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Exhibit A
CUSIP NO. 58449S-10-5 13D
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 18, 1999
BY AND AMONG
MEDICAL ALLIANCE, INC.,
DHS ACQUISITION CORP.,
AND
DIAGNOSTIC HEALTH SERVICES, INC.
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TABLE OF CONTENTS
Page
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TABLE OF DEFINITIONS v
ARTICLE I THE MERGER 2
Section 1.01 The Merger 2
Section 1.02 Conversion of Shares 3
Section 1.03 Surrender and Payment 4
Section 1.04 Stock Option Plans 6
Section 1.05 DHS Warrants 7
Section 1.06 DHS Preferred Stock 7
Section 1.07 Fractional Shares 7
ARTICLE II THE SURVIVING CORPORATION 8
Section 2.01 Certificate of Incorporation 8
Section 2.02 By-Laws 8
Section 2.03 Directors and Officers 8
ARTICLE III REPRESENTATIONS AND WARRANTEES OF MAI 8
Section 3.01 Organization and Power 8
Section 3.02 Corporate Authorization 9
Section 3.03 Governmental Authorization 9
Section 3.04 Non-Contravention 10
Section 3.05 Capitalization of MAI 10
Section 3.06 Capitalization of Subsidiaries 11
Section 3.07 SEC Filings 12
Section 3.08 Financial Statements 12
Section 3.09 Information Supplied 13
Section 3.10 Absence of Certain Changes 13
Section 3.11 No Undisclosed Liabilities 14
Section 3.12 Litigation 15
Section 3.13 Taxes 15
Section 3.14 Employee Benefit Plans; ERISA 17
Section 3.15 Certain Agreements; Compliance with Agreements 18
Section 3.16 Compliance with Laws and-Orders 20
Section 3.17 Environmental Matters 21
Section 3.18 Assets 22
Section 3.19 Intellectual Property Rights 22
Section 3.20 Labor Matters 22
Section 3.21 Transactions with Affiliates 23
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Section 3.22 Insurance 23
Section 3.23 Takeover Statutes 23
Section 3.24 Finders' Fees 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF DHS 24
Section 4.01 Organization and Power 24
Section 4.02 Corporate Authorization 24
Section 4.03 Governmental Authorization 25
Section 4.04 Non-Contravention 25
Section 4.05 Capitalization of DHS 25
Section 4.06 Capitalization of Subsidiaries 26
Section 4.07 SEC Filings 27
Section 4.08 Financial Statements 27
Section 4.09 Information Supplied 28
Section 4.10 Absence of Certain Changes 28
Section 4.11 No Undisclosed Liabilities 29
Section 4.12 Litigation 29
Section 4.13 Taxes 30
Section 4.14 Employee Benefits; ERISA 32
Section 4.15 Certain Agreements; Compliance with Agreements 33
Section 4.16 Compliance with Laws and Orders 35
Section 4.17 Environmental Matters 35
Section 4.18 Assets 35
Section 4.19 Intellectual Property Rights 36
Section 4.20 Labor Matters 36
Section 4.21 Transactions with Affiliates 37
Section 4.22 Insurance 37
Section 4.23 Takeover Statutes 37
Section 4.24 Finders' Fees 37
ARTICLE V COVENANTS 38
Section 5.01 Conduct of MAI 38
Section 5.02 Conduct of DHS 40
Section 5.03 No Solicitation 42
Section 5.04 Approval of Stockholders 44
Section 5.05 Preparation of Form S-4 and Proxy Statement 45
Section 5.06 Access to Information 46
Section 5.07 Notices of Certain Events 46
Section 5.08 Regulatory and Other Approvals 47
Section 5.09 Public Announcements 47
Section 5.10 Further Assurances 48
Section 5.11 MAI Affiliates 48
Section 5.12 Obligations of Merger Subsidiary 48
Section 5.13 Listing of Stock 48
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Section 5.14 Antitakeover Statutes 48
Section 5.15 Tax Treatment 49
Section 5.16 Appointment of Directors 49
Section 5.17 Director and Officer Indemnification 49
Section 5.18 Employee Benefits 49
Section 5.19 Good Faith Efforts 50
ARTICLE VI GENERAL CONDITIONS PRECEDENT TO THE MERGER 50
Section 6.01 Stockholder Approval 50
Section 6.02 HSR Act 50
Section 6.03 Registration Statements; State Securities Laws 50
Section 6.04 Listing 50
Section 6.05 Suits or Other Proceedings 50
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF DHS 51
Section 7.01 Representations and Warranties 51
Section 7.02 Performance of Obligations 51
Section 7.03 No Material Adverse Change 51
Section 7.04 Consents 51
Section 7.05 Opinion of MAI Counsel 51
Section 7.06 Proceedings 51
Section 7.07 Tax Opinion 52
Section 7.08 Fairness Opinion 52
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MAI AND MERGER SUBSIDIARY 52
Section 8.01 Representations and Warranties 52
Section 8.02 Performance of Obligations 52
Section 8.03 No Material Adverse Change 53
Section 8.04 Consents 53
Section 8.05 Opinion of DHS Counsel 53
Section 8.06 Proceedings 53
Section 8.07 Fairness Opinion 53
Section 8.08 Accounting Matters 53
ARTICLE IX TERMINATION 54
Section 9.01 Termination 54
Section 9.02 Effect of Termination 55
ARTICLE X MISCELLANEOUS 56
Section 10.01 Notices 56
Section 10.02 Entire Agreement Non-Survival of Representations and Warranties: Third Party
Beneficiaries 57
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Section 10.03 Amendment 58
Section 10.04 Waiver 58
Section 10.05 Expenses 58
Section 10.06 Successors and Assigns 58
Section 10.07 Governing Law 58
Section 10.08 Jurisdiction 58
Section 10.09 Counterparts: Effectiveness 59
Section 10.10 Interpretation 59
Section 10.11 Severability 59
Section 10.12 Specific Performance 59
Section 10.13 Performance by Merger Subsidiary 59
EXHIBITS
Voting Agreement A
Affiliate Letter B
Registration Rights Agreement C
Opinion of MAI Counsel D
Opinion of DHS Counsel E
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TABLE OF DEFINITIONS
TERM SECTION
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1933 Act 3.03
1934 Act 3.03
Adjusted Option 1.04(a)
Adjusted Warrant 1.05
Affiliate Letter 5.11
Alternative Proposal 5.03(a)
Antitrust Division 5.08
Closing 1.01(b)
Closing Date 1.01(b)
Code recitals
Confidentiality Agreement 5.06(a)
Delaware Law 1.01(a)
DHS preamble
DHS 10-K 4.08
DHS Agreement 4.04
DHS Balance Sheet 4.08
DHS Balance Sheet Date 4.08
DHS Benefit Plans 4.14(a)
DHS Common Stock 1.02(a)
DHS Disclosure Letter 4.01
DHS ERISA Affiliate 4.14(a)
DHS Financial Statements 4.08
DHS Group 4.13(i)
DHS Holders recitals
DHS Option Plans 1.04(a)
DHS Stock Option 1.04(a)
DHS Permits 4.16
DHS Plans 4.05(a)
DHS Preferred Stock 4.05(a)
DHS SEC Documents 4.07(a)
