SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MAY 19, 1995
MEDICAL INNOVATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-17787 76-0280551
(State or jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
______________________________
ONE RIVERWAY, SUITE 2300, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 688-6600
N/A
(Former name or former address, if changed since last report)
______________________________
Exhibit Index at Page 4
Page 1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 19, 1995 the Registrant acquired from Arthur L. Rice, Virginia F. Rice,
Kenneth A. Rice, Lucille Rice Roberts, Lauretta Rice Colvin and Angela Rice
McBride (collectively, the "Selling Shareholders"), in a stock for stock
transaction, all of the issued and outstanding shares of common stock of
Hospital HomeCare Corporation ("HHCC") pursuant to an Agreement and Plan of
Reorganization dated May 19, 1995 (the "Agreement"). The assets of HHCC consist
primarily of accounts receivable, contract rights, equipment and various related
assets. Such assets were used by HHCC in connection with its business as a
provider of hospital home health management services in various states. The
Registrant intends to continue HHCC's historical business utilizing its assets.
The acquisition of HHCC was a privately negotiated transaction and, to the best
of the Registrant's knowledge, there was no relationship between HHCC and the
Registrant, or any affiliate, director or officer of the Registrant, or any
associate of any such director or officer.
The transaction was closed on May 19, 1995. The Registrant acquired the HHCC
stock, valued at $4,700,000, in exchange for 3,262,473 newly-issued restricted
shares of the Registrant's common stock, the number of which was determined in
accordance with an exchange formula set forth in the Agreement. The value of
HHCC was based upon, among other business factors, HHCC's unaudited operating
results, after certain pro forma adjustments, for its fiscal year ended March
31, 1995, and estimated operating results, after certain pro forma adjustments,
for the remainder of the Registrant's fiscal year ending December 31, 1995 and
its fiscal year ending December 31, 1996. In addition, Arthur L. Rice, one of
the Selling Shareholders, entered into a three year Employment Agreement with
the Registrant, which included a covenant restricting Mr. Rice's ability to
engage in the same business in which HHCC is engaged without the consent of the
Registrant, under which he will receive an annual salary of $50,000. In
connection with the Employment Agreement, Mr. Rice received, under the
Registrant's 1988 Stock Option Plan, an option to purchase 100,000 shares of the
Registrant's common stock at the price of $1.6875, the fair market value of a
share of Registrant's common stock on May 19, 1995, the date of grant.
Of the shares of the Registrant's common stock exchanged for the HHCC common
stock, 163,124 shares (the "Escrowed Stock") were delivered to an escrow agent
to be held in escrow for a period of four (4) years. During the term of the
escrow, shares of the Escrowed Stock will be returned to the Registrant to
satisfy specific claims by Registrant against the Selling Shareholders for
indemnification under the Agreement. On May 19, 1997, one-half of the Escrowed
Stock, less any amounts previously transferred to Registrant for indemnification
claims or reserved for pending claims for indemnification, will be delivered to
the Selling Shareholders. On May 19, 1999, any remaining Escrowed Stock, less
any amounts reserved for pending claims for indemnification, will be returned to
the Selling Shareholders. For purposes of determining the number of shares of
the Escrowed Stock to be transferred to the Registrant, each share of the
Escrowed Stock will be deemed to have the same value as used in the Agreement to
determine the number of shares of the Registrant's common stock exchanged for
the HHCC common stock.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired.
At the date of this Report, it is impracticable to provide the financial
statements of HHCC required by Form 8-K. The Registrant intends to file such
financial statements under cover of a Form 8 amendment to this Report as soon as
possible, but in no event later than August 4, 1995.
(b) Pro forma financial information.
At the date of this Report, it is impracticable to provide the pro forma
financial statements required by Form 8-K. The Registrant intends to file such
financial information under cover of a Form 8 amendment to this Report as soon
as possible, but in no event later than August 4, 1995.
(c) Exhibits.
Documents filed as part of this report:
1. Agreement and Plan of Reorganization, dated as of May 19, 1995, by and
among Medical Innovations, Inc., Hospital HomeCare Corporation, Arthur L. Rice,
Virginia F. Rice, Kenneth A. Rice, Lucille Rice Roberts, Lauretta Rice Colvin
and Angela Rice McBride. The schedules to the Agreement, other than Schedule
2.2, which sets forth the shares of common stock to be issued by the Registrant
pursuant to the Agreement, have been omitted and are as described in the
Agreement. The Registrant hereby agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDICAL INNOVATIONS, INC.
By: /s/ MARK H. FISHER
Mark H. Fisher, President
Date: May 24, 1995
Page 3
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
------- ------------------- ----
2.1 --Agreement and Plan of Reorganization, dated as of May 19,
1995, by and among Medical Innovations, Inc., Hospital
HomeCare Corporation, Arthur L. Rice, Virginia F. Rice,
Kenneth A. Rice, Lucille Rice Roberts, Lauretta Rice Colvin
and Angela Rice McBride. The schedules to the Agreement,
other than Schedule 2.2, which sets forth the shares of
common stock to be issued by the Registrant pursuant to the
Agreement, have been omitted and are as described in the
Agreement. The Registrant hereby agrees to furnish
supplementally a copy of any omitted schedule to the
Commission upon request. __
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
executed as of May 19, 1995, by and among MEDICAL INNOVATIONS, INC., a Delaware
corporation ("MI"), ARTHUR L. RICE, VIRGINIA F. RICE, KENNETH A. RICE, LUCILLE
RICE ROBERTS, LAURETTA RICE COLVIN and ANGELA RICE MCBRIDE, each an individual
(collectively, the "Shareholders"), and HOSPITAL HOMECARE CORPORATION, a Texas
corporation ("HHCC"). HHCC and the Shareholders are sometimes referred to
collectively as the "HHCC Parties." The HHCC Parties and MI are sometimes
hereinafter referred to collectively as the "Parties" or individually as a
"Party."
W I T N E S S E T H:
WHEREAS, the Shareholders are the sole owners and holders of all of
the issued and outstanding capital stock of HHCC (the "Stock"); and
WHEREAS, MI desires to acquire all of the shares of the Stock from
the Shareholders, the Shareholders desire to acquire certain shares of MI's
common stock, $.0075 par value (the "MI Common Stock"), and MI deems it
advisable to issue such MI Common Stock to the Shareholders in exchange for all
of the Stock (the "Exchange"); and
WHEREAS, the Parties intend that the Exchange will constitute a tax
free reorganization under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Exchange is intended to be treated as a "pooling of
interests" for accounting purposes; and
WHEREAS, the Parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement and to prescribe various conditions precedent to
such transactions;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confessed, the Parties hereby agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following
meanings:
1.1 AFFILIATE. The term "Affiliate" of a person shall mean, with
respect to that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of, that
person. As used in the definition of Affiliate, the term "control" (including
the terms "controlling," "controlled by," or "under common control with") means
the possession, direct or indirect, of the power to direct, cause the direction
of, or influence the management and policies of a person, whether through the
ownership of voting securities, by contract, through the holding of a position
as a director or officer of such person, or otherwise. As used in this Section,
the term "person" means an individual, a corporation, a partnership, a limited
liability company, an association, a joint stock company, a trust, an
incorporated organization, or a government or political subdivision thereof.
1.2 BALANCE SHEET DATE. The term "Balance Sheet Date" shall mean
March 31, 1995.
1.3 BUSINESS. The term "Business" shall mean the current business of
HHCC, consisting of (but not limited to) providing hospital home health
management services.
1.4 EMPLOYEE. The term "Employee" shall mean any employee of HHCC
who as of the date of this Agreement or the Closing Date, as defined below, is
employed or otherwise performs work or provides services in connection with the
operation of the Business, including those, if any, on disability, sick leave,
layoff or leave of absence, who, in accordance with HHCC's applicable policies
would be eligible to return to active status.
1.5 ESCROW AGENT. The term "Escrow Agent" shall mean Texas Commerce
Bank National Association, a national banking association.
1.6 ESCROW AGREEMENT. The term "Escrow Agreement" shall mean the
Stock Escrow Agreement by and among MI, the Shareholders and the Escrow Agent
dated to be effective as of the Closing Date.
1.7 HHCC COMMON STOCK. The term "HHCC Common Stock" shall mean the
common stock of HHCC, no par value.
1.8 HHCC FINANCIAL STATEMENTS. The term "HHCC Financial Statements"
shall mean the financial statements of HHCC as of March 31, 1995.
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1.9 MI FINANCIAL STATEMENTS. The term "MI Financial Statements"
shall mean the March 31, 1995 consolidated financial statements of MI and its
subsidiaries (the "MI Subsidiaries").
1.10 RICE EMPLOYMENT AGREEMENT. The term "Rice Employment Agreement"
shall mean the Employment Agreement between Arthur L. Rice and MI dated to be
effective as of the Closing Date.
ARTICLE II
EXCHANGE OF STOCK
2.1 EXCHANGE OF STOCK. Subject to the terms and conditions set forth
herein, the Shareholders will sell, transfer, convey, assign, and deliver to MI
all of the Stock, free and clear of any restrictions, liens, security interests,
encumbrances, rights of another or adverse claims of any and every nature
whatsoever, and will deliver certificates representing the same in duly
transferable form. Such transfers will be made on the Closing Date.
2.2 ISSUANCE OF MI COMMON STOCK. As consideration for the transfer
of the Stock and the performance by the Shareholders of various other matters as
provided herein, simultaneously with the transfers of the Stock as set forth in
Section 2.1 above, MI will issue shares of MI Common Stock, and deliver
certificates representing the same in duly transferable form, to the
Shareholders in the amounts set forth on SCHEDULE 2.2, which schedule will be
delivered on or prior to the Closing Date; provided, however, that certificates
representing five percent (5%) of the shares of MI Common Stock otherwise
issuable to each Shareholder will be delivered by MI to the Escrow Agent to be
held pursuant to the terms of the Escrow Agreement.
