notify Acquiror of
all relevant terms of any such inquiries or proposals received by such
Stockholder or by any such employee, investment banker, financial
advisor, attorney, accountant or other representative relating to any
of such matters and if such inquiry or proposal is in writing, such
Stockholder shall deliver or cause to be delivered to Acquiror a copy
of such inquiry or proposal.
-2-
<PAGE>
(c) Each Stockholder agrees that such Stockholder will vote
(by proxy or in person) or execute and deliver a written consent with
respect to all Shares beneficially owned by such Stockholder (i) in
favor of the Merger and (ii), subject to the provisions of paragraph
(d) below, against any combination proposal or other matter that may
interfere or be inconsistent with the Merger (including without
limitation a Competing Transaction).
(d) Each Stockholder agrees that, if requested by Acquiror,
it will not attend or vote any Shares beneficially owned by any such
Stockholder at any annual or special meeting of stockholders, or
execute any written consent of stockholders, during such period.
(e) Each Stockholder shall take all affirmative steps
reasonably requested by Acquiror to indicate the full support of such
Stockholder for the Merger, and hereby consents to Acquiror's
announcement in any press release, public filing, advertisement or
other document, that such Stockholder fully supports the Merger.
(f) Acquiror and each of the Stockholders agree that they shall
use all reasonable efforts to seek the successful completion of the
Merger in an expeditious manner.
(g) To the extent inconsistent with the provisions of this Section
2, each Stockholder hereby revokes any and all proxies by such Stockholder
with respect to the Shares or any other voting securities of the Company
beneficially owned by such Stockholder.
Nothing in this Agreement shall be deemed to prohibit any Stockholder
from acting in accordance with such Stockholder's fiduciary duties solely to
the extent that such Stockholder is acting in the capacity of officer or
director of the Company.
3. MISCELLANEOUS
(a) The Stockholders, on the one hand, and Acquiror, on the
other, acknowledge and agree that irreparable damage would occur if 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 the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, in addition to any other
remedy to which they may be entitled at law or equity.
(b) Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(c) All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be validly given, made or
served, if in writing and delivered personally, by telecopier or sent by
registered mail, postage prepaid:
-3-
<PAGE>
If to Acquiror:
HORIZON/CMS HEALTHCARE CORPORATION
6001 Indian School Road
Suite 500
Albuquerque, New Mexico 87110
Attention: General Counsel
Telecopier No.: (505) 881-4961
with a copy to:
Vinson & Elkins L.L.P.
3600 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Attention: William E. Joor III
Telecopier No.: (713) 758-2346
If to the Stockholders:
c/o MEDICAL INNOVATIONS, INC.
One Riverway
Suite 2300
Houston, Texas 77056
Attention: General Counsel
Telecopier No.: (713) 688-6600
with a copy to:
Boyer, Ewing & Harris Incorporated
The Coastal Tower
Nine Greenway Plaza
Suite 3100
Houston, Texas 77046
Attention: John R. Boyer, Jr.
Telecopier No.: (713) 871-2024
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed delivered on the day the sender receives
telecopier confirmation that such notice was received at the telecopier
number of the addressee. Notice given by mail as set out above shall be
deemed delivered three days after the date the same is postmarked.
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<PAGE>
(d) From and after the termination of this Agreement, the
covenants of the parties set forth herein shall be of no further force or
effect and the parties shall be under no further obligation with respect
thereto.
(e) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) A person shall be deemed a "beneficial owner" of or to
have "beneficial ownership" Shares in accordance with the
interpretation of the term "beneficial ownership" as defined in
Rule 13-d(3) under the Exchange Act, as in effect on the date hereof,
provided that a person shall be deemed to be the beneficial owner of,
and to have beneficial ownership of, Shares that such person or any
Affiliate of such person has the right to acquire (whether such right
is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrant or options,
or otherwise.
(ii) "Merger" shall mean the transaction referred to in the
second whereas clause of this Agreement or any amendment to or
modification of such transaction that does not reduce the value of
the financial consideration to be received by Stockholders pursuant
such transaction.
(iii) "Significant Subsidiary" shall have the meaning
ascribed to it in Rule 1-02 of SEC Regulation S-X as in effect on the
date hereof.
(h) This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns, but shall not be assignable by
any party hereto without the prior written consent of the other parties
hereto.
(i) No party may waive any of the terms or conditions of this
Agreement except by a duly signed writing referring to the specific
provision to be waived.
(j) This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware.
(k) This Agreement constitutes the entire agreement, and
supersedes all other and prior agreements and understandings, both written
and oral, among the parties hereto.
(l) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute
one and the same instrument.
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<PAGE>
(m) This Agreement shall be effective among, be binding upon, and
inure to the benefit of, the parties that execute this Agreement without
regard to whether one or more of the Stockholders set forth on the
signature page hereto executes this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Stockholders have executed and Acquiror has
caused a duly authorized officer to execute this Agreement, all as of the day
and year first above written.
HORIZON/CMS HEALTHCARE CORPORATION
By: /s/ NEAL M. ELLIOTT
----------------------------------
Neal M. Elliott
Chairman of the Board, President
and Chief Executive Officer
STOCKHOLDERS:
/s/ HARVEY R. HOUCK, JR.
-------------------------------------
Harvey R. Houck, Jr.
Harvey R. Houck, Jr. & Patricia W.
Houck Foundation, Inc.
By: /s/ HARVEY R. HOUCK, JR.
----------------------------------
Harvey R. Houck
Title:
/s/ MARK H. FISHER
-------------------------------------
Mark H. Fisher
/s/ ARTHUR RICE
-------------------------------------
Arthur Rice
/s/ LAURETTA RICE COLVIN
-------------------------------------
Lauretta Rice Colvin
/s/ ANGELA RICE MCBRIDE
-------------------------------------
Angela Rice McBride
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<PAGE>
/s/ THOMAS KALED
-------------------------------------
Thomas Kaled
/s/ LUIS CAMPOS
-------------------------------------
Luis Campos
/s/ PHILLIP TUTTLE
-------------------------------------
Phillip Tuttle
/s/ JOHN SCHURWON
-------------------------------------
John Schurwon
-8-
<PAGE>
ANNEX I
TO
VOTING AGREEMENT
DATED AS OF FEBRUARY 13, 1996
<TABLE>
<CAPTION>
SHARES WARRANT OPTION
SHAREHOLDER OUTSTANDING SHARES SHARES TOTAL
- ----------- ----------- ------- ------ -----
<S> <C>
Harvey R. Houck, Jr. 489,241 1,211,046 0 1,700,287
Mark H. Fisher 450,755 483,774 0 934,529
Arthur Rice 2,033,609 0 100,000 2,133,609
Thomas Kaled 948,409 0 250,000 1,198,409
Luis Campos 744,795 0 250,000 994,795
Phillip Tuttle 468,004 0 0 468,004
Harvey R. Houck and
Patricia W. Houch Foundation, Inc. 400,000 0 0 400,000
Lauretta Rice Colvin 493,612 0 0 493,612
Angela Rice McBride 493,612 0 0 493,612
John Schurwon 333,248 18,182 0 351,430
--------- --------- ------- ---------
Totals 6,885,285 1,713,002 600,000 9,168,287
--------- --------- ------- ---------
--------- --------- ------- ---------
</TABLE>