DHS Securities 4.05(a)
DHS Stockholders' Approval 5.04(a)
DHS Stockholders' Meeting 5.04(a)
DHS Subsidiary Securities 4.06
DHS Tax Returns 4.13
DHS Warrants 1.05
Effective Time 1.01(c)
Environmental Laws 3.17(b)
Environmental Liabilities 3.17(b)
ERISA 3.14(a)
Exchange Agent 1.03(a)
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Form S-4 3.09
FTC 5.08
GAAP 3.08
Governmental Authorities 3.03
Hazardous Substance 3.17(b)
HSR Act 3.03
Indemnified Persons 5.17
Intellectual Property 3.19(a)
Laws 3.04
Lien 3.04
MAI preamble
MAI 10-K 3.08
MAI Affiliates 5.11
MAI Agreement 3.04
MAI Balance Sheet Date 3.08
MAI Balance Sheet 3.08
MAI Benefit Plans 3.14(a)
MAI Common Stock 1.02(a)
MAI Disclosure Letter 2.03
MAI ERISA Affiliate 3.14(a)
MAI Financial Statements 3.08
MAI Group 3.13(i)
MAI Holders recitals
MAI Option Plan 3.05(a)
MAI Permits 3.16
MAI Proposal 5.03(b)
MAI SEC Documents 3.07(a)
MAI Securities 3.05(a)
MAI Stock Option 1.04(a)
MAI Shareholders' Approval 5.04(b)
MAI Shareholders' Meeting 5.04(b)
MAI Subsidiary Securities 3.06
MAI Tax Returns 3.13(a)
MAI Warrants 3.05
Material Adverse Effect 3.01
Merger 1.01(a)
Merger Consideration 1.02(c)
Merger Subsidiary preamble
Most Recent DHS Balance Sheet 4.08(b)
Most Recent MAI Balance Sheet 3.08(b)
Notice of Superior Proposal 5.04(a)
Orders 3.04
Person 1.02(d)
Proxy Statement 3.09
Qualified Stock Options 1.04(a)
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SEC 3.07(a)
Service 3.13(h)
Share(s) 1.02(a)
Stockholders recitals
Shareholders' Meetings 5.04(b)
Subsidiary 1.02(d)
Subsidiary of MAI 3.17(b)
Superior Proposal 5.04(a)
Surviving Corporation 1.01(a)
Takeover Statute 3.23
Tax Return 3.13(1)
Taxes 3.13(1)
Taxing Authority 3.13(1)
Texas Law
Voting Agreement recitals
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of May 18,
1999 among MEDICAL ALLIANCE, INC., a Texas corporation ("MAI"), DHS ACQUISITION
CORP., a Delaware corporation ("Merger Subsidiary"), and DIAGNOSTIC HEALTH
SERVICES, INC., a Delaware corporation ("DHS").
W I T N E S S E T H:
WHEREAS, DHS and its Subsidiaries are engaged primarily in the
provision of outsourced medical support services and equipment to hospitals,
physician offices and other health care facilities, and MAI and its Subsidiaries
are engaged primarily in the provision of services used to create temporary
surgical environments in physician offices; and
WHEREAS, DHS and MAI are parties to an Agreement and Plan of Merger
dated as of February 18, 1999 (the "Original Agreement"), pursuant to which the
parties thereto contemplated effecting the business combination of DHS and MAI
by means of the merger of a wholly-owned subsidiary of DHS with and into MAI;
and
WHEREAS, the respective Boards of Directors of DHS and MAI have
determined to restructure the proposed business combination on the terms and
conditions hereinafter set forth, and to amend and restate the Original
Agreement pursuant to this Agreement; and
WHEREAS, the respective Boards of Directors of DHS and MAI have
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate, the acquisition of DHS by MAI by means of a merger
of Merger Subsidiary into DHS, as a result of which DHS will become a
wholly-owned subsidiary of MAI, all on the terms and conditions set forth
herein; and
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger contemplated by this Agreement qualify as a "reorganization"
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "CODE"); and
WHEREAS, as a condition and inducement to MAI entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, MAI is entering into a Voting
Agreement with Mapleleaf Capital, Ltd., Sunwestern Cayman 1998 Partners,
Sunwestern Investment Fund III, Xxxx X. Xxxxxxxx, Xxxx X. Xxxx, Xxxxx X.
Xxxxxxxxxxxx, Xxxxxx X. Xxxxxxxxxx, Xxxx Xxxxxxxx and Xxxx XxXxxxxxx
(collectively, the "MAI HOLDERS") and Xxx X. Xxxxxx, Xxxx X. Xxxxxx, Xxxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxx, Xx X. Xxxxx and Xxxxxx X. Xxxxxxxx (collectively,
the "DHS HOLDERS," and collectively with the MAI Holders, the "STOCKHOLDERS"),
in the form of Exhibit A hereto (the "VOTING AGREEMENT") pursuant to which,
among other things, the DHS Holders have agreed to vote the shares of DHS Common
Stock owned by them in favor of this Agreement, the Merger and the
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other transactions provided for herein, and the MAI Holders have agreed to vote
the shares of MAI Common Stock owned by them in favor of the issuance of shares
of MAI Common Stock pursuant to the Merger and the other transactions
contemplated by the Merger.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements set forth herein and in
the Voting Agreement, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
THE MERGER
Section 1.01 The Merger.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, Merger Subsidiary shall be merged (the
"MERGER") with and into DHS in accordance with the Delaware General Corporation
Law (the "DELAWARE LAW"), whereupon the separate existence of Merger Subsidiary
shall cease, and DHS shall continue as the surviving corporation (the "SURVIVING
CORPORATION").
(b) Upon the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "CLOSING") shall take place at 10:00
a.m. on a date to be specified by the parties (the "CLOSING DATE"), which shall
be no later than the fifth business day after satisfaction of the conditions set
forth in Article VI, at the offices of Xxxxxxx Xxxxxx L.L.P. in Dallas, Texas,
unless another time, date or place is agreed to in writing by the parties
hereto.
(c) Upon the Closing, DHS and Merger Subsidiary will file a
certificate of merger with the Secretary of State of the State of Delaware and
make all other filings or recordings required by Delaware Law in connection with
the Merger. The Merger shall become effective at such time as the articles of
merger are duly filed with the Secretary of State of the State of Delaware or at
such later time as is agreed by DHS and MAI and specified in the certificate of
merger (the "EFFECTIVE TIME").
(d) The Merger shall have the effects set forth in Section 251
of the Delaware Law.