2.3 TAXES. The Shareholders that reside outside of the state of
Texas agree that they will pay all income, sales and use taxes, if any, arising
out of the transfer of the Stock.
ARTICLE III
CLOSING
3.1 CLOSING DATE. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place simultaneous with the execution
of this Agreement. Such Closing shall take place at the offices of Boyer, Ewing
& Harris Incorporated, The Coastal Tower, 9 Greenway Plaza, Suite 3100, Houston,
Texas 77046, or at such other place as MI and HHCC shall agree. The date on
which the Closing occurs is herein referred to as the "Closing Date."
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3.2 SHAREHOLDERS' DELIVERIES. At the Closing, the Shareholders shall
deliver or cause to be delivered to MI:
(a) All of the stock certificates evidencing issued and
outstanding shares of the Stock, together with irrevocable stock
powers in form and substance satisfactory to MI's counsel, duly
authorized and executed by the record holder of each such stock
certificate;
(b) Certified resolutions of the Board of Directors of HHCC,
in form and content reasonably acceptable to MI;
(c) A counterpart of the Rice Employment Agreement executed by
Arthur L. Rice;
(d) A counterpart of the Escrow Agreement executed by each
Shareholder;
(e) An opinion, dated the Closing Date, from Meyer Orlando &
Evans, counsel for HHCC, in form and substance satisfactory to MI's
counsel;
(f) The immediately effective written resignations of the
directors of HHCC (other than Arthur Rice) and such officers of HHCC
as MI may request;
(g) An agreement of each Shareholder, in a form satisfactory
to counsel for MI, regarding such Shareholder's holding and sale of
MI Common Stock received as a result of the Exchange or otherwise
and agreeing that in no event will any such MI Common Stock be sold
or otherwise transferred until such time as MI publishes financial
results covering at least 30 days of the combined operations of MI
and HHCC after the Exchange;
(h) The certificates evidencing the existence, good standing
and authority of HHCC in the State of Texas and in each other
jurisdiction set forth on SCHEDULE 4.1; and
(i) All other items required to be delivered hereunder or as
may be requested which are necessary or would reasonably facilitate
consummation of the transactions contemplated hereby.
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In addition, the Shareholders will put MI into full possession and enjoyment of
HHCC, the Business, and the Assets (as defined in Section 4.7) immediately upon
the occurrence of the Closing.
3.3 MI DELIVERIES. At the Closing, MI will deliver or cause to be
delivered to the Shareholders, the following:
(a) Certificates representing the shares of MI Common Stock
issuable to the Shareholders in the Exchange, registered in the
names of the Shareholders in the amounts indicated on SCHEDULE 2.2;
(b) Certified resolutions of the Board of Directors of MI, in
form and content reasonably acceptable to the Shareholders;
(c) A counterpart of the Rice Employment Agreement executed by
MI;
(d) A counterpart of the Escrow Agreement executed by MI;
(e) An opinion, dated the Closing Date, from Boyer, Ewing &
Harris Incorporated, counsel for MI, in form and substance
satisfactory to HHCC's counsel;
(f) The certificates evidencing the existence, good standing
and authority of each of the MI Companies in their respective states
of incorporation and in each other jurisdiction set forth on
SCHEDULE 5.1; and
(g) All other items required to be delivered hereunder or as
may be requested or which are necessary or would reasonably
facilitate consummation of the transactions contemplated hereby.
3.4 RICE AGREEMENT. The Parties hereby acknowledge and agree that
the Rice Employment Agreement shall become effective at the Closing.
3.5 CONFIDENTIALITY AGREEMENT. The Parties hereby acknowledge and
agree that the Confidentiality Agreement executed by MI and HHCC shall
automatically terminate at the Closing.
3.6 VALUE OF MI COMMON STOCK. The Parties hereby acknowledge and
agree that the Shareholders will receive at Closing that number of shares of MI
Common Stock, rounded to the nearest thousandth, without fractional shares,
representing aggregate value
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of Four Million Seven Hundred Thousand and No/100 Dollars ($4,700,000.00). For
purposes of this Section 3.6, the "value" of a share of MI Common Stock means
the average of the closing bid and ask prices of the MI Common Stock on the
NASDAQ Small-Cap Market for the ten (10) trading days ending on the fifth (5th)
trading day immediately preceding the Closing Date.
3.7 FURTHER ASSURANCES. At and after the Closing, each of the
Parties shall take all appropriate action and execute all documents of any kind
which may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. Shareholders, at any time at or after the Closing, will
execute, acknowledge and deliver any further stock powers, bills of sale,
assignments and other assurances, documents and instruments of transfer,
reasonably requested by MI, and will take any other action consistent with the
terms of this Agreement that may reasonably be requested by MI, for the purpose
of assigning and confirming to MI, all of the Stock, or if necessary, any of the
Assets.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HHCC AND SHAREHOLDERS
HHCC and the Shareholders, jointly and severally, represent and
warrant as follows:
4.1 ORGANIZATION. HHCC is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has all necessary corporate powers to own its properties and to
operate its business as now owned and operated by it, and, to the best of HHCC's
knowledge, is qualified to do business in all jurisdictions in which the nature
and operation of its business require such qualification, such jurisdictions
being specified on SCHEDULE 4.1 attached hereto. These are the only
jurisdictions in which the nature of the Business or of HHCC's properties makes
such qualification necessary, except for those jurisdictions where the failure
to so qualify would not have a material adverse effect on the Business.
4.2 AUTHORITY. The HHCC Parties each have the full right, power,
legal capacity and authority to execute, deliver and perform their respective
obligations under this Agreement, and no approvals or consents of any other
person or entity are necessary in connection herewith. The execution, delivery
and performance of this Agreement by HHCC has been duly authorized by its board
of directors.
4.3 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or filing or registration with, any governmental or regulatory authority, or
any other person or entity is required to be made or obtained by any HHCC Party
in connection with the
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execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
4.4 VALID AND BINDING OBLIGATIONS. Upon the execution and delivery
hereof, this Agreement shall constitute the legal, valid, and binding
obligations of the HHCC Parties, enforceable in accordance with its terms,
except as same may be limited by applicable bankruptcy laws, insolvency laws,
and other similar laws affecting the rights of creditors generally.
4.5 CAPITAL. The authorized capital stock of HHCC consists of Ten
Million (10,000,000) shares of HHCC Common Stock, of which Ninety Thousand
(90,000) shares are issued and outstanding. All of the Stock is validly issued,
fully paid and nonassessable. There are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements or commitments that
obligate HHCC to issue or to transfer from treasury additional shares of HHCC
Common Stock or other securities.
4.6 TITLE TO STOCK. The Shareholders have good, indefeasible and
marketable title to the Stock, free and clear of any restrictions or conditions
to transfer or assignment, or mortgages, liens, pledges, charges, encumbrances,
equities, claims, covenants, conditions, restrictions, options or agreements, or
any other security interest. The Stock represents all of the issued and
outstanding capital stock of HHCC.
4.7 TITLE TO ASSETS; POSSESSION. Except for the assets specifically
identified on SCHEDULE 4.11 as being owned by Arthur L. Rice or other employees
of HHCC (the "Excluded Assets"), HHCC has good and indefeasible title to all the
assets and interests in assets, whether real, personal, mixed, tangible or
intangible, used in the Business. All these assets are free and clear of
restrictions on or conditions to transfer or assignment, and free and clear of
mortgages, liens, pledges, charges, encumbrances, equities, claims, easements,
rights-of-way, covenants, conditions or restrictions. No officer, director or
employee of HHCC, nor any spouse, child or other relative of any of these
persons, owns or has any interest, directly or indirectly, in any of the real or
personal property owned by or leased to HHCC or any copyrights, patents,
trademarks, trade names or trade secrets licensed to HHCC. The assets described
in SCHEDULES 4.9 THROUGH 4.11, 4.13, 4.15 AND 4.16, other than the Excluded
Assets, (collectively, the "Assets") constitute all of the property, whether
real, personal, mixed, tangible, or intangible, that is used in the Business by
HHCC. HHCC does not own legal or equitable title to any assets or interests in
assets except as set forth in the HHCC Financial Statements and in SCHEDULES 4.9
THROUGH 4.11, 4.13, 4.15 AND 4.16, other than the Excluded Assets. The
Shareholders shall deliver to MI on the Closing Date, possession of and/or
control or dominion over all of the Assets, including without limitation all of
HHCC's
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cash, accounts receivable, property, plant and equipment, inventory, contract
rights and general intangibles, customer and supplier lists, patent rights, and
assumed and trade names.
4.8 CONDITION. All of the Assets are in good operating
condition and repair, ordinary wear and tear excepted.
4.9 REAL PROPERTY; LEASED REAL PROPERTY.
A. HHCC owns no real property.
B. SCHEDULE 4.9 to this Agreement is a list of all real
property leased by HHCC (the "Leased Real Property"), together with the name and
address of each lessor thereof. Each lease of Leased Real Property is valid and
in full force and effect; neither HHCC nor any third party is in default
thereunder; and there has not occurred any event, fact or circumstance which
with notice or lapse of time or both, would constitute a default. A true,
complete and correct copy of the lease for each parcel of Leased Real Property
has been provided to MI.
4.10 CONTRACTS. SCHEDULE 4.10 to this Agreement lists all of the
contracts, documents, instruments, agreements, and other written or oral
arrangements to which HHCC is a party or by which HHCC or its Assets are bound
(the "Contracts"). Each of the Contracts is valid and in full force and effect,
and there has not been any default by HHCC, or any third party to any of said
Contracts, or any event, fact or circumstance which with notice or lapse of time
or both, would constitute a default by HHCC, or any other party to any of the
Contracts. Neither HHCC nor the Shareholders have received notice that any party
to any of the Contracts intends to cancel or terminate any of the Contracts or
exercise or not exercise any options that they might have under any of the
Contracts. No party to any of the Contracts has the right to terminate any of
the Contracts as a result of the closing of the transactions contemplated
herein.
