<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
AMENDMENT NO. 1 TO 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)
MAY 15, 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. / /
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 8,588,287 shares, which
constitutes approximately 48.6% of the total number of shares outstanding.
Ownership percentages set forth herein assume that at May 15, 1996 there were
17,687,882 shares outstanding.
<PAGE>
- --------------------------------------------------------------------------------
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) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER 0
OF --------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,588,287
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
8,588,287
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.6%
- --------------------------------------------------------------------------------
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 dated as of May 15, 1996 (the "Merger Agreement"), pursuant
to which Merger Sub would merge with and into MI (the "Merger"). Pursuant to
and subject to the terms of, 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 the right to receive
$1.85 (the "Merger Consideration").
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<PAGE>
Notwithstanding the foregoing, if between May 15, 1996 and the Effective Time,
the outstanding shares of 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 Merger Consideration 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 herein by reference.
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 and
the receipt of certain regulatory approvals. 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
third quarter of 1996.
Pursuant to a Termination Agreement dated May 15, 1996 (the "Termination
Agreement") Horizon, Merger Sub and MI, simultaneous with the execution of the
Merger Agreement, terminated that certain Agreement and Plan of Merger dated as
of February 13, 1996 among such parties. A copy of the Termination Agreement
is included as Exhibit C to this Schedule 13D, and the Termination Agreement
is specifically incorporated herein by reference.
Pursuant to a Voting Agreement, dated as of May 15, 1996 (the "Voting
Agreement"), between Horizon and certain stockholders of MI holding in the
aggregate 8,588,287 shares of MI Common Stock (or approximately 48.6% of the
number of shares outstanding on May 15, 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 D to this Schedule 13D, and the Voting Agreement is
specifically incorporated herein by reference.
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 or be inconsistent with the Merger. Consequently Horizon
shares voting, but not dispositive, power as to such 8,588,287 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
the 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 May 15, 1996,
by and among Horizon, Merger Sub and MI.
Exhibit C -- Termination Agreement, dated as of May 15, 1996 by and among
Horizon, Merger Sub and MI.
Exhibit D -- Voting Agreement, dated as of May 15, 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: June 5, 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
May 15, 1996, by and among Horizon/CMS
Healthcare Corporation, Horizon MI Corporation
and Medical Innovations, Inc.
C Termination Agreement, dated as of May 15, 1996
by and among Horizon/CMS Healthcare Corporation,
Horizon MI Corporation and Medical Innovations, Inc.
D Voting Agreement, dated as of May 15, 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>
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 1.02. 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 . . . . . . . . . . . . . . . . . . . 3
SECTION 2.04. STOCK TRANSFER BOOKS . . . . . . . . . . . . . . . 5
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . . . 5
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. . . . . . 6
SECTION 3.03. CAPITALIZATION . . . . . . . . . . . . . . . . . . 6
SECTION 3.04. AUTHORITY. . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . 8
SECTION 3.06. PERMITS; COMPLIANCE. . . . . . . . . . . . . . . . 9
SECTION 3.07. REPORTS; FINANCIAL STATEMENTS. . . . . . . . . . . 11
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . 12
SECTION 3.09. ABSENCE OF LITIGATION. . . . . . . . . . . . . . . 13
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. . . . . . . 13
SECTION 3.11. TAXES. . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.12. CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . 16
SECTION 3.13. VOTE REQUIRED. . . . . . . . . . . . . . . . . . . 16
SECTION 3.14. BROKERS. . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.15. INSURANCE. . . . . . . . . . . . . . . . . . . . . 16
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<PAGE>
SECTION 3.16. PROPERTIES . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.17. MANAGEMENT CONTRACTS . . . . . . . . . . . . . . . 17
SECTION 3.18. OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . 17
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.. . . 17
SECTION 4.02. AUTHORITY. . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . 18
SECTION 4.04. VOTE REQUIRED. . . . . . . . . . . . . . . . . . . 19
SECTION 4.05. BROKERS. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.06. SUFFICIENT FUNDS . . . . . . . . . . . . . . . . . 19
ARTICLE V.