(e) Each party hereto will, either prior to or after the
Effective Time, execute such further documents, instruments, deeds, bills of
sale, assignments and assurances and take such further actions as may reasonably
be requested by one or more of the other parties to consummate the Merger, to
vest the Surviving Corporation with full title to all assets, properties,
privileges, rights, approvals, immunities and franchises of Merger Subsidiary or
DHS, or to effect the other purposes of this Agreement.
Section 1.02 Conversion of Shares.
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(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any common stock of DHS or Merger
Subsidiary:
(i) each share of Common Stock, par value $0.001 per share, of
DHS (the "DHS COMMON STOCK") held by DHS as treasury stock or owned by
MAI or any Subsidiary of MAI immediately prior to the Effective Time
shall automatically be canceled and retired without any conversion
thereof, and no MAI Common Stock or other consideration shall be
delivered in exchange therefor;
(ii) each share of common stock, par value $.01 per share, of
Merger Subsidiary outstanding immediately prior to the Effective Time
shall automatically be converted into and become one share of common
stock of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation; and
(iii) each share (each, a "SHARE" and collectively, the
"SHARES") of DHS Common Stock outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Section
1.02(a)(i), automatically be converted into the right to receive .375
shares of fully paid and non-assessable Common Stock, par value $0.002
per share of MAI (the "MAI COMMON STOCK"); provided, however, that the
foregoing conversion ratio shall be (A) appropriately adjusted in the
event that there shall occur any stock dividend, stock split,
combination of shares, recapitalization or other such event relating to
the MAI Common Stock or the DHS Common Stock between the date hereof
and the Effective Time, (B) proportionately increased or decreased (as
the case may be) in the event and to the extent that the number of
outstanding shares of MAI Common Stock shall, at the Effective Time, be
greater than or less than the number of outstanding shares of MAI
Common Stock on the date hereof, other than increases resulting from
the exercise of options or warrants that are outstanding on the date
hereof or hereafter issued in accordance with Section 5.01(f) and any
issuance of MAI Common Stock pursuant to the outstanding Asset Purchase
Agreement between MAI and Xxxxxx Xxxxxxx, such that the DHS
stockholders receive in the Merger the same percentage of the total
outstanding MAI Common Stock (immediately after giving effect to the
Merger) as they would have received had the Merger been consummated on
the date of this Agreement, and (C) increased or decreased (as the case
may be) in the event and to the extent that the number of outstanding
shares of DHS Common Stock shall, at the Effective Time, be less than
or greater than the number of outstanding shares of DHS Common Stock on
the date hereof, other than increases resulting from exercises of
options or warrants outstanding on the date hereof or hereafter issued
in accordance with Section 5.02(f) and from the conversion of any DHS
Preferred Stock (including additional shares of DHS Preferred Stock
which may hereafter accrue as in-kind dividends), such that the DHS
stockholders receive in the Merger the same percentage of the total
outstanding MAI Common Stock (immediately after giving effect to the
Merger) as they would have received had the Merger been consummated on
the date of this Agreement.
(b) From and after the Effective Time, all Shares converted in
accordance with Section 1.02(a)(iii) shall no longer be outstanding and shall
automatically be canceled and retired
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and shall cease to exist, and each holder of a certificate representing any such
Shares shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration. From and after the Effective Time, all
certificates representing the common stock of Merger Subsidiary shall be deemed
for all purposes to represent the number of shares of Common Stock of the
Surviving Corporation into which they were converted in accordance with Section
1.02(a)(ii).
(c) The MAI Common Stock to be received as consideration
pursuant to the Merger by each holder of Shares (together with any cash which
may be paid in lieu of fractional shares of MAI Common Stock in accordance with
Section 1.07) is referred to herein as the "MERGER CONSIDERATION."
(d) For purposes of this Agreement, the word "SUBSIDIARY" when
used with respect to any Person means any other Person, whether incorporated or
unincorporated, of which at least a majority of the securities or other
interests having by their terms ordinary voting power to elect at least a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such Person or by any one or more of its Subsidiaries.
For purposes of this Agreement, "PERSON" means an individual, a corporation, a
limited liability company, a partnership, an association, a trust or any other
entity or organization, including a Governmental Authority.
Section 1.03 Surrender and Payment.
(a) Prior to the Effective Time, MAI shall appoint its stock
transfer agent as agent (the "EXCHANGE AGENT") for the purpose of exchanging
certificates representing Shares for the Merger Consideration. Promptly after
the Effective Time (but in any event within five (5) business days thereafter),
MAI will send, or will cause the Exchange Agent to send, to each holder of
Shares at the Effective Time (i) a letter of transmittal for use in such
exchange (which shall specify that delivery of the Merger Consideration shall be
effected, and risk of loss and title to the certificates representing DHS Common
Stock shall pass, only upon proper delivery of the certificates representing
Shares to the Exchange Agent), and (ii) instructions for use in effecting the
surrender of the certificates representing Shares in exchange for the
certificates representing MAI Common Stock constituting Merger Consideration.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of certificates theretofore representing Shares for
any amount which may be required to be paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(b) Each holder of Shares that have been converted into a
right to receive the Merger Consideration, upon surrender to the Exchange Agent
of a certificate or certificates representing such Shares, together with a
properly completed letter of transmittal covering such Shares, will be entitled
to receive the Merger Consideration payable in respect of such Shares and any
dividends payable pursuant to Section 1.03(f). Until so surrendered, each such
certificate shall, after the Effective Time, represent for all purposes only the
right to receive the Merger Consideration and any dividends payable pursuant to
Section 1.03(f).
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(c) If any certificate representing Merger Consideration is to
be delivered to a Person other than the registered holder of the Shares
represented by the certificate or certificates surrendered in exchange therefor,
it shall be a condition to the issuance of such certificate evidencing MAI
Common Stock that the certificate or certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of shares of MAI Common Stock to
a Person other than the registered holder of such Shares represented by the
certificate or certificates so surrendered or establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable.
(d) After the Effective Time, there shall be no further
registration of transfers of Shares on the stock transfer book of DHS. If, after
the Effective Time, certificates representing Shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article I.
(e) Any portion of the Merger Consideration that remains
unclaimed by the holders of Shares one (1) year after the Effective Time shall
be returned to MAI, upon demand, and any such holder who has not exchanged his
Shares for the Merger Consideration in accordance with this Section 1.03 prior
to that time shall thereafter look only to MAI for payment of the Merger
Consideration. Notwithstanding the foregoing, MAI shall not be liable to any
holder of Shares for any amount paid to a public official pursuant to applicable
abandoned property laws. Any amounts remaining unclaimed by holders of Shares
seven (7) years after the Effective Time (or such earlier date immediately prior
to such time as such amounts would otherwise escheat to or become property of
any Governmental Authority) shall, to the extent permitted by applicable law,
become the property of MAI free and clear of any claims or interest of any
Person previously entitled thereto.