4.11 EQUIPMENT. SCHEDULE 4.11 to this Agreement describes and
specifies all of, and the location of, all of the equipment, as that term is
defined in the Uniform Commercial Code, owned by HHCC (the "Equipment"). None of
the Equipment is held under any security agreement, conditional sales contract,
or other title retention or security arrangement or is located other than in the
possession of HHCC. The Equipment is in good operating condition and repair,
ordinary wear and tear excepted.
4.12 LEASED EQUIPMENT. No equipment used in connection with the
Business is leased by HHCC from a third party.
4.13 ACCOUNTS RECEIVABLE. SCHEDULE 4.13 to this Agreement is a
listing of the aged accounts receivable of HHCC as set forth in the HHCC
Financial Statements (collectively, the
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"Accounts"). The Accounts, and all papers and documents relating thereto, are
genuine and in all respects what they purport to be, and each such Account is
valid and subsisting and arises out of a bona fide sale or lease of goods sold
or leased and delivered to, or out of and for services theretofore actually
rendered by HHCC to, or otherwise in compliance with the terms of the applicable
Contract with, the account debtor named in such Account. HHCC is the owner of
each such Account free and clear of any charges, liens, security interests,
adverse claims, and encumbrances of any and every nature whatsoever. HHCC and
the Shareholders make no representation concerning the collectability of the
Accounts, but are not aware of any facts that indicate that any such Accounts
are not collectable.
4.14 LICENSES. HHCC neither owns, nor has any rights, licenses or
sublicenses in, any permits, licenses, franchises or other authorizations
(collectively, "Licenses"), except for those that are not material or unique to
the Business. To the best of HHCC's knowledge, HHCC has not infringed, and is
not now infringing, on any license belonging to any other person, firm, or
corporation. HHCC owns or holds all Licenses necessary to the conduct of the
Business in the manner and in the areas in which the Business is presently
conducted. To the best of HHCC's knowledge, all such Licenses, if any, are valid
and in full force and effect and the use thereof does not, and will not,
conflict with, infringe on or otherwise violate any rights of others.
4.15 INTELLECTUAL PROPERTY. SCHEDULE 4.15 contains a description of
all of the intellectual property owned by HHCC (the "Intellectual Property").
HHCC is the sole owner of all of the Intellectual Property, free and clear of
any liens, encumbrances, restrictions, or legal or equitable claims of others.
HHCC has registered all trade names, trademarks, and service marks in all
jurisdictions necessary to evidence ownership thereof and to permit HHCC to
conduct the Business in the way it is currently conducted, or otherwise has all
rights or licenses necessary to use the same. HHCC has all patents or patent
applications and copyrights registered in all jurisdictions necessary to
evidence the ownership thereof and to permit HHCC to conduct the Business in the
way in which it is currently conducted, or otherwise has all rights or licenses
necessary to use same. All of the copyrights and trademarks set forth on
SCHEDULE 4.15 are valid and in full force and effect and are not subject to any
taxes, maintenance fees, or actions which have not been currently paid. To the
best of HHCC's knowledge, none of such Intellectual Property infringes upon any
patents, trade or assumed names, trademarks, service marks, or copyrights
belonging to any other person, firm, or corporation. HHCC is not a party to any
license, agreement, or arrangement, whether as licensor, licensee, or otherwise,
with respect to any of the Intellectual Property. HHCC does not have a license
or a right to use any other patents, service marks, trademarks, trade and
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assumed names, trade secrets and royalty rights and other proprietary
intangibles, other than the Intellectual Property.
4.16 NOTES RECEIVABLE. Set forth on SCHEDULE 4.16 is a true,
complete and accurate list of all of the notes receivable held by HHCC,
including for each the name of the debtor, the amount outstanding with respect
thereto (principal and interest), and a specific list of any and all defaults
and facts, circumstances and events which, with notice or lapse of time or both,
will become a default.
4.17 SUBSIDIARIES. HHCC does not own, directly or indirectly through
any person or entity, any interest or investment (whether equity or debt) in any
corporation, partnership, business, trust or other entity.
4.18 INSURANCE. SCHEDULE 4.18 to this Agreement lists all insurance
policies maintained by HHCC. HHCC believes that it maintains adequate insurance
protection.
4.19 BANKING. Prior to the execution hereof, HHCC has provided MI
with a list of the names and addresses of all banks or other financial
institutions in which HHCC has an account, deposit or safe deposit box, with the
names of all persons authorized to draw on these accounts, make deposits or have
access to these boxes.
4.20 POWERS OF ATTORNEY. Prior to the execution hereof, HHCC has
provided MI with a list of the name of each person, corporation, firm,
association, business entity or enterprise holding a general or special power of
attorney from HHCC, and a true, complete and correct copy of each such power of
attorney.
4.21 CUSTOMERS AND SUPPLIERS. Prior to the execution hereof, HHCC
has provided MI with a true, correct, current and complete list of all of the
customers and suppliers of the Business, together with summaries of the accounts
receivable for each customer and accounts payable for each supplier as of the
Balance Sheet Date. HHCC is not aware of any facts evidencing that any of its
significant customers or suppliers intend to cease doing business with HHCC, or
materially alter the amount of the business that such customers or suppliers are
presently doing with HHCC.
4.22 EMPLOYEES. Prior to the execution hereof, HHCC has provided MI
with a list of the names, addresses, hire dates, dates of birth and job
descriptions of all Employees of HHCC, stating the rates of compensation
including, if determined, bonuses payable to each, and a list of those Employees
who are not actively working in the Business and the reasons therefore.
4.23 EMPLOYEE BENEFITS. Prior to the execution hereof, HHCC has
provided MI with a true, correct and complete list of all
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pension, profit-sharing, bonus, deferred compensation, percentage compensation,
severance pay, retirement, insurance or other "employee benefit plans" within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), that are maintained or sponsored by HHCC or any
Affiliate for the benefit of any Employee (the "Plans"). HHCC has complied with
all the terms and provisions of, and has performed all of the obligations
required of it under, the Plans, and HHCC is not in default under any provision
thereof in any manner which would permit any other party thereto to cancel or
terminate any of such Plans. HHCC has not incurred any accumulated funding
deficiency within the meaning of ERISA in connection with any of the Plans. All
of the Plans are fully funded under the terms of such Plans and as required by
ERISA, on and as of the Closing Date. All of HHCC's employee pension or
profit-sharing plans are qualified within the meaning of Section 401 of the
Internal Revenue Code. None of the fiduciary responsibility provisions of Part
4, Subtitle B, Title I of ERISA, and the other equivalent provisions under the
Internal Revenue Code, have been violated with respect to any such Plans. HHCC
has complied with all of the reporting and disclosure requirements set forth in
Part I, Subtitle B, Title I of ERISA. In addition, (i) no benefit plan that is
subject to ERISA has been terminated or partially terminated, (ii) no proceeding
has been initiated to terminate any Plan, (iii) HHCC has not incurred nor does
it expect to incur any liability to the Pension Benefit Guaranty Corporation,
(iv) there has been no "reportable event" within the meaning of Section 4043(b)
of ERISA, (v) the present value of accrued benefits under all Plans subject to
Title IV of ERISA did not exceed the market value of the assets of such Plans as
of the close of the most recent plan year of such Plans, and (vi) no Plan is a
"multi-employer plan" within the meaning of Section 4001(a)(3) of ERISA.
4.24 EMPLOYMENT AGREEMENTS. Prior to the execution hereof, HHCC has
provided MI with a copy of each of the employment contracts and collective
bargaining agreements to which HHCC is a party or by which HHCC is bound
(collectively, the "Employment Agreements"). All of the Employment Agreements
are in full force and effect, and neither HHCC nor any other party is in default
under any of them. There have been no claims of default and there are no facts
or conditions which if continued, or on notice, will result in a default under
any of the Employment Agreements. HHCC is in compliance with, and upon the
closing of the transactions set forth or contemplated herein will remain in
compliance with, all of its obligations under such Employment Agreements. No
Employees are represented by any labor organization, and, as of the date hereof,
no labor organization or group of Employees has made a written demand to HHCC
for recognition, or filed a petition with the National Labor Relations Board, or
announced its intention to hold an election of a collective bargaining
representative. There is no pending or threatened labor dispute, strike or work
stoppage affecting or potentially affecting the Business.
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4.25 BONUS AND SEVERANCE. HHCC will not owe a bonus or severance
payment or similar obligation to any of their employees, officers, or directors,
as a result of the transactions contemplated by this Agreement, nor will any of
such persons be entitled to an increase in bonus or severance payments or other
benefits as a result of the transactions contemplated hereby, nor in the event
of the subsequent termination of their employment.
4.26 LIABILITIES. HHCC is not aware of any liabilities, obligations
or commitments of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due (the foregoing collectively referred
to as "Liabilities"), except for (i) liabilities which are adequately disclosed
or accrued against in the HHCC Financial Statements or identified and reflected
in the notes thereto, and (ii) Liabilities which have been incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date.
4.27 LITIGATION. There is no suit, action, arbitration or legal,
administrative or other proceeding or governmental investigation pending or
threatened against or affecting HHCC, the Assets or the Business. and there have
been no suits, actions, arbitrations or legal, administrative or other
proceedings or governmental investigations that have been pending or threatened
against or affecting HHCC, the Assets or the Business during HHCC's last three
(3) fiscal years. HHCC is not in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court, department,
agency or instrumentality.
4.28 TAX RETURNS. Within the times and in the manner prescribed by
law, HHCC has filed all state and local tax returns required by law, including
all sales and use taxes, and has paid all such taxes, assessments and penalties
due and payable. HHCC has filed its federal income tax returns for all fiscal
years to and including the fiscal year ending March 31, 1994, with the Internal
Revenue Service, has paid all applicable taxes, and the results of any reviews
or audits are accurately reflected in the HHCC Financial Statements. There are
no present disputes as to taxes of any nature payable by HHCC and HHCC has made
adequate provisions for any taxes payable or anticipated to be payable with
respect to the fiscal year ending March 31, 1995.