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY . . . . . . . 20
SECTION 5.02. NEGATIVE COVENANTS OF THE COMPANY. . . . . . . . . 20
SECTION 5.03. NEGATIVE COVEANTS OF ACQUIROR. . . . . . . . . . . 23
SECTION 5.04. ACCESS AND INFORMATION . . . . . . . . . . . . . . 23
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.01. PRESENTATION TO COMPANY STOCKHOLDERS . . . . . . . 24
SECTION 6.02. PROXY STATEMENT. . . . . . . . . . . . . . . . . . 25
SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS. . . . . . . 26
SECTION 6.04. PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . 27
SECTION 6.05. STATE TAKEOVER STATUTES. . . . . . . . . . . . . . 27
SECTION 6.06. MERGER SUB . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.07. INDEMNIFICATION AND INSURANCE. . . . . . . . . . . 28
SECTION 6.08. OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . 29
SECTION 6.09. STOCK OPTIONS. . . . . . . . . . . . . . . . . . . 29
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<PAGE>
ARTICLE VII.
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE ACQUIROR
COMPANIES. . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE
COMPANY. . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. . . . . . . . . . . . . . . . . . . . 31
SECTION 8.02. EFFECT OF TERMINATION. . . . . . . . . . . . . . . 33
SECTION 8.03. AMENDMENT. . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.04. WAIVER . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.05. FEES, EXPENSES AND OTHER PAYMENTS. . . . . . . . . 34
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS . . . . . . . . . . . . . . . . . . . . 35
SECTION 9.02. NOTICES. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 9.03. CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . 36
SECTION 9.04. HEADINGS . . . . . . . . . . . . . . . . . . . . . 37
SECTION 9.05. SEVERABILITY . . . . . . . . . . . . . . . . . . . 37
SECTION 9.06. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . 38
SECTION 9.07. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.08. PARTIES IN INTEREST. . . . . . . . . . . . . . . . 38
SECTION 9.09. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.10. GOVERNING LAW. . . . . . . . . . . . . . . . . . . 38
SECTION 9.11. COUNTERPARTS . . . . . . . . . . . . . . . . . . . 38
SECTION 9.12. SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . 38
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 15, 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; and
WHEREAS, Acquiror, Merger Sub and the Company have agreed to terminate that
certain Agreement and Plan of Merger dated February 13, 1996 by and among the
parties hereto simultaneously with the execution of this Agreement;
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 (i) Company Common Stock described in Section 2.01(c) of
this Agreement and (ii) Dissenting Shares (as hereinafter defined) in
respect of which appraisal rights are properly exercised and perfected)
shall be converted into the right to receive $1.85 per share in cash,
without interest thereon (the "Merger Consideration") which Merger
Consideration shall be payable upon surrender of the certificate
representing such share (a "Certificate") in the manner provided in Section
2.02 of this Agreement. Notwithstanding the foregoing, if between the date
of this Agreement and the Effective Time the outstanding shares of 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
-2-
<PAGE>
of shares, the Merger Consideration 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 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 and Dissenting Shares) shall thereafter represent
the right to receive $1.85 in cash per share of Company Common Stock
previously represented thereby, without interest thereon. The holders of
Certificates previously evidencing Company Common Stock shall cease to have
any rights with respect to such Company Common Stock except the right to
receive the Merger Consideration and as otherwise provided herein or by
law. Such Certificates previously evidencing Company Common Stock shall be
exchanged for cash upon the surrender of such Certificates in accordance
with the provisions of Section 2.02 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.
(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 $.0075 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 Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, funds that
will be sufficient to enable the Exchange Agent to make payments with
respect to all Certificates representing Company Common Stock for which the
Merger Consideration is payable in accordance with this Section 2.02. The
cash deposited with the Exchange Agent in accordance with this subsection
2.02(a) is hereinafter referred to as the "Exchange Fund." The Exchange
Agent shall, pursuant to irrevocable instructions, deliver cash, as
described above, in exchange for surrendered Certificates pursuant to the
terms of this Agreement out of the Exchange Fund. 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
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<PAGE>
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 for payment of the Certificates. 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 cash in an amount equal to the
product of the number of shares of Company Common Stock represented by the
Certificate or Certificates surrendered and the Merger Consideration, 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, the appropriate amount of cash may
be paid to the transferee if the Certificate evidencing the Company Common
Stock shall be surrendered to the Exchange Agent, accompanied by all
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 Company Common Stock
(other than shares of Company Common Stock to be canceled pursuant to
Section 2.01(c) of this Agreement and Dissenting Shares) 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 Company Common Stock 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.