(f) No dividends or other distributions with respect to MAI
Common Stock issued in the Merger shall be paid to the holder of any
unsurrendered certificates representing Shares until such certificates are
surrendered as provided in this Section 1.03. Subject to the effect of
applicable laws, following the surrender of such certificates, there shall be
paid, without interest, to the record holder of the MAI Common Stock issued in
exchange therefor at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time payable prior to
or on the date of such surrender with respect to such whole shares of MAI Common
Stock and not previously paid, less the amount of any withholding taxes which
may be required thereon.
(g) In the event that any certificate representing Shares
shall have been lost, stolen or destroyed, upon the making of an affidavit
(containing a standard form of indemnity) of the fact by the person claiming
such certificate to be lost, stolen or destroyed, MAI will, after the Effective
Time, issue in exchange for such lost, stolen or destroyed certificate the
certificate evidencing shares of MAI Common Stock deliverable in respect
thereof, as determined in accordance with this Article I. When authorizing such
issue of the certificate of shares of MAI Common Stock in exchange therefor, MAI
may, in its discretion and as a condition precedent to the issuance thereof,
require (unless such requirement is waived by Xxxx Xxxx or Xxxx Xxxxxx) the
owner of such lost, stolen or destroyed certificate (unless such owner is an
institutional
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investor) to give XXX x xxxx in such sum as it may direct as indemnity against
any claim that may be made against MAI with respect to the certificate alleged
to have been lost, stolen or destroyed.
(h) Approval and adoption of this Agreement by the
stockholders of DHS shall constitute, as an integral part of the Merger,
ratification of the appointment of, and the reappointment of, said Exchange
Agent.
Section 1.04 Stock Option Plans.
(a) At the Effective Time, the terms of each outstanding
option granted by DHS to purchase shares of DHS Common Stock (a "DHS STOCK
OPTION") under the 1992 Stock Option Plan of DHS, the 1995 Nonqualified Stock
Option Plan of DHS, the 1995 Incentive Stock Option Plan of DHS, and the 1997
Nonqualified Stock Option Plan of DHS (collectively, the "DHS OPTION PLANS"),
whether vested or unvested, shall be adjusted as necessary to provide that at
the Effective Time, each DHS Stock Option outstanding immediately prior to the
Effective Time shall be fully vested pursuant to the terms of the DHS Option
Plans and shall be deemed to constitute and shall become an option to acquire,
on the same terms and conditions as were applicable under such DHS Stock Option,
the same number of shares of MAI Common Stock as the holder of such DHS Stock
Option would have been entitled to receive pursuant to the Merger (including, if
applicable, after giving effect to the adjustments contemplated by the proviso
to Section 1.02(a)(iii)) had such holder exercised such DHS Stock Option in full
immediately prior to the Effective Time, at a price per share of MAI Common
Stock (subject to any express price adjustments contained in the subject DHS
Stock Option) equal to (i) the aggregate exercise price for the shares of DHS
Common Stock otherwise purchasable pursuant to such DHS Stock Option, divided by
(ii) the aggregate number of shares of MAI Common Stock deemed purchasable
pursuant to such DHS Stock Option (each, as so adjusted, an "ADJUSTED OPTION");
provided that, after aggregating all the shares of a holder subject to DHS Stock
Options, any fractional share of MAI Common Stock resulting from such
calculation for such holder shall be rounded up to the nearest whole share and
provided, further, that in the case of any option to which Section 421 of the
Code applies by reason of its qualification under any of Sections 422 through
424 of the Code ("QUALIFIED STOCK OPTIONS"), the option price, the number of
shares purchasable pursuant to such option, and the terms and conditions of
exercise of such option shall be determined in order to comply with Section 424
of the Code.
(b) As soon as practicable after the Effective Time, MAI shall
deliver to the holders of DHS Stock Options appropriate notices setting forth
such holders' rights pursuant to the DHS Option Plan and the agreements
evidencing the grants of such DHS Stock Options and that such DHS Stock Options
and agreements shall be assumed by MAI and shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 1.04
after giving effect to the Merger).
(c) MAI shall take such actions as are reasonably necessary
for the assumption of the DHS Option Plans pursuant to this Section 1.04,
including the reservation, issuance and listing of MAI Common Stock as is
necessary to effectuate the transactions contemplated by this Section 1.04. MAI
shall prepare and file with the SEC a registration statement on Form S-8 or
other appropriate form with respect to shares of MAI Common Stock subject to DHS
Stock
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Options issued under the DHS Option Plans (as well as shares of MAI Common Stock
which become subject to the DHS Warrants as provided in Section 1.05) and shall
use its reasonable efforts to have such registration statement declared
effective as soon as practicable following the Effective Time and to maintain
the effectiveness of such registration statement or registration statements
covering such DHS Stock Options (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such DHS Stock
Options remain outstanding.
Section 1.05 DHS Warrants. At the Effective Time, by virtue of the
Merger and without requirement of any action on the part of the holder(s)
thereof (but subject to any required consent of such holder(s) with respect to
the adjustments hereunder), the outstanding common stock purchase warrants of
DHS (the "DHS WARRANTS") immediately prior to the Effective Time shall
automatically be converted into and shall become warrants of MAI to acquire, on
the same terms and conditions as were applicable under such DHS Warrant, the
same number of shares of MAI Common Stock as the holder of such DHS Warrant
would have been entitled to receive pursuant to the Merger (including, if
applicable, after giving effect to the adjustments contemplated by the proviso
to Section 1.02(a)(iii)) had such holder exercised such DHS Warrant in full
immediately prior to the Effective Time, at a price per share of MAI Common
Stock equal to (a) the aggregate exercise price for the shares of DHS Common
Stock otherwise purchasable pursuant to such MAI Warrant, divided by (b) the
aggregate number of shares of MAI Common Stock deemed purchasable pursuant to
such DHS Warrant (each, as so adjusted, an "ADJUSTED WARRANT"); provided that,
after aggregating all of the shares of a holder subject to DHS Warrants, any
fractional share of MAI Common Stock resulting from such calculation for such
holder shall be rounded up to the nearest whole share.
Section 1.06 DHS Preferred Stock. Immediately after the Effective
Time, each outstanding share of DHS Preferred Stock shall continue to be an
outstanding share of DHS Preferred Stock, provided that, upon conversion thereof
in accordance with the certificate of designations applicable thereto, such DHS
Preferred Stock shall be convertible into MAI Common Stock, with reference to
the exchange ratio set forth in Section 1.02(a)(iii) and the applicable
provisions of the certificate of designations respecting such DHS Preferred
Stock.