4.29 COMPLIANCE WITH LAWS. HHCC is in material compliance with all
applicable federal, state or local statutes, laws, and regulations (including,
without limitation, any applicable building, zoning or other law, ordinance or
regulation) that affect, or are likely to affect, directly or indirectly, the
Business, the Assets, the Liabilities, or the customers, suppliers or financial
prospects of HHCC.
4.30 ENVIRONMENTAL LAWS. The Assets have never been used for the
generation, manufacture, storage, treatment, disposal,
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release, or threatened release of any hazardous substance, as those terms are
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. Section 9601 et seq.).
4.31 NO BREACH OR VIOLATION. The consummation of the transactions
contemplated by this Agreement will not result in or constitute any of the
following: (i) a default or an event that, with notice or lapse of time or both,
would be a default, breach or violation of the Bylaws or the Articles of
Incorporation of HHCC or, except for third party consents described in this
Agreement or any schedule hereunder, any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust or
other agreement, instrument or arrangement by which the Assets are or may be
affected, or to which HHCC or any of the Shareholders are a party, or by which
HHCC, the Shareholders, or the Assets are bound, (ii) except for third party and
governmental consents to assignments described in this Agreement or in any
schedule delivered hereunder, an event that would permit any party to terminate
any Contract or other arrangement with HHCC, (iii) the creation or imposition of
any lien, charge, or encumbrance on any of the Assets, or (iv) a breach of any
term or provision of this Agreement.
4.32 HHCC FINANCIAL STATEMENTS. HHCC has previously provided to MI
the unaudited HHCC Financial Statements of HHCC at March 31, 1995.
4.33 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date, with respect to the Business there has been no:
(i) material adverse change in the financial condition, Liabilities,
Assets, Business or prospects of HHCC;
(ii) direct or indirect redemption or acquisition of any capital
stock of HHCC;
(iii) waiver or release of any right of or claim held by HHCC except
in the ordinary course of business;
(iv) material loss, destruction or damage to any property or Asset
of HHCC, whether or not insured;
(v) labor trouble, pending or threatened, involving HHCC, or
material change in the personnel of HHCC or the terms and conditions of
their employment;
(vi) acquisition or disposition of any material assets, individually
or in the aggregate, nor any contract or arrangement therefor;
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(vii) transaction by HHCC except in the ordinary course of business
except for the negotiation of the transactions contemplated by this
Agreement and the payment of related fees and expenses;
(viii) individual capital expenditure by HHCC exceeding $10,000, nor
aggregate capital expenditures by HHCC exceeding $25,000;
(ix) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates)
by HHCC;
(x) revaluation by HHCC of any of the Assets or Liabilities;
(xi) declaration, setting aside or payment of a dividend or other
distribution in respect to the capital stock of HHCC;
(xii) increase in salary or other compensation payable or to become
payable by HHCC to any of its officers, directors or employees, or the
declaration, payment or commitment or obligation of any kind for the
payment, by HHCC, of a bonus or other additional salary or compensation to
any such person;
(xiii) amendment or termination of any contract, agreement, permit
or license to which HHCC is a party;
(xiv) loan by HHCC to any person or entity, or guaranty by HHCC of
any loan;
(xv) sale, transfer, encumbrance, mortgage, pledge or other
encumbrance of any of the Assets;
(xvi) other event or condition of any character that has or might
reasonably have an adverse effect on the financial condition, Business,
Assets or prospects of HHCC;
(xvii) issuance or sale by HHCC of any shares of its capital stock,
or of any other of its securities; or
(xviii) agreement by HHCC to do any of the things described in the
preceding clauses (i) through (xvii).
4.34 INTERESTS IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as
disclosed on SCHEDULE 4.34, neither HHCC nor the Shareholders, nor any officer,
director or Employee (nor any former shareholder, officer, director or
employee), nor any spouse or child of any of them, has any direct or indirect
interest in any
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competitor, supplier or customer of HHCC, or in any person from whom or to whom
HHCC leases any real or personal property, or in any other person with whom HHCC
is doing business, or who is disclosed as a customer or supplier under Section
4.21.
4.35 ADVERSE INFORMATION. HHCC and the Shareholders have no
information or knowledge of any change contemplated in any applicable laws,
ordinances or restrictions, or any judicial or administrative action, or any
action by adjacent landowners, or natural or artificial conditions upon the
Leased Real Property, which would have a material adverse effect upon the
Business, the Assets or their respective values. To the best of the
Shareholders' knowledge, there is no significant adverse fact or condition of
any kind or character whatsoever which would adversely affect HHCC's intended
use of the Leased Real Property after the Closing Date.
4.36 DISCLOSURE. HHCC and the Shareholders have provided to MI on or
prior to the execution of this Agreement, to the extent requested by MI, actual
copies of all Contracts, documents concerning all litigation and administrative
proceedings, employee benefits, insurance policies, lists of suppliers,
customers, and Employees, and corporate records relating to HHCC or the Assets
and Liabilities, and such information covers all material commitments and
Liabilities of HHCC.
4.37 FULL DISCLOSURE. This Agreement, the Schedules and Exhibits
hereto, and all other documents and written information furnished by the
Shareholders, HHCC or their respective Affiliates, on behalf of the Shareholders
or HHCC, to MI or its representatives pursuant hereto or in connection herewith,
are true, complete and correct, and do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made herein and therein not misleading. There are no facts relating
to the Business or HHCC's Assets, Liabilities, prospects, operations or
financial condition, which materially and adversely affects or, so far as the
Shareholders can now reasonably foresee, will materially and adversely affect
the Business, HHCC, or the Assets, Liabilities, prospects, operations or
financial condition thereof, or the ability of HHCC or the Shareholders to
perform this Agreement or any of their respective obligations hereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MI
MI hereby represents and warrants as follows:
5.1 ORGANIZATION. MI and each of the MI Subsidiaries (collectively,
the "MI Companies") is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
necessary corporate
- 15 -
powers to own its properties and to operate its business as now owned and
operated by it, and is qualified to do business in all jurisdictions in which
the nature and operation of its business require such qualification, such
jurisdictions being specified on SCHEDULE 5.1 attached hereto. These are the
only jurisdictions in which the nature of the MI Companies' businesses or of
their properties makes such qualification necessary except for those
jurisdictions where the failure to so qualify would not have a material adverse
effect on the Business.
5.2 AUTHORITY. MI has the full right, power, legal capacity and
authority to execute, deliver and perform its obligations under this Agreement,
and no approvals or consents of any other person or entity are necessary in
connection herewith. The execution, delivery and performance of this Agreement
by MI has been duly authorized by its board of directors.
5.3 CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 5.3, no
consent, approval or authorization of, or filing or registration with, any
governmental or regulatory authority, or any other person or entity is required
to be made or obtained by MI or the MI Subsidiaries in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
5.4 VALID AND BINDING OBLIGATIONS. Upon the execution and delivery
hereof, this Agreement shall constitute the legal, valid, and binding obligation
of MI, enforceable in accordance with its terms, except as same may be limited
by applicable bankruptcy laws, insolvency laws, and other similar laws affecting
the rights of creditors generally.
5.5 CAPITAL. The authorized capital stock of MI consists of (i)
Seventy-Five Million (75,000,000) shares of MI Common Stock, of which Twelve
Million Five Hundred Seventy-Two Thousand Four Hundred Seven (12,572,407) shares
are issued and outstanding, and (i) Three Million (3,000,000) shares of
Preferred Stock, having a par value of $.01 per share, none of which are issued
or outstanding. All of the shares of MI Common Stock are validly issued, fully
paid and nonassessable. The only outstanding subscriptions, options, employee
stock options, rights, warrants, convertible securities or other agreements or
commitments which obligate MI to issue or to transfer from treasury, or
otherwise, additional shares of MI Common Stock, or any shares of MI's Preferred
Stock, are described in SCHEDULE 5.5.
5.6 TITLE TO ASSETS; POSSESSION. The MI Companies have good and
indefeasible title to all the assets and interests in assets, whether real,
personal, mixed, tangible or intangible, used in the business of the MI
Companies. All these assets are free and clear of restrictions on or conditions
to transfer or assignment, and free and clear of mortgages, liens, pledges,
charges, encum-
- 16 -
brances, equities, claims, easements, rights-of-way, covenants, conditions or
restrictions, except as set forth in the MI 10-K, as defined below. All real
property and tangible personal property of each MI Company is in good operating
condition and repair, ordinary wear and tear excepted. No officer, director or
employee of any MI Company, nor any spouse, child or other relative of any of
these persons, owns or has any interest, directly or indirectly, in any of the
real or personal property owned by or leased to any MI Company or any
copyrights, patents, trademarks, trade names or trade secrets licensed by any MI
Company.
5.7 LEASED MI REAL PROPERTY. All the leases concerning the real
property leased to a MI Company are valid and in full force, and there does not
exist any default by a MI Company, or event that with notice or lapse of time,
or both, would constitute a default under any of these leases. To the best of
MI's knowledge, there does not exist any default or event that with notice or
lapse of time, or both, would constitute a default under any of the leases, by
any person or entity other than a MI Company that is a party to any of such
leases.
5.8 CONTRACTS. All contracts to which any of the MI Companies is a
party are in full force and effect and binding in accordance with their
respective terms, and none of such contracts precludes consummation of the
transactions as contemplated herein. In addition, no event has occurred or
condition exists which constitute or which with notice or lapse of time, or
both, would constitute, a default, breach, or violation by any party thereto.
5.9 LICENSES. Each MI Company has all permits, licenses, franchises
and other authorizations necessary to the conduct of the business of such MI
Company in the manner and in the areas in which they are presently being
conducted, all such permits, licenses, franchises, and authorizations are valid
and in full force and effect. No MI Company has engaged in any activity which
could cause the revocation or suspension of any such permits, licenses,
franchises, or authorizations and no actions or proceedings looking to or
contemplating revocation or suspension of any thereof is pending or threatened.