(c) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains unclaimed by the former holders of Company Common Stock for
six months after the Effective Time shall be delivered to Acquiror, upon
demand, and any former holders of Company Common Stock who have not
theretofore complied with this Article II shall thereafter look only to
Acquiror for the Merger Consideration, without any interest thereon.
Neither Acquiror nor the Company shall be liable to any holder of shares of
Company Common Stock for any Merger Consideration or cash delivered to a
public official pursuant to any applicable abandoned property escheat or
similar law.
(d) 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 Company Common Stock
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 Company Common Stock in
respect of which such deduction and withholding was made by Acquiror.
SECTION 2.03 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to
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the Effective Time and that are held by stockholders who have properly exercised
appraisal rights with respect thereto under Section 262 of the Delaware Law (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration as provided in 2.01(a), but the holders of Dissenting Shares shall
be entitled to receive such payment as shall be determined pursuant to Section
262 of the Delaware Law; PROVIDED, HOWEVER, that if any such holder shall have
failed to perfect or shall withdraw or lose the right to appraisal and payment
under the Delaware Law, each such holder's shares of Company Common Stock shall
thereupon be deemed to have been converted as of the Effective Time into the
right to receive the Merger Consideration, without any interest thereon, as
provided in Section 2.01(a), and such shares shall no longer be Dissenting
Shares.
SECTION 2.04. 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 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
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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).
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 April 30, 1996, 15,954,880
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 4,140,002 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) 2,127,002 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 April 30, 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 April 30, 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 3.16 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,
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limitations on the Company's or such subsidiaries' voting rights, charges
or other encumbrances of any nature whatsoever.
(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.
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(d) Section 3.03(d) of the Company Disclosure Schedule sets forth a
complete and correct list as of April 30, 1996, of (i) the number of stock
options outstanding, (ii) 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 3.13 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 3.13 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 on business
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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) material 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 meritorious challenge. Section 3.06(a) of
the Company Disclosure Schedule also sets forth, as of the date of this
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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 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
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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 Company Reports 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 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
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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 15
month period ending March 31, 1996.
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 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
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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 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,
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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 (other than
as contemplated by this Agreement), 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 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
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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 United States Internal Revenue Code
(the "Code").
(g) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(h) 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.
SECTION 3.12. CERTAIN BUSINESS PRACTICES. To the Company's knowledge,
except as set forth in Section 3.12 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,
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(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 3.13. 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 3.14. 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 firms will be entitled to
any payment relating to the transactions contemplated by this Agreement.
SECTION 3.15. INSURANCE. Except as set forth in Section 3.15 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 3.15 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 3.16. PROPERTIES. Except as set forth in Section 3.16 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 Reports on Form 10-K and 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
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.
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SECTION 3.17. MANAGEMENT CONTRACTS. Section 3.17 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 3.18. 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 Merger Consideration 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
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 materially impair the
ability of Acquiror or Merger Sub to consummate the transactions contemplated
hereby.
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SECTION 4.02. 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 4.03. 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 4.03(b) are obtained or made and except as
otherwise disclosed in Section 4.03(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 or any judgment,
order, or decree 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
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,
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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 have an Acquiror Material
Adverse Effect and (iii) as disclosed in Section 4.03(b) of the Acquiror
Disclosure Schedule,
SECTION 4.04. 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 4.05. 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 4.06. SUFFICIENT FUNDS. Acquiror has sufficient funds available
(either in the form of cash currently held by Acquiror or current commitments
from third parties to provide such cash to Acquiror, or a combination of both)
to consummate the Merger and the transactions contemplated hereby in accordance
with the terms of this Agreement.
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.
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SECTION 5.02. 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' 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
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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 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
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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 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 5.02(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
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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 5.03. 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 take any action, and will not permit any of its subsidiaries to take any
action, that will materially impair the ability of Acquiror or Merger Sub to
consummate the Merger and the other transactions contemplated hereby.