Section 1.07 Fractional Shares. Neither certificates nor scrip for
fractional shares of MAI Common Stock will be issued in the Merger, but in lieu
thereof each holder of DHS Common Stock otherwise entitled to a fraction of a
share of MAI Common Stock (after aggregating all fractional shares of DHS Common
Stock that would otherwise be received by such holder) will be entitled
hereunder to (a) if permitted or not prohibited by the senior and subordinated
lenders to MAI or DHS, a cash payment calculated as hereinafter provided, or (b)
if such cash payment is not permitted or is prohibited by MAI's or DHS' lenders,
an additional fractional share in an amount sufficient to round such
stockholder's aggregate holdings of MAI Common Stock to the next nearest whole
share. The amount of any such cash payment shall equal, in the case of each
fractional share, an amount (rounded to the nearest whole cent), without
interest, calculated as the product of (i) such fraction, multiplied by (ii) the
arithmetic mean of the closing sales prices for the MAI Common Stock reported on
the NASDAQ National Market System for each of the five (5) consecutive trading
days on which MAI Common Stock was traded immediately preceding the Effective
Time as quoted in the Wall Street Journal, or other reliable financial newspaper
or publication. For the purposes of the preceding sentence, a "trading
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day" means a day on which trading generally takes place on the NASDAQ National
Market System. No such fractional share interest shall entitle the owner thereof
to vote or to any rights of a stockholder of MAI.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.01 Certificate of Incorporation. Subject to the provisions of
Section 5.17, the certificate of incorporation of Merger Subsidiary shall be the
certificate of incorporation of the Surviving Corporation, until thereafter
amended in accordance with applicable law and such certificate of incorporation.
Section 2.02 By-Laws. Subject to the provisions of Section 5.17, the
by-laws of Merger Subsidiary in effect at the Effective Time shall be the
by-laws of the Surviving Corporation, until thereafter amended in accordance
with applicable law, the certificate of incorporation of the Surviving
Corporation and such by-laws.
Section 2.03 Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
the Delaware Law and the certificate of incorporation and by-laws of the
Surviving Corporation, the directors and the officers of the Surviving
Corporation shall be those persons set forth on Schedule 2.03 to the disclosure
letter delivered by MAI to DHS concurrently with the execution and delivery of
this Agreement (the "MAI DISCLOSURE LETTER").
ARTICLE III
REPRESENTATIONS AND WARRANTEES OF XXX
XXX represents and warrants to DHS that:
Section 3.01 Organization and Power. Each of MAI and its Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has the requisite corporate
power and authority and governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted. Each of MAI and
its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect on MAI. For purposes of this Agreement, a "MATERIAL
ADVERSE EFFECT" with respect to any Person means a material adverse effect (a)
on the condition (financial or otherwise), business, liabilities, properties,
assets, results of operations or prospects of such Person and its Subsidiaries,
taken as a whole, or (b) on the ability of such Person to perform its
obligations under or to consummate the transactions contemplated by this
Agreement. Schedule 3.01 to the MAI Disclosure Letter sets forth (i) the name
and jurisdiction of incorporation of each Subsidiary of MAI, (ii) its authorized
capital stock, (iii) the number of issued and outstanding shares of its capital
stock, and (iv) the record and beneficial owners of such shares. Except as set
forth on Schedule 3.01 to the MAI Disclosure
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Letter, MAI does not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any Person. MAI has heretofore delivered to DHS
true and complete copies of the certificate or articles of incorporation and
by-laws as currently in effect of MAI and its Subsidiaries.
Section 3.02 Corporate Authorization. The execution, delivery and
performance by MAI and Merger Subsidiary of this Agreement and the consummation
by MAI and Merger Subsidiary of the transactions contemplated hereby are within
the corporate powers of MAI and Merger Subsidiary and, except for the required
approval by the shareholders of MAI of the issuance of shares of MAI Common
Stock in connection with the Merger, have been duly authorized by all necessary
corporate action, including, without limitation, authorization and approval of
the Board of Directors of Merger Subsidiary and the Board of Directors of MAI,
in its capacity as the Board of Directors of MAI and in its capacity as the sole
stockholder of Merger Subsidiary. This Agreement has been duly executed and
delivered by each of MAI and Merger Subsidiary and, subject to the approval of
the holders of MAI Common Stock with respect to the issuance of shares of MAI
Common Stock in connection with the Merger (including any shares contemplated by
Sections 1.04 and 1.05), constitutes a legal, valid and binding agreement of
each of MAI and Merger Subsidiary, enforceable against MAI or Merger Subsidiary,
as applicable, in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity, regardless of whether in a proceeding in equity or
at law). The shares of MAI Common Stock issued in connection with the Merger,
when issued in accordance with the terms hereof, will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 3.03 Governmental Authorization. The execution, delivery and
performance by MAI and Merger Subsidiary of this Agreement, and the consummation
by MAI and Merger Subsidiary of the transactions contemplated hereby, require no
action by or in respect of, or filing with or notice to, any United States
federal, state or local government, any foreign country, any foreign state or
local government or any court, administrative agency or commission or other
governmental or regulatory agency or authority of any of the foregoing
(collectively "GOVERNMENTAL AUTHORITIES" and individually a "GOVERNMENTAL
AUTHORITY"), other than (a) the filing of a certificate of merger with respect
to the Merger with the Delaware Secretary of State; (b) compliance with any
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), provided that nothing contained in this
Agreement shall be deemed to constitute an acknowledgement that any requirements
under the HSR Act are applicable to the transactions contemplated by this
Agreement; (c) compliance with any applicable requirements of the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
"1933 ACT"); (d) compliance with any applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "1934 ACT"); and (e) compliance with any other applicable
securities laws.
Section 3.04 Non-Contravention. Except as set forth on Schedule 3.04 to
the MAI Disclosure Letter, the execution, delivery and performance by MAI and
Merger Subsidiary of this Agreement do not, and the consummation by MAI and
Merger Subsidiary of the transactions
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contemplated hereby will not, require the consent of any other Person, or
conflict with, result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, result in or give to any
Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien on any of the assets or properties of MAI or any of its Subsidiaries under,
any of the terms, conditions or provisions of (a) the certificate or articles of
incorporation, by-laws or similar organizational documents of MAI or any of its
Subsidiaries, (b) assuming receipt of the approval of stockholders referred to
in Section 3.02, and compliance with the matters referred to in Section 3.03,
any United States or foreign statute, law, regulation, rule or ordinance
(together "LAWS") or any judgment, injunction, order, writ, license, permit or
decree of any Governmental Authority (together "ORDERS") binding upon or
applicable to MAI, any Subsidiary of MAI or any of their respective assets or
properties, or (c) any note, bond, mortgage, security agreement, indenture,
lease, contract, instrument or other agreement of any kind to which MAI or any
Subsidiary of MAI is a party or by which MAI or any Subsidiary of MAI or any of
their respective assets or properties is bound (a "MAI AGREEMENT") or any
license, franchise, permit or other similar authorization held by MAI or any
Subsidiary of MAI. For purposes of this Agreement, "LIEN" means, with respect to
any asset, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, and, in addition, with respect to real
property, any easement, right of way or other restriction, limitation or burden
of any kind in respect of such real property.