5.10 INSURANCE. SCHEDULE 5.10 to this Agreement lists all insurance
policies maintained by the MI Companies, and MI has provided the Shareholders
with copies of all insurance policies reasonably requested by the Shareholders
prior to the execution hereof. The MI Companies maintain (i) insurance on all
their assets and businesses of a type customarily insured by similar companies
in the same industry, covering property damage and loss of income by fire or
other casualty, and (ii) adequate insurance protection against all liabilities,
claims, and risks against which it is customary to insure, including but not
limited to, product liability insurance and applicable malpractice insurance.
- 17 -
5.11 CUSTOMERS AND SUPPLIERS. The MI Companies are not aware of any
facts evidencing that any of their significant customers or suppliers intend to
cease doing business with the MI Companies, or materially alter the amount of
the business that such customers or suppliers are presently doing with the MI
Companies.
5.12 EMPLOYEE BENEFITS. SCHEDULE 5.12 to this Agreement is a true,
correct and complete list of all pension, profit-sharing, bonus, deferred
compensation, percentage compensation, severance pay, retirement, insurance or
other "employee benefit plans" within the meaning of Section 3(3) of ERISA that
are maintained or sponsored by the MI Companies or any Affiliate for the benefit
of any Employee (the "MI Plans"). The MI Companies have complied with all the
terms and provisions of, and has performed all of the obligations required of it
under, the MI Plans, and the MI Companies are not in default under any provision
thereof in any manner which would permit any other party thereto to cancel or
terminate any of such MI Plans. The MI Companies have not incurred any
accumulated funding deficiency within the meaning of ERISA in connection with
any of the MI Plans. All of the MI Plans are and will be fully funded under the
terms of such MI Plans and as required by ERISA, through and including the date
of this Agreement and the Closing Date, respectively. All of the MI Companies'
employee pension or profit-sharing plans are qualified within the meaning of
Section 401 of the Internal Revenue Code. None of the fiduciary responsibility
provisions of Part 4, Subtitle B, Title I of ERISA, and the other equivalent
provisions under the Internal Revenue Code, have been violated with respect to
any such MI Plans. The MI Companies have complied with all of the reporting and
disclosure requirements set forth in Part I, Subtitle B, Title I of ERISA. In
addition, (i) no benefit plan that is subject to ERISA has been terminated or
partially terminated, (ii) no proceeding has been initiated to terminate any MI
Plan, (iii) the MI Companies have not incurred nor do they expect to incur any
liability to the Pension Benefit Guaranty Corporation, (iv) there has been no
"reportable event" within the meaning of Section 4043(b) of ERISA, (v) the
present value of accrued benefits under all MI Plans subject to Title IV of
ERISA did not exceed the market value of the assets of such MI Plans as of the
close of the most recent plan year of such MI Plans, and (vi) no MI Plan is a
"multi-employer plan" within the meaning of Section 4001(a)(3) of ERISA.
5.13 LIABILITIES. The MI Companies do not have any liabilities,
obligations or commitments of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, except for (i) liabilities which
are adequately disclosed or accrued against in the MI Financial Statements or
identified and reflected in the notes thereto, and (ii) liabilities which have
been incurred in the ordinary course of business and consistent with past
practice since March 31, 1995.
- 18 -
5.14 LITIGATION. Except as set forth in SCHEDULE 5.14, there is no
suit, action, arbitration or legal, administrative or other proceeding or
governmental investigation pending or threatened, against or affecting the MI
Companies, or any of their businesses, assets, prospects or financial condition.
The matters set forth in SCHEDULE 5.14, except as otherwise specifically
indicated thereon, if decided adversely to the MI Companies will not result in a
material adverse change in the business, assets, prospects or financial
condition of MI. No MI Company is in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court, department,
agency or instrumentality.
5.15 TAX RETURNS. Within the times and in the manner prescribed by
law, each of the MI Companies has filed all state and local tax returns required
by law and has paid all such taxes, assessments and penalties due and payable.
MI has filed its consolidated federal income tax returns for all fiscal years to
and including the fiscal year ending December 31, 1993, with the Internal
Revenue Service, and the results of any reviews or audits are accurately
reflected in the MI Financial Statements. There are no present disputes as to
taxes of any nature payable by any MI Company.
5.16 COMPLIANCE WITH LAWS. The MI Companies are in material
compliance with all applicable federal, state or local statutes, laws, and
regulations (including, without limitation, any applicable building, zoning or
other law, ordinance or regulation) that affect, or are likely to affect,
directly or indirectly, their properties, financial condition or the operation
of their business.
5.17 NO BREACH OR VIOLATION. The consummation of the transactions
contemplated by this Agreement will not result in or constitute any of the
following: (i) a default or an event that, with notice or lapse of time or both,
would be a default, breach or violation of the Bylaws or the charter documents
of the MI Companies or, except for third party consents described in this
Agreement or any schedule hereunder, any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust or
other agreement, instrument or arrangement to which any MI Company is a party or
by which any of them or the property of any of them is bound, (ii) except for
third party and governmental consents to assignments described in this Agreement
or in any schedule delivered hereunder, an event that would permit any party to
terminate any contract, license or other arrangement with the MI Companies,
(iii) the creation or imposition of any lien, charge, or encumbrance on any of
the assets of the MI Companies, or (iv) a breach of any term or provision of
this Agreement.
- 19 -
5.18 COMMISSION FILINGS; MI FINANCIAL STATEMENTS. The MI Companies
have previously furnished to HHCC true and complete copies of MI's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 (the "MI 10-K") which
contain consolidated balance sheets of MI as of December 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the three (3) years ending on those dates, audited by Price
Waterhouse, MI's independent public accountants, whose opinions with respect to
such financial statements are included in the MI 10-K. In addition, MI has
previously furnished to HHCC true and complete copies of MI's Report on Form
10-Q for the fiscal quarter ended March 31, 1995 (the "MI 10-Q") including
unaudited consolidated balance sheet of MI as of March 31, 1995 and the related
unaudited consolidated statements of income and cash flows for such quarter
period ending on March 31, 1995. The audited and unaudited financial statements
referred to in this Section 5.18 are true and correct in all material respects,
and are prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly and accurately present the financial position
of the MI Companies as of the date thereof, and the results of the MI
Companies's operations for the respective periods indicated in all material
respects. The MI 10-K and the MI 10-Q have been prepared and filed with the SEC
in accordance with all applicable laws and requirements, and all of the
information contained therein is true, complete and correct in all material
respects.
5.19 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1995,
other than as set forth in the MI 10-Q, there has been no:
(i) material adverse change in the financial condition, liabilities,
assets, business or prospects of the MI Companies;
(ii) direct or indirect redemption or acquisition of any capital
stock of the MI Companies;
(iii) waiver or release of any right of or claim held by the MI
Companies;
(iv) material loss, destruction or damage to any property of the MI
Companies, whether or not insured;
(v) labor trouble, pending or threatened, involving the MI
Companies, or material change in the personnel of the MI Companies or the
terms and conditions of their employment;
(vi) acquisition or disposition of any material assets, individually
or in the aggregate, nor any contract or arrangement therefor, nor any
other
- 20 -
transaction by the MI Companies otherwise than sales of inventory for
value in the ordinary course of business;
(vii) transaction by the MI Companies except in the ordinary course
of business;
(viii) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates)
by the MI Companies;
(ix) revaluation by the MI Companies of any of its assets or
liabilities;
(x) declaration, setting aside or payment of a dividend or other
distribution in respect to the capital stock of the MI Companies;
(xi) amendment or termination of any contract, agreement, permit or
license to which any of the MI Companies is a party;
(xiii) loan by any of the MI Companies to any person or entity, or
guaranty by any of the MI Companies of any loan;
(xiv) sale, transfer, encumbrance, mortgage, pledge or other
encumbrance of any asset of the MI Companies;
(xv) other event or condition of any character that has or might
reasonably have an adverse effect on the financial condition, business,
assets or prospects of the MI Companies;
(xvi) issuance or sale by any of the MI Companies of any shares of
its capital stock, or of any other of its securities; or
(xvii) agreement by any of the MI Companies to do any of the things
described in the preceding clauses (i) through (xvi).
5.20 ADVERSE INFORMATION. MI has no information or knowledge of any
change contemplated in any applicable laws, ordinances or restrictions, or any
judicial or administrative action, which would have a material adverse effect
upon the business or assets of the MI Companies.
5.21 DISCLOSURE. MI has provided to HHCC on or prior to the
execution of this Agreement, to the extent requested by HHCC, actual copies of
all contracts, documents concerning all litigation and administrative
proceedings, employee benefits, licenses,
- 21 -
insurance policies, lists of suppliers, customers, and employees, and corporate
records relating to the MI Companies or the assets and liabilities of the MI
Companies, and such information covers all material commitments and liabilities
of the MI Companies.
5.22 FULL DISCLOSURE. This Agreement, the Schedules and Exhibits
hereto, the MI 10-K, the MI 10-Q and all other documents and written information
furnished by MI or its Affiliates, on behalf of MI, to HHCC, the Shareholders or
their respective representatives pursuant hereto or in connection herewith, are
true, complete and correct, and do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made herein and therein not misleading. There are no facts relating
to the MI Companies' business, assets, liabilities, prospects, operations or
financial condition, which materially and adversely affects or, so far as MI can
now reasonably foresee, will materially and adversely affect the MI Companies,
or the business, liabilities, prospects, operations or financial condition
thereof, or the ability of MI to perform this Agreement or any of its
obligations hereunder.