SECTION 5.04. 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) Notwithstanding the foregoing provisions of this Section 5.04,
the Company shall not be required to grant access or furnish information to
the Acquiror or the Acquiror Representatives 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.
(c) 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. PROXY STATEMENT.
(a) As promptly as reasonably practicable after the execution of this
Agreement, the Company shall prepare and file with the SEC preliminary
proxy materials with respect to the actions to be taken at the Company
Stockholders Meeting, which shall be in form and substance reasonably
satisfactory to Acquiror. As promptly as reasonably practicable after
comments are received from the SEC with respect to such preliminary proxy
materials, the Company shall use its best reasonable efforts to respond to
the comments of the SEC, which comments shall be in form and substance
reasonably satisfactory to Acquiror. Acquiror shall provide the Company
with such information as may be required to be included in the proxy
statement or as may be reasonably required to respond to any comment of the
SEC. After all the comments received from the SEC have been cleared by the
SEC staff and all information required to be contained in the proxy
statement, to the reasonable satisfaction of Acquiror, has been included
therein by the Company, the Company shall file with the SEC the Proxy
Statement and the Company shall use its best reasonable efforts to have the
Proxy Statement cleared by the SEC as soon thereafter as practicable. The
Company shall cause the Proxy Statement to be mailed to its stockholders of
record as promptly as reasonably practicable after clearance by the SEC.
Unless the Company is advised in writing by outside counsel that such a
recommendation is no longer consistent with the discharge of applicable
fiduciary duties of the directors of the Company, the Proxy Statement shall
include the recommendation of the Board of Directors of the Company 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 the Proxy Statement will, at
the mailing date of the Proxy Statement and at the time of the Company
Stockholders' Meeting, contain any untrue
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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 a supplement to the Proxy Statement, 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 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 the Proxy Statement will, at
the mailing date of the Proxy Statement 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 a supplement to the
Proxy Statement, 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, 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.
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 Entity 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
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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, 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
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could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
SECTION 6.04. 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.
SECTION 6.05. 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 6.06. 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 6.07. INDEMNIFICATION AND INSURANCE.
(a) 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 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 Proxy Statement 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 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) 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
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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 6.07(b) 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
6.07, 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 6.07(b) 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
6.07(b)(ii) up to an amount determined 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 6.08. 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, to obtain a
reasonable description of such opinion from such firm for inclusion in the Proxy
Statement and to provide a copy of such opinion to Acquiror.
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SECTION 6.09. STOCK OPTIONS. The Company agrees to take all actions
necessary to cause each of the options, whether vested or unvested, to purchase
Company Common Stock granted under the Option Plans prior to the Effective Time
and outstanding on the date hereof (the "Options") and each of the Common Stock
Warrants outstanding on the date hereof to (a) be exercised prior to the
Effective Time, (b) expire, lapse or otherwise terminate by its terms or (c) be
terminated immediately prior to the Effective Time solely in exchange for the
right to receive, promptly upon the surrender of an Option or Common Stock
Warrant, as the case may be, an amount in cash equal to the product of (i) the
number of shares of Company Common Stock subject to such Option or Common Stock
Warrant, as the case may be, and (ii) the amount by which the Merger
Consideration exceeds the exercise price per share of Company Common Stock
subject to such Option or Common Stock Warrant, as the case may be.
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) STOCKHOLDER APPROVAL. The Merger and this Agreement shall have
been approved and adopted by the requisite vote of the stockholders of the
Company.
(b) 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.
(c) 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.
(d) 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
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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 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) OPTIONS, COMMON STOCK WARRANTS AND PREFERRED STOCK WARRANTS. The
Company shall have taken all actions required by Section 6.09, 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.
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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 September 30, 1996 PROVIDED, HOWEVER, that this
Agreement may be extended by written notice of either Acquiror or the
Company to a date not later than December 31, 1996, if the Merger shall not
have been consummated as a result of the Company or the Acquiror Companies
having failed by September 30, 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
5.04(c), 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.
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
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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 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 Proxy Statement, 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 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)
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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 6.07 shall survive the Effective
Time and those set forth in Sections 5.04(c), 8.02 and 8.05 and Article IX
hereof shall survive termination.
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:
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(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: James H. Wilson
Telecopier No.: (713) 615-5926
(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.