Section 3.05 Capitalization of MAI.
(a) The authorized capital stock of MAI consists solely of
30,000,000 shares of MAI Common Stock and 5,000,000 shares of preferred stock,
par value $.002 per share (the "MAI PREFERRED STOCK"). As of the close of
business on April 30, 1999, (i) 6,134,251 shares of MAI Common Stock were issued
and outstanding, 277,203 shares of MAI Common Stock were issued and held in the
treasury of MAI, and 1,090,435 shares of MAI Common Stock were reserved for
issuance under the MAI Option Plan and the MAI Warrants, (ii) options to
purchase 812,137 shares of MAI Common Stock were outstanding under the MAI
Option Plan and warrants to purchase 15,610 shares of MAI Common Stock were
outstanding (the "MAI WARRANTS"), and (iii) no shares of MAI Preferred Stock
were issued, outstanding or held in the treasury of MAI. All of the outstanding
shares of MAI Common Stock are, and all shares reserved for issuance will be,
when issued in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized, validly issued,
fully paid and non-assessable. Except (A) as set forth in this Section 3.05 or
in Schedule 3.05 to the MAI Disclosure Letter, and (B) for Shares that may be
issued as provided in Section 5.01(f), there are outstanding (w) no shares of
capital stock or other voting securities of MAI, (x) no securities of MAI
convertible into or exchangeable for shares of capital stock or voting
securities of MAI, (y) no options, warrants or other rights to acquire from MAI,
and no preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, obligating
MAI to issue, transfer or sell, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of MAI or obligating MAI to grant, extend or enter into any such
option, warrant, subscription or other right, convertible security, agreement,
arrangement or commitment, and (z) no restricted
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stock awards, stock appreciation rights, performance share agreements or stock
unit awards of MAI (the items in clauses (w), (x), (y) and (z) being referred to
collectively as the "MAI SECURITIES").
(b) Except as set forth on Schedule 3.05 to the MAI Disclosure
Letter, (i) there are no voting trusts or other agreements or understandings to
which MAI or any Subsidiary of MAI is a party with respect to the voting of the
capital stock of MAI or any Subsidiary of MAI, (ii) no Person has or is entitled
to any registration rights in respect of any MAI Securities, and (iii) none of
MAI or its Subsidiaries has any contractual obligation to redeem, repurchase or
otherwise acquire any MAI Securities or any capital stock of any Subsidiary of
MAI, including as a result of the transactions contemplated by this Agreement,
or to provide funds to, or make any investment in, any Subsidiary of MAI or any
other Person. Except as permitted by this Agreement, following the Merger,
neither MAI nor any of its Subsidiaries will have any obligation to issue,
transfer or sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise.
Section 3.06 Capitalization of Subsidiaries. Except as set forth on
Schedule 3.06 to the MAI Disclosure Letter, all of the outstanding shares of
capital stock of, or other ownership interests in, each Subsidiary of MAI, are
duly authorized, validly issued, fully paid and non-assessable and are owned,
beneficially and of record, by MAI, directly or indirectly, free and clear of
any consensual Lien (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests). There are
no (a) outstanding securities of MAI or any Subsidiary of MAI convertible into
or exchangeable for shares of capital stock or other voting securities or
ownership interests in any Subsidiary of MAI, or (b) options, warrants or other
rights to acquire from MAI or any Subsidiary of MAI, and no other obligation of
MAI or any Subsidiary of MAI to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or exchangeable
for, any capital stock, voting securities or ownership interests in, any
Subsidiary of MAI (the items in clauses (a) and (b) being referred to
collectively as the "MAI SUBSIDIARY SECURITIES").
Section 3.07 SEC Filings.
(a) MAI has filed all reports, schedules, forms, statements
and other documents with the Securities and Exchange Commission (the "SEC")
required to be filed by MAI since October 11, 1996 (the "MAI SEC DOCUMENTS").
(b) As of its filing date, each MAI SEC Document filed
pursuant to the 1934 Act complied as to form in all material respects with the
requirements of the 1934 Act and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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(c) Each MAI SEC Document that is a registration statement, as
amended or supplemented, if applicable, filed pursuant to the 1933 Act as of
the date such registration statement or amendment became effective complied as
to form in all material respects with the requirements of the 1933 Act and did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 3.08 Financial Statements.
(a) The audited consolidated financial statements included in
MAI's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(the "MAI 10-K") and the unaudited consolidated interim financial statements of
MAI included in the MAI SEC Documents filed after such date (collectively, the
"MAI FINANCIAL STATEMENTS") complied, or will comply, as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of MAI and its consolidated Subsidiaries as of
the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject to footnote disclosures and normal year-end
adjustments in the case of any unaudited interim financial statements). The MAI
Financial Statements have been prepared from and are consistent with the books
and records of MAI, which reflect all material transactions of MAI and its
Subsidiaries. For purposes of this Agreement, "MAI BALANCE SHEET" means the
consolidated balance sheet of MAI as of December 31, 1998 set forth in the MAI
10-K and "MAI BALANCE SHEET DATE" means December 31, 1998. Each Subsidiary of
MAI is treated as a consolidated subsidiary of MAI in the MAI Financial
Statements for all periods covered thereby.
(b) Without limitation of Section 3.08(a), (i) MAI or its
Subsidiaries has good and marketable title to all of the assets reflected in the
balance sheet of MAI included in its quarterly report on Form 10-Q for the
quarter ended March 31, 1999 (the "MOST RECENT MAI BALANCE SHEET") free and
clear of all liens, security interests, encumbrances or other adverse claims
other than liens of secured lenders disclosed in the footnotes to the Most
Recent MAI Balance Sheet and interests of lessors in respect of capitalized
leases, (ii) the reserve for doubtful accounts reflected in the Most Recent MAI
Balance Sheet is adequate and in accordance with GAAP, (iii) the inventories
reflected in the Most Recent MAI Balance Sheet have been valued at the lower of
cost or market, and are not materially in excess of the normal requirement of
MAI's business, and (iv) all equipment and other fixed assets reflected in the
Most Recent MAI Balance Sheet are in good operating condition (reasonable wear
and tear excepted); all of the representations in this Section 3.08(b) being
subject to the collection of accounts receivable, sale and use of inventory, and
disposition of obsolete equipment, in the ordinary course of business.