ARTICLE VI
ADDITIONAL WARRANTIES AND
CERTAIN COVENANTS AND AGREEMENTS
6.1 SHAREHOLDERS' AND HHCC'S COVENANTS. The Shareholders and HHCC,
jointly and severally, represent, warrant, covenant and agree that from the
Balance Sheet Date through the Closing Date:
A. BUSINESS RELATIONSHIPS. HHCC and the Shareholders have used
their best efforts to preserve the business organization of HHCC
intact, to keep available to the Business its present Employees, and
to preserve its present relationship with suppliers, customers and
others having business relationships with them; and
B. INSURANCE. HHCC has maintained its existing insurance as to
the Business and the Assets, subject to variations in amounts
required by the ordinary operations of the Business; and
C. OPERATION AND MAINTENANCE. HHCC (i) has maintained and
operated the Business in a good and businesslike manner in
accordance with good and prudent business practices, (ii) has
conducted the Business only in the ordinary course, in substantially
the same manner as heretofore conducted, (iii) has maintained and
kept the properties and equipment of HHCC in good repair, working
order and condition, ordinary wear and tear excepted, (iv) has not
committed or permitted to be committed any waste to the Leased Real
Property, (v) has not entered into any agreement or instrument which
would bind HHCC or the Assets after
- 22 -
Closing, and which would be outside the normal scope of maintaining
and operating the Business and the Assets in the ordinary course of
business, (vi) has performed all of HHCC's obligations under all
contracts and commitments applicable to HHCC or the Assets, (vii)
has maintained its books of account and records in the usual,
regular and customary manner, (viii) has complied with all statutes,
laws, ordinances and regulations applicable to HHCC, the Assets, and
the conduct of the Business, (ix) has not removed any personal
property from the Leased Real Property, except for Excluded Assets
and assets not used by HHCC in the Business, unless such personal
property is replaced with an item of at least equal value that is
properly suited for its intended purpose, (x) has paid all bills and
other payments due with respect to the ownership, use, insurance,
operation, renovation, and maintenance of the Business or the
Assets, other than those items the failure of which to pay would not
have a material adverse impact on the Business, (xi) has taken all
action necessary or prudent to prevent liens or other claims for the
same from being filed or asserted against any part of the Assets,
(xii) has maintained in good condition, and has made all repairs and
replacements, structural and nonstructural, ordinary and
extraordinary, required under the applicable lease agreement with
respect to any portion of the Leased Real Property, (xiii) has not
made any material changes in HHCC's operations or business
practices, and (xiv) has advised MI promptly in writing of any
material adverse change, or any event, fact or circumstance which
could reasonably be expected to result in a material adverse change,
in the financial condition, results of operations, business or
prospects of HHCC.
Except as disclosed herein, by way of amplification and not
limitation of the foregoing paragraph, HHCC has not, without the
prior written consent of MI: (i) issued or committed to issue any
capital stock or other ownership interest, (ii) granted or committed
to grant any options, warrants, convertible securities or other
rights to subscribe for, purchase or otherwise acquire any shares of
its capital stock or other ownership interest, (iii) declared, set
aside, or paid any dividend or distribution from the Business with
respect to its capital stock or other ownership interest, (iv)
directly or indirectly redeemed, purchased or otherwise acquired or
committed to acquire any of its capital stock or other ownership
interest, or directly or indirectly terminated or reduced or
committed to terminate or reduce any bank line of credit or the
availability of any funds under any other loan or financing
agreement, except as specifically required by the terms of such
indebtedness, (v) effected a split or reclassification of any its
capital stock, (vi) amended its Articles of Incorporation, Bylaws or
other governing instruments, (vii) entered into any license
agreement, or any research and development agreements except in the
ordinary course of business, (viii) except in the ordinary course of
business, entered into any employment, consulting, agency,
distribution or service agreement, contract or commitment with any
person, or modified or canceled any such
- 23 -
agreement, commitment or contract, containing an obligation to pay
or accrue any sum of money, provided that the foregoing restriction
shall not apply to the hiring by HHCC of persons to replace
Employees who left the employ of HHCC in which no employment
agreement specifying a minimum term of employment is entered into
with such person, (ix) entered into, modified or canceled, any
agreement, contract or commitment relating to capital expenditures
containing an obligation to pay or accrue any sum of money, the
entry into, or modification or cancellation of, which would have, or
could be reasonably expected to have, a material adverse effect on
the Business, (x) entered into, modified or canceled, any agreement,
contract, indenture or other instrument relating to the borrowing of
money or other contracting or payment of indebtedness or the
guarantee of any obligation for the borrowing of money or other
contracting or payment of indebtedness, (xi) entered into, modified
or canceled, any lease of real or personal property having a term of
more than one year or containing an obligation to pay or accrue any
sum of money, (xii) entered into, modified or canceled, any
agreement, contract or commitment relating to the disposition or
acquisition of any interest in any business enterprise, except in
the ordinary course of business, (xiii) entered into, modified or
canceled any other agreement, contract or commitment (other than any
agreement, contract or commitment for the purchase of machinery or
supplies or for the provision of services entered into in the
ordinary course of business) which is not terminable without payment
of any sum of money by HHCC, (xiv) merged or consolidated with, or
agreed to merge or consolidate with, or purchase substantially all
of the assets of, or otherwise acquire, any business or any business
organization or division thereof, other than in connection with the
transaction contemplated hereby, (xv) amended any Plan, except as
required by law or as contemplated by this Agreement, (xvi) in any
way lessened its best efforts to improve the financial position and
business operations of HHCC, (xvii) voluntarily taken any action
which will result in the representations contained in Article IV not
being true and correct at the Closing Date, or (xviii) undertaken
any action or failed to take any action, either of which may
reasonably be expected to have an adverse effect on the financial
position of HHCC.
6.2 HIRING OF EMPLOYEES. The Shareholders shall, upon request of MI,
use their reasonable best efforts to cause certain key Employees of HHCC to
remain as employees or consultants to HHCC in the operation and conduct of the
Business, as MI may deem necessary or desirable in MI's sole discretion. MI will
not terminate any of the Employees for a period of twelve months after the
Closing Date, except for cause.
6.3 RECORD RETENTION. The Shareholders acknowledge and agree that
from and after the Closing Date, MI will be entitled to possession of all
documents, books, records, agreements, and financial data of any sort relating
to HHCC or the Business.
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6.4 NOMINATION OF MI DIRECTORS. At the next meeting of its Board of
Directors, which shall be held prior to July 1, 1995, MI will increase the
number of positions on its Board of Directors to six (6), and Arthur L. Rice
will be elected to fill the vacancy created thereby, to serve until the next
annual meeting of the stockholders of MI.
6.5 SECURITIES LAW COMPLIANCE. Each Shareholder hereby acknowledges,
represents, and warrants to, and agrees with, MI as follows:
(a) Such Shareholder has been furnished a copy of (and has
thoroughly and carefully reviewed) the following documents with respect to MI
and its actual and proposed business and affairs (such documents being
collectively referred to as the "MI Documents"):
(i) The MI 10-K, as filed with the Securities and Exchange
Commission (the "Commission").
(ii) The MI 10-Q, as filed with the Commission.
(iii) Definitive Proxy Statement for use at MI's 1995 Annual
Meeting of Stockholders to be held June 14, 1995, as filed with the
Commission.
It is understood and agreed that the MI Documents, along with this
Agreement (including all disclosure schedules and attachments), constitute the
disclosure documents for purposes of the offering and sale of the MI Common
Stock hereunder and related federal and state securities law, and such documents
must be read and understood collectively. MI has only furnished such Exhibits to
MI Documents as have been specifically requested, and each Shareholder
understands and agrees that all of such additional exhibits are available upon
request from MI, and are in the public records of the Commission. Each
Shareholder understands the information contained therein and herein, and has
had access to the same kind of information that would be available in a
registration statement filed by MI under the Securities Act of 1933, as amended
to date (the "Securities Act"), and to all other information requested by such
Shareholder.
(b) Each Shareholder understands that the offering and sale of the
MI Common Stock hereunder is intended to be exempt from registration under the
Securities Act, by virtue of Section 4(2) of the Securities Act and the
provisions of Regulation D promulgated under the Securities Act. In furtherance
thereof, each Shareholder represents and warrants to and agrees with MI as
follows:
(i) Such Shareholder acknowledges that all documents, records,
and books pertaining to this investment have
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been made available for inspection by it and its attorneys,
accountants or other representatives;
(ii) Such Shareholder or its advisor(s) have had a reasonable
opportunity to ask questions of and receive answers from a person or
persons acting on behalf of MI concerning the offering of the MI
Common Stock hereunder and MI and all such questions have been
answered to the full satisfaction of such Shareholder;
(iii) Such Shareholder is not purchasing the MI Common Stock
as a result of or subsequent to any advertisement, article, notice,
or other communication published in any newspaper, magazine, or
similar media, or broadcast over television or radio, or
presentation at any seminar or meeting, or any solicitation by a
person not previously known to such Shareholder in connection with
investments in securities generally;
(iv) Such Shareholder is not relying on MI with respect to the
tax and other economic considerations of an investment, and such
Shareholder has relied on the advice of, or has consulted with, only
its own advisors;
(v) Such Shareholder will not sell or otherwise transfer the
MI Common Stock issued hereunder without registration of such
securities under the Securities Act or an exemption therefrom, and
fully understands and agrees that such Shareholder must bear the
economic risk of its purchase for an indefinite period of time
because, among other reasons, the MI Common Stock issued hereunder
has not been registered under the Securities Act or under the
securities laws of certain states and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless such MI Common
Stock is subsequently registered under the Securities Act and under
the applicable securities laws of such states or unless an exemption
from such registration is available in the opinion of counsel for
the holder, which counsel and opinion are reasonably satisfactory to
MI and its counsel. Each Shareholder represents that it is willing
and able to bear the economic risk of its investment in the MI
Common Stock issued hereunder, has no need for liquidity with
respect thereto, is able to sustain a complete loss of its
investment, and is purchasing such MI Common Stock for its own
account, for investment and not with a view to resale or
distribution thereof except in compliance with the Securities Act;
and
(vi) Each Shareholder understands that MI is under no
obligation to register the MI Common Stock issued hereunder except
as provided in this Agreement, or to assist such Shareholder in
complying with any exemption from registration under the Securities
Act or under the securities laws of any state, and such Shareholder
agrees that an appropriate restrictive legend will be
- 26 -
placed on any certificate or certificates representing the MI Common
Stock issued hereunder.