Telecopier No.: (713) 871-2024
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;
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<PAGE>
(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) "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;
(g) "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
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
(h) "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.
(i) "Trading Day" shall mean each business day on which the NYSE is
open for trading.
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<PAGE>
(j) "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.
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.
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<PAGE>
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.
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<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/ Scot Sauder
----------------------------------------------
Scot Sauder
Vice President of Legal Affairs
HORIZON MI CORPORATION
By: /s/ Scot Sauder
----------------------------------------------
Scot Sauder
Vice President of Legal Affairs
MEDICAL INNOVATIONS, INC.
By: /s/ Mark H. Fisher
----------------------------------------------
Mark H. Fisher
Chairman of the Board and
Chief Executive Officer
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<PAGE>
EXHIBIT C
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, dated as of May 15, 1996 (this "Termination
Agreement"), is by and among MEDICAL INNOVATIONS, INC., a Delaware
corporation ("Medical Innovations"), HORIZON/CMS HEALTHCARE CORPORATION, a
Delaware corporation ("Horizon"), and HORIZON MI CORPORATION, a Delaware
corporation ("Horizon MI").
WHEREAS, the parties to this Termination Agreement are parties to that
certain Agreement and Plan of Merger dated as of February 13, 1996 (the
"Merger Agreement");
WHEREAS, Section 8.01(a) of the Merger Agreement provides that such
Merger Agreement may be terminated at any time prior to the Effective Time
(as defined in the Merger Agreement) by mutual consent of Horizon and Medical
Innovations;
WHEREAS, the parties to this Termination Agreement have indicated their
desire to terminate the Merger Agreement pursuant to Section 8.01(a) of such
Merger Agreement;
NOW, THEREFORE, the parties hereto hereby agree that pursuant to Section
8.01(a) of the Merger Agreement, the Merger Agreement is hereby terminated as
of the date of this Termination Agreement with the effects of such
termination as set forth in Section 8.02 of the Merger Agreement, except that
(i) this Agreement will relieve each party hereto from its obligations with
respect to any breach of the Merger Agreement and (ii) Medical Innovations
shall not be obligated to pay any Expenses (as defined in the Merger
Agreement) relating to printing the Registration Statement and the Proxy
Statement/Prospectus (other than fees and disbursements of counsel,
accountants and investment bankers) incurred prior to the date of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Termination Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
MEDICAL INNOVATIONS, INC.
By: /s/ Mark H. Fisher
--------------------------------------------------
Mark H. Fisher
Chairman of the Board and Chief Executive Officer
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
By: /S/ Scot Sauder
--------------------------------------------------
Vice President of Legal Affairs
HORIZON MI CORPORATION
By: /s/ Scot Sauder
--------------------------------------------------
Scot Sauder
Vice President of Legal Affairs
<PAGE>
Exhibit D
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is dated as of May 15, 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 8,668,287 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) 100,000 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 right to receive $1.85, in cash,
as 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.
(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
<PAGE>
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 December
31, 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.
(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
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<PAGE>
(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:
If to Acquiror:
HORIZON/CMS HEALTHCARE CORPORATION
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<PAGE>
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: James H. Wilson
Telecopier No.: (713) 615-5926
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.
(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.
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<PAGE>
(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.
(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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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/ Scot Sauder
----------------------------------------------
Scot Sauder
Vice President of Legal Affairs
STOCKHOLDERS:
/s/ Harvey R. Houck, Jr.
-------------------------------------------------
Harvey R. Houck, Jr.
Harvey R. Houck, Jr. & Patricia W. Houck
Foundation, Inc.
By: /s/ Harvey R. Houck
----------------------------------------------
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
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<PAGE>
ANNEX I
TO
VOTING AGREEMENT
DATED AS OF MAY 15, 1996
SHARES WARRANT OPTION
OUTSTANDING SHARES SHARES TOTAL
----------- ------- ------ -----
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 0 948,409
Luis Campos 744,795 0 0 744,795
Phillip Tuttle 468,004 0 0 468,004
Harvey R. Houck and
Patricia W. Houck
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 6,855,285 1,713,002 100,000 8,668,287
--------- --------- ------- ---------
--------- --------- ------- ---------