Section 3.09 Information Supplied. None of the information supplied or
to be supplied by MAI for inclusion or incorporation by reference in and none of
the statements based on such information contained in (a) the joint proxy
statement to be filed with the SEC relating to the shareholders' meetings of MAI
and DHS to be held in connection with the Merger, as amended or supplemented
from time to time (as so amended or supplemented, the "PROXY STATEMENT"), will,
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at the date the Proxy Statement is first mailed to stockholders and at the time
of the meetings of such stockholders in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, or (b) the registration statement on Form
S-4 of MAI to be filed under the 1933 Act relating to the issuance of MAI Common
Stock in the Merger, as amended or supplemented from time to time (as so amended
or supplemented, the "FORM S-4"), will, at the time the Form S-4 becomes
effective under the 1933 Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 3.10 Absence of Certain Changes. Except as disclosed in the MAI
SEC Documents filed prior to the date of this Agreement or as disclosed on
Schedule 3.10 to the MAI Disclosure Letter, since December 31, 1998, MAI and its
Subsidiaries have conducted their respective businesses in the ordinary course
consistent with past practice and there has not been:
(a) Any material transaction of MAI or any of its Subsidiaries
outside of the normal course of business, any damage or destruction (whether or
not covered by insurance) of any material assets of MAI or any of its
Subsidiaries, or any event, occurrence or development which, individually or in
the aggregate, has had or would be reasonably likely to have a Material Adverse
Effect on MAI;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of MAI, any
issuance of MAI Common Stock other than upon exercise of MAI Warrants or MAI
Options outstanding on December 31, 1998, or any repurchase, redemption or other
acquisition by MAI or any Subsidiary of MAI of any amount of outstanding shares
of capital stock or other equity securities of, or other ownership interests in,
MAI or any Subsidiary of MAI;
(c) any amendment of any term of any MAI Securities or
MAI Subsidiary Securities;
(d) (i) any incurrence or assumption by MAI or any Subsidiary
of MAI of any indebtedness for borrowed money other than under existing credit
facilities in the ordinary course of business consistent with past practices, or
(ii) any guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by MAI or any Subsidiary of MAI
for the obligations of any other Person (other than any wholly-owned Subsidiary
of MAI);
(e) any creation or assumption by MAI or any Subsidiary of MAI
of any consensual Lien on any material asset of MAI or any Subsidiary of MAI;
(f) any making of any loan, advance or capital contribution to
or investment in any Person by MAI or any Subsidiary of MAI other than (i)
loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries of MAI, or (ii) loans or advances to employees of MAI or any
Subsidiary of MAI made in the ordinary course of business consistent with past
practice;
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(g) (i) any contract or agreement entered into by MAI or any
Subsidiary of MAI on or prior to the date hereof relating to any material
acquisition or disposition of any assets or business, or (ii) any modification,
amendment, assignment, termination or relinquishment by MAI or any Subsidiary of
MAI of any contract, license, or other right (including any insurance policy
naming it as a beneficiary or a loss payable payee) that would be reasonably
likely to have a Material Adverse Effect on MAI, other than those contemplated
by this Agreement;
(h) any change in any method of accounting or accounting
principles or practices by MAI or any Subsidiary of MAI, except for any such
change required by reason of a change in GAAP; or
(i) any (i) grant of any severance or termination pay to any
director, officer or employee of MAI or any of its Subsidiaries, (ii) entering
into of any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of MAI or any of its Subsidiaries, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, or (iv)
increase in rates of compensation or bonus in excess of five (5%) percent or
increase in other benefits payable to officers or employees of MAI or any of its
Subsidiaries or increase in compensation, bonus or other benefits payable to
directors of MAI or any of its Subsidiaries.
Section 3.11 No Undisclosed Liabilities. Neither MAI nor any Subsidiary
of MAI has any material liabilities or obligations (whether pursuant to
contracts or otherwise) of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, except:
(a) those liabilities and obligations set forth on the MAI
Balance Sheet and not heretofore paid or discharged;
(b) those liabilities and obligations incurred since December
31, 1998 in the ordinary course of business consistent with past practice; and
(c) those liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby.
Section 3.12 Litigation. Except as disclosed on Schedule 3.12 to the
MAI Disclosure Letter, (a) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of MAI, threatened against, relating to
or affecting, nor are there are any Governmental Authority investigations or
audits pending or, to the knowledge of MAI, threatened against, relating to or
affecting, MAI or any of its Subsidiaries or any of their respective assets or
properties nor, to the knowledge of MAI, is there any valid basis for any such
action, suit, arbitration, proceeding, investigation or audit which, if
adversely determined, would have a Material Adverse Effect on MAI, and (b)
neither MAI nor any of its Subsidiaries is subject to any order of any
Governmental Authority which adversely affects the ability of MAI to consummate
the transactions contemplated by this Agreement.
Section 3.13 Taxes.
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(a) All Tax Returns required to be filed by MAI, any of its
Subsidiaries, or any corporation that was included in the filing of a return
with MAI or its Subsidiaries on a consolidated, combined or unitary basis have
been filed (the "MAI TAX RETURNS") and all Taxes required to be shown on the MAI
Tax Returns, or a subsequent assessment with respect thereto, or otherwise due
or payable (to the extent in excess of $50,000 in the aggregate) have been paid
and any penalties and interest relating to such Taxes (to the extent in excess
of $50,000 in the aggregate) have been paid. No other Taxes (to the extent in
excess of $50,000 in the aggregate) are payable by the MAI Group with respect to
items or periods covered by such Tax Returns or with respect to Tax periods
prior to the date of this Agreement. None of the MAI Tax Returns contain, or are
required to contain, a disclosure statement under Section 6662 of the Code, or
any similar provision of state, local or foreign law, with respect to any items
that relate to MAI or its Subsidiaries in order to avoid a penalty for any
taxable year. All MAI Tax Returns are true, correct and complete in all material
respects. MAI has made available to DHS correct and complete copies of all MAI
Tax Returns for all periods which are not closed by the statute of limitations.
(b) No adjustment relating to any MAI Tax Return has been
proposed formally or, to MAI's knowledge, informally by any Governmental
Authority (to the extent in excess of $50,000 in the aggregate), and no basis
exists for any such adjustment that would have a Material Adverse Effect on MAI.
There are no outstanding subpoenas or requests for information with respect to
any MAI Tax Returns or portions thereof. There are no pending or, to MAI's
knowledge, threatened actions or proceedings for the assessment or collection of
Taxes for which MAI or its Subsidiaries may be liable (to the extent in excess
of $50,000 in the aggregate). There are no Tax liens on any assets of MAI or its
Subsidiaries, except with respect to Taxes which are not yet due and payable.
(c) No consent under Section 341(f) of the Code has been filed
with respect to MAI or any of its Subsidiaries. Neither MAI nor any of its
Subsidiaries is or has been subject to the dual consolidated loss provisions of
Section 1503 of the Code.
(d) MAI and its Subsidiaries are members of an affiliated
group (within the meaning of Section 1504 of the Code) that is eligible to file
a consolidated return. No other entity is or has been eligible to file a
consolidated or combined return with MAI and its Subsidiaries, and neither MAI
nor its Subsidiaries have filed or consented to the filing of any Federal or
state consolidated or combined return with any entity not a member of the MAI
Group. Neither MAI nor any of its Subsidiaries has been at any time a member of
any partnership or joint venture or the holder of a beneficial interest in any
trust for any Person for which the statute of limitations for any Tax
potentially applicable as a result of such membership or holding has not
expired.