6.6 REGISTRATION OF STOCK UNDER THE SECURITIES ACT.
A. REGISTRABLE STOCK. As used in this Section, the term
"Registrable Stock" shall mean all MI Common Stock issued to the
Shareholders.
B. INCIDENTAL REGISTRATION. If shares of MI Common Stock are
proposed to be registered under the Securities Act (other than a
registration effected solely to implement an employee benefit plan
or a transaction to which Rule 145 is applicable), MI will each such
time give written notice to all holders of Registrable Stock of such
event. Upon the written request of a holder or holders of any shares
of Registrable Stock given within ten (10) days after receipt of any
such notice (stating the number of shares of Registrable Stock to be
disposed of and the intended method of disposition of such shares by
such holder or holders), MI will use its best efforts to cause
promptly all such shares of Registrable Stock intended to be
disposed of, the holders of which shall have so requested
registration thereof, to be registered under the Securities Act so
as to permit the sale or other disposition (in accordance with the
intended methods thereof as aforesaid) by such holder or holders of
the shares so registered, subject to the limitations set forth in
Paragraph C of this Section.
C. LIMITATIONS ON INCIDENTAL REGISTRATION. If MI gives notice
pursuant to Paragraph B of this Section for the purpose of
permitting a disposition (either underwritten or otherwise) of
securities of MI, MI shall have the right to determine the aggregate
size of the offering and to limit the number of shares of MI Common
Stock to be registered by the holders of Registrable Stock pursuant
to Paragraph B of this Section, including the right to exclude (i)
all shares to be sold on behalf of selling stockholders if MI's
underwriters or financial advisors determine such exclusion is
necessary or advisable to insure a successful offering of MI
securities, and (ii) any shares to be sold on behalf of any
stockholder who has twice previously registered shares of MI Common
Stock pursuant to Paragraph B or G of this Section. If MI limits the
number of (but does not exclude) shares sold by selling
stockholders, the maximum number of shares to be registered on
behalf of any holder of Registrable Stock shall be determined by
multiplying the number of shares of Registrable Stock such holder
has requested be registered by a fraction, the numerator of which is
the number of shares of selling stockholders to which the
registration is limited, and the denominator of which is the number
of shares of MI Common Stock validly requested to be included in
such registration by all holders of MI Common Stock having
registration rights.
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D. REGISTRATION PROCEDURES. In connection with MI's best
efforts to effect promptly the registration of shares of the MI
Common Stock under the Securities Act, MI will:
(i) Prepare and file with the Commission a registration
statement with respect to such shares and use its best efforts
to cause such registration statement to become and remain
effective as provided herein for a period of not less than
three (3) months, except that MI shall not be required to
conduct any special audit;
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement and
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and current and to
comply with the provisions of the Securities Act with respect
to the sale or other disposition of all shares covered by such
registration statement, including such amendments and
supplements as may be necessary to reflect the intended method
of disposition from time to time of the prospective seller or
sellers of such shares for a period of not less than three (3)
months;
(iii) Furnish to each prospective seller such number of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as such seller may reasonably request in
order to facilitate the public sale or other disposition of
the shares owned by such seller; and
(iv) Use its reasonable efforts to register or qualify
the shares covered by such registration statement under such
other securities or blue sky or other applicable laws of such
jurisdictions within the United States, as each prospective
seller shall reasonably request, to enable such prospective
seller to consummate the public sale or other disposition in
such jurisdictions of the shares owned by such seller.
Each prospective seller of the MI Common Stock issue to the
Shareholders hereunder, and each underwriter designated by such
seller, shall be required to furnish to MI such information as MI
may reasonably require from such seller or underwriter for inclusion
in the registration statement (and the prospectus included therein).
The holders of shares included in the registration statement
will not (until further notice) effect sales thereof after receipt
of telegraphic or written notice from MI to suspend sales in order
to permit MI to correct or update a registration statement or
prospectus; but the obligations of MI with respect to maintaining
any registration statement current and effective shall
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be extended by a period of days equal to the period such suspension
is in effect.
E. EXPENSES OF REGISTRATION. All expenses incurred in
effecting any registration pursuant to this Section, including,
without limitation, all registration and filing fees, printing
expenses, expenses of compliance with Blue Sky laws, fees and
disbursements of counsel for MI, shall be borne by MI, save and
except the following which shall be borne by the holders of the
securities registered pursuant to such registration, pro rata based
upon the value of their securities so registered as compared to all
securities so registered:
(i) all fees and disbursements of counsel for such
holders; and
(ii) underwriting discounts or commissions, as the case
may be, attributable to the sale of registered securities by
such holders.
F. INDEMNIFICATION. (i) MI agrees to indemnify each holder
requesting or joining in a registration, each person or entity who
controls such holder within the meaning of Section 15 of the
Securities Act, and each underwriter and selling broker of the
securities so registered, and their respective successors, against
all claims, losses, damages, liabilities, fines and penalties (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document incident to
any registration, qualification or compliance (or in any related
registration statement, notification or the like) or any omission
(or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or any violation by MI of any rule or regulation
promulgated under the Securities Act applicable to MI and relating
to action or inaction required of MI in connection with any such
registration, qualification or compliance, and agrees to reimburse
each such holder, each person or entity who controls such holder
within the meaning of Section 15 of the Securities Act, and each
such underwriter, and their respective successors, for any legal and
any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability
or action, provided however, that MI will not be liable in any such
case if (and to the extent that) such statement or omission was made
in reliance upon information (including, without limitation written
negative responses to inquiries) furnished to MI by an instrument
duly executed by such holder or underwriter and stated to be
specifically for use in such prospectus, offering circular or other
document (or related registration statement, notification or the
like) or any amendment or supplement thereto.
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(ii) Each holder requesting or joining in a registration
and each underwriter of the securities so registered will
indemnify MI and its officers and directors and each person,
if any, who controls any holder thereof within the meaning of
Section 15 of the Securities Act and their respective
successors against all claims, losses, damages, liabilities,
fines and penalties (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus,
offering circular or other document incident to any
registration, qualification or compliance (or in any related
registration statement, notification or the like) or any
omission (or alleged omission) to state therein a material
fact required to be stated or necessary to make the statements
therein not misleading, and will reimburse MI, as applicable,
and each other person indemnified pursuant to this
subparagraph (ii) for any legal and any other expenses
reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action,
provided however, that this subparagraph (ii) shall apply only
if (and only to the extent that) such statement or omission
was made in reliance upon information (including, without
limitation, written negative responses to inquiries) furnished
to MI by an instrument duly executed by such holder or
underwriter and stated to be specifically for use in such
prospectus, offering circular or other document (or related
registration statement, notification or the like) or any
amendment or supplement thereto.
G. MI REGISTRATION OBLIGATIONS. MI acknowledges that if it has
not registered shares of MI Common Stock under the Securities Act
prior to June 29, 1996, MI is currently required under an agreement
with certain of its stockholders to proceed with a registration of
shares of the MI Common Stock immediately following such date. MI
agrees to cause all shares of Registrable Stock intended to be
disposed of, the holders of which shall have so requested
registration under Paragraph B above, to be included in any such
registration, without limitation under Paragraph C above, so as to
permit the sale or other disposition by such holder or holders of
the shares so registered. If such registration is not effected on or
before August 1, 1996, MI agrees that it will (i) if MI is then
eligible to utilize a registration statement on Form S-3 (or any
successor form) for sales by shareholders under Rule 415 promulgated
under the Securities Act, MI will use its best efforts to effect
promptly the registration on Form S-3 of the delayed or continuous
offering and sale of all shares of Registrable Stock requested to be
included in such registration statement by the holders thereof, or
(ii) if MI is not then eligible to utilize such registration
statement in such a manner, upon the request of holders of the
Registrable Stock indicating their intent to sell or otherwise
dispose of at least 600,000 shares of the Registrable Stock within
six (6) months after such date, use its best efforts to effect
promptly a registration so as
- 30 -
to permit the sale or other disposition by such holder or holders of
the shares so registered.
6.7 SPECIFIC INDEMNIFICATION BY THE SHAREHOLDERS.
A. INDEMNIFICATION. The Shareholders shall indemnify, save,
defend and hold harmless MI from and against any and all costs,
lawsuits, losses, liabilities, deficiencies, claims and expenses,
including interest, penalties, attorneys' fees and all amounts paid
in investigation, defense or settlement of any of the foregoing
(collectively referred to herein as "Damages"), specifically
incurred by MI or any MI Affiliate in connection with, arising out
of, resulting from, or incident to HHCC's compliance with state
filing requirements prior to the Closing Date and/or employee
compensation matters related to tax returns filed by HHCC prior to
the Closing Date; provided that MI will not be indemnified for any
Damages that are incurred prior to such time as MI or any MI
Affiliate receives reasonable notice from the appropriate state or
taxing authority or its agent, whether written or verbal, of any
potential liability that would be subject to indemnification by the
Shareholders hereunder, unless MI receives the prior consent of
Arthur L. Rice on behalf of the Shareholders, which consent shall
not be unreasonably conditioned, delayed or withheld.
B. DEFENSE OF CLAIMS. If MI or any Affiliate of MI receives
reasonable notice, whether written or verbal, of any potential
liability that would be subject to indemnification by the
Shareholders hereunder, written notice thereof describing such
potential liability in reasonable detail and indicating the amount
(estimated, if necessary) or good faith estimate of the reasonably
foreseeable estimated amount of Damages (which estimate shall in no
way limit the amount of indemnification MI is entitled to receive
hereunder), shall be given to the Shareholders as promptly as
practicable (and in any event within twenty (20) days, after the
service of the citation or summons); provided that the failure of MI
to give timely notice shall not affect its rights to indemnification
hereunder unless such failure materially prejudices the
Shareholders. MI shall control the defense and investigation of any
such lawsuit or action and shall employ and engage attorneys of its
choice to handle and defend the same, and the Shareholders shall
cooperate in all reasonable respects with MI and such attorneys in
the investigation, trial, and defense of such lawsuit or action and
any appeal arising therefrom. MI shall not pay, settle or compromise
any such claim without the consent of Arthur L. Rice on behalf of
the Shareholders, which consent shall not be unreasonably
conditioned, delayed or withheld. MI also shall not take any action
that could reasonably be expected to lead to a lawsuit or
enforcement action for which the Shareholders would have
indemnification obligations under this Section 6.7 without the
consent of Arthur L. Rice on behalf of the Shareholders, which
consent shall not be unreasonably conditioned, delayed or withheld.
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C. SATISFACTION OF SHAREHOLDERS' OBLIGATIONS. The obligations
of the Shareholders under this Section 6.7 will only be satisfied by
a distribution of shares of MI Common Stock having an aggregate
value equal to the amount of such obligations from the Escrow Agent
to MI pursuant to the terms of the Escrow Agreement. To the extent
that the value of the shares of MI Common Stock held by the Escrow
Agent is not sufficient to satisfy the obligations of the
Shareholders under this Section 6.7, MI will have the right to
receive all of the remaining shares of MI Common Stock held by the
Escrow Agent, but shall have no further rights against, or as to,
the Shareholders or MI Common Stock owned by the Shareholders not
covered by the Escrow Agreement. For purposes of this Section 6.7,
the value of each share of MI Common Stock transferred from Escrow
Agent to MI to satisfy obligations of the Shareholders hereunder
shall be deemed to equal the value of a share of MI Common Stock as
set forth in Section 3.6 above.
ARTICLE VII
MISCELLANEOUS
7.1 COOPERATION. The Parties shall undertake their respective best
efforts, and shall instruct their respective counsel, accountants and other
representatives, to cooperate with each other and the other Parties' counsel,
accountants and other representatives in connection with any steps required to
be taken as part of their respective obligations under this Agreement and in
connection with the consummation of the transactions contemplated hereby.
7.2 CONFIDENTIALITY. After the Closing, the Shareholders agree, on
behalf of themselves, and agree to use their reasonable efforts to cause their
Affiliates, employees and agents, not to divulge, communicate, use to the
detriment of MI or its Affiliates or for the benefit of any other person or
persons, any confidential information or trade secrets of HHCC with respect to
the Assets or the Business, including personnel information, secret processes,
know-how, customer lists, formulae, or other technical data; provided, if the
Shareholders or any of their Affiliates are compelled to disclose such
information to any tribunal, regulatory or governmental authority or agency or
else stand liable for contempt or suffer other censure and penalty, the
Shareholders or their Affiliates may so disclose such information without any
liability hereunder, upon furnishing MI at least ten (10) days prior written
notice, if possible under the circumstances.
7.3 PUBLICITY. The Parties agree that all press releases,
announcements and other publicity concerning this Agreement shall be subject to
the prior approval of both of them; provided, however, that MI may issue a press
release in order to maintain compliance with applicable federal or state laws,
or stock
- 32 -
exchange or NASDAQ rules or by-laws so long as the press release is
contemporaneously given to the HHCC Parties.
7.4 BROKERAGE COMMISSIONS AND OTHER FEES. The Shareholders hereby
jointly and severally represent and warrant that except for fees to be paid to
Davey & Magill in the amount of One Hundred Twenty-Five Thousand and No/100
Dollars ($125,000.00), which will be paid by Arthur L. Rice on behalf of HHCC on
or about the Closing Date, neither the Shareholders nor HHCC have incurred any
liability for, nor knows of any person or entity entitled to, any commission or
finder's fee in connection with this Agreement or the transactions contemplated
herein. MI hereby represents and warrants that MI has not incurred any liability
for, and does not know of any person or entity entitled to, any commission or
finder's fee in connection with this Agreement or the transactions contemplated
herein. Except as expressly set forth herein to the contrary, each Party shall
be responsible for all costs, fees and expenses (including attorney and
accountant fees and expenses) paid or incurred by such Party in connection with
the preparation, negotiation, execution, delivery and performance of this
Agreement, or otherwise in connection with the transactions contemplated hereby.
7.5 SPECIFIC PERFORMANCE. Each Parties' obligations under this
Agreement are unique. If any Party should default in its obligations under this
Agreement, the Parties each acknowledge that it would be extremely impracticable
to measure the resulting damages; accordingly, the nondefaulting Party, in
addition to any other available rights or remedies, may sue in equity for
specific performance, and the Parties each expressly waive the defense that a
remedy in damages will be adequate. Notwithstanding any breach or default by any
of the Parties of any of their respective representations, warranties, covenants
or agreements under this Agreement, if the purchase and sale contemplated by it
shall be consummated at the Closing, each of the Parties waives any rights that
it may have to rescind this Agreement or the transaction consummated by it;
provided, however, this waiver shall not affect any other rights or remedies
available to the Parties under this Agreement or under the law.
7.6 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in this Agreement, except as otherwise specifically
provided, notwithstanding any investigation made by or on behalf of any of the
Parties, shall expire immediately after the Closing.
7.7 MODIFICATION OF AGREEMENT. This Agreement may be amended or
modified only in writing signed by all of the Parties.
7.8 NOTICES. All notices, consents, demands or other communications
required or permitted to be given pursuant to this
- 33 -
Agreement shall be deemed sufficiently given when delivered personally or
telefaxed during regular business hours during a business day to the appropriate
location described below, or three (3) business days after posting thereof by
United States first-class, registered or certified mail, return receipt
requested, with postage and fees prepaid and addressed as follows:
IF TO MI: Medical Innovations, Inc.
One Riverway, Suite 2300
Houston, Texas 77056
Attn: Chief Executive Officer
Fax No.: (713) 590-2520
With copy to: Mr. John R. Boyer, Jr.
Boyer, Ewing & Harris Incorporated
Nine Greenway Plaza, Suite 3100
Houston, Texas 77046
Fax No.: (713) 871-2024
IF TO HHCC: Hospital HomeCare Corporation
1140 Empire Central, Suite 500
Dallas, Texas 75247
Fax No.: (214) 637-3749
With copy to: Mr. Walter J. Cicack
Meyer Orlando & Evans
2300 America Tower
2929 Allen Parkway
Houston, Texas 77019
Fax No.: (713) 523-2002
IF TO SHAREHOLDERS: c/o Arthur L. Rice
1140 Empire Central, Suite 500
Dallas, Texas 75247
Fax No.: (214) 637-3749
With copy to: Mr. Patrick Magill
Davey & Magill
24 Greenway Plaza, Suite 605
Houston, Texas 77046
Fax No.: (713) 622-8727
Any Party at any time by furnishing notice to the other Parties in the manner
described above may designate additional or different addresses for subsequent
notices or communications.
7.9 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not invalidate or affect the enforceability of
any other provision of this Agreement.
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7.10 ENTIRE AGREEMENT. This Agreement, together with the other
agreements of even date executed by the Parties, collectively set forth the
entire agreement among the Parties with respect to the subject matter hereof.
7.11 WAIVER. No delay in the exercise of any right under this
Agreement shall waive such rights. Any waiver, to be enforceable, must be in
writing.
7.12 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Texas. Any
litigation between or among the Parties with respect to the subject matter of
this Agreement shall take place in the appropriate federal and state district
courts of Harris County, Texas, and each Party hereby irrevocably submits to the
personal jurisdiction of such courts.
7.13 ASSIGNMENT. The Parties may not assign this Agreement or any
interest herein without the prior written consent of the other Parties. Any
attempted assignment by any Party of its, his or her rights or obligations
without such consent shall be null and void. Notwithstanding the foregoing, MI
may assign its rights, duties, and obligations under this Agreement to any MI
Subsidiary, in which event such assignee shall be entitled to enforce all of
MI's rights, titles and interests herein; provided that MI shall remain
responsible for its obligations hereunder upon any such assignment. Reference to
any of the Parties in this Agreement shall be deemed to include the successors
and assigns of such Party.
7.14 HEADINGS. Headings in this Agreement are for convenience only
and shall not affect the interpretation of this Agreement.
7.15 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to
this Agreement are hereby incorporated into and made a part of this Agreement.
7.16 RIGHTS AND LIABILITIES OF PARTIES. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the Parties and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
Party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over against any Party to this Agreement.
7.17 SURVIVAL. Except as otherwise provided herein, this Agreement,
including but not limited to all covenants, warranties, representations and
indemnities contained herein, shall
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survive the Closing and the delivery of the documents, instruments or agreements
relating to the Agreement and the transactions contemplated herein, and shall
not be deemed merged therein.
7.18 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the Parties and their respective successors and
assigns, but this provision shall in no way alter the restrictions set forth
herein relating to assignment by the Parties.
7.19 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as
of the date first above written.
MI:
MEDICAL INNOVATIONS, INC.
By: /s/ MARK H. FISHER
Mark H. Fisher, Chairman of the Board
President and Chief Executive Officer
HHCC:
HOSPITAL HOMECARE CORPORATION
By: /s/ ARTHUR L. RICE
Arthur L. Rice, President
SHAREHOLDERS:
/s/ ARTHUR L. RICE
Arthur L. Rice
/s/ VIRGINIA F. RICE
Virginia F. Rice
/s/ KENNETH A. RICE
/s/ LUCILLE RICE ROBERTS
Lucille Rice Roberts
/s/ LAURETTA RICE COLVIN
Lauretta Rice Colvin
/s/ ANGELA RICE McBRIDE
Angela Rice McBride
- 37 -
SCHEDULE 2.2
Net MI
Shares
Total MI Shares 5% Escrow at Closing
--------------- --------- ----------
Arthur and Virginia Rice ....... 2,033,609 101,680 1,931,929
Kenneth Rice ................... 120,820 6,041 114,779
Lucille Rice Roberts ........... 120,820 6,041 114,779
Lauretta Rice Colvin ........... 493,612 24,681 468,931
Angela Rice McBride ............ 493,612 24,681 468,931
--------- --------- ---------
3,262,473 163,124 3,099,349
========= ========= =========