(e) MAI and its Subsidiaries have properly accrued all current
or contested Taxes (to the extent in excess of $50,000 in the aggregate) on
their books and records, and their books and records reflect reserves that are
adequate for the payment of all Taxes (to the extent in excess of $50,000 in the
aggregate) not yet due and payable that are properly accruable thereon through
the date of this Agreement (including Taxes being contested). Neither MAI nor
any of its Subsidiaries have any liability for any Taxes which, in the
aggregate, are more than $50,000 in excess of amounts accrued or the reserves
established. All Taxes (to the extent in excess of
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$50,000 in the aggregate) required to be withheld, collected or deposited in
connection with the operations and activities of MAI or its Subsidiaries have
been timely withheld, collected or deposited and, to the extent required, have
been paid to the relevant taxing authority.
(f) MAI does not own nor has it owned during the past five (5)
years any capital stock of DHS. At the Effective Time, the fair market value of
the assets of MAI will exceed the sum of its liabilities, plus the amount of
other liabilities, if any, to which the assets are subject.
(g) There are no requests for rulings, determinations or
information currently outstanding with any Taxing Authority that could
reasonably be expected to affect the Taxes of MAI or any of its Subsidiaries.
(h) The MAI Tax Returns have been audited by the Internal
Revenue Service ("SERVICE") or other governmental agency (or closed by
applicable statutes of limitations) and all Tax liabilities in respect thereof
have been finally determined for all taxable years ending on or before December
31, 1996. There are no outstanding waivers or agreements extending the statute
of limitations for any period with respect to any Tax to which MAI or any of its
Subsidiaries may be liable.
(i) "TAXES" shall mean any and all taxes, charges, fees,
levies or other assessments, including income, gross receipts, excise, real or
personal property, sales, withholding, social security, retirement,
unemployment, occupation, use, goods and services, service use, license, value
added, capital, net worth, payroll, profits, withholding, franchise, transfer
and recording taxes, fees and charges, and any other taxes, assessment or
similar charges imposed by the Service or any taxing authority (whether domestic
or foreign including any state, county, local or foreign government or any
subdivision or taxing agency thereof (including a United States possession)) (a
"TAXING AUTHORITY"), whether computed on a separate, consolidated, unitary,
combined or any other basis, and such term shall include any interest whether
paid or received, fines, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees, levies or other
assessments. "TAX RETURN" shall mean any report, return, document, declaration
or other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including
information returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for the extension
of time in which to file any such report, return, document, declaration or other
information. The term "MAI GROUP" shall mean, individually and collectively, (i)
MAI, (ii) its Subsidiaries, and (iii) any trust, corporation, partnership or any
other entity as to which MAI or its Subsidiaries is liable for Taxes incurred by
such entity either as a transferee, or pursuant to Treasury Regulations Section
1.1502-6, or pursuant to any other provision of federal, state, local or foreign
law or regulations.
(j) MAI has made available to DHS a true and complete copy of
any (i) elections, letter rulings and determination letters relating to Taxes
with respect to MAI or its Subsidiaries which were in effect or affected Taxes
for any periods which are not closed by the statute of limitations, and (ii)
examination reports, closing agreements and statements of deficiencies for Taxes
assessed against or agreed to by MAI or any of its Subsidiaries which were in
effect or affected Taxes for any periods which are not closed by the statute of
limitations.
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Section 3.14 Employee Benefit Plans; ERISA.
(a) Except as set forth on Schedule 3.14 to the MAI Disclosure
Letter, there are no employee benefit plans (including any plans for the benefit
of directors or former directors), contracts or agreements (including employment
agreements and severance agreements, incentive compensation, bonus, stock
option, stock appreciation rights and stock purchase plans) of any type
(including plans described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), maintained by MAI, any of its
Subsidiaries or any trade or business, whether or not incorporated (a "MAI ERISA
AFFILIATE"), that together with MAI would be deemed a "controlled group" within
the meaning of Section 4001(a)(14) of ERISA, or with respect to which MAI, any
of its Subsidiaries, or any MAI ERISA Affiliate, has or may have a liability
(the "MAI BENEFIT PLANS"). Except as disclosed on Schedule 3.14 to the MAI
Disclosure Letter (or as otherwise permitted by this Agreement), (i) neither MAI
nor any ERISA Affiliate has any plan or commitment, whether legally binding or
not, to create any additional MAI Benefit Plan or modify or change any existing
MAI Benefit Plan that would affect any employee or terminated employee of MAI or
any ERISA Affiliate, and (ii) since December 31, 1997, there has been no change,
amendment, modification to, or adoption of, any MAI Benefit Plan.
(b) With respect to each MAI Benefit Plan: (i) if intended to
qualify under Section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under Section 501(a) of the
Code; (ii) no failures to administer such plan in accordance with its terms and
applicable law have occurred that have had or would reasonably be expected to
have a Material Adverse Effect on MAI; (iii) no breaches of fiduciary duty have
occurred; (iv) no prohibited transaction within the meaning of Section 406 of
ERISA has occurred; (v) as of the date of this Agreement, no lien imposed under
the Code or ERISA exists; and (vi) all contributions and premiums due (including
any extensions for such contributions and premiums) have been made in full or
adequate provision has been made therefor in the MAI Financial Statements.
(c) None of the MAI Benefit Plans has incurred any
"accumulated funding deficiency," as such term is defined in Section 412 of the
Code, whether or not waived.
(d) Neither MAI nor any MAI ERISA Affiliate has incurred any
liability under Title IV of ERISA (including Sections 4063-4064 and 4069 of
ERISA) since the effective date of ERISA that has not been satisfied in full.
(e) With respect to each MAI Benefit Plan that is a "welfare
plan" (as defined in Section 3(l) of ERISA), no such plan provides medical or
death benefits with respect to current or former employees of MAI or any of its
Subsidiaries beyond their termination of employment, other than as required by
law or on an employee-pay-all basis.
(f) Except as set forth on Schedule 3.14 to the MAI Disclosure
Letter, the consummation of the Merger pursuant to this Agreement will not (i)
entitle any individual to
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severance pay or any tax "gross-up" payments with respect to the imposition of
any tax pursuant to Section 4999 of the Code or accelerate the time of payment
or vesting, or increase the amount, of compensation or benefits due to any
individual with respect to any MAI Benefit Plan, or (ii) constitute or result in
a prohibited transaction under Section 4975 of the Code or Section 406 or 407 of
ERISA with respect to any MAI Benefit Plan.
(g) There is no MAI Benefit Plan that is a "multiemployer
plan," as such term is defined in Section 3(37) of ERISA, or which is covered by
Section 4063 or 4064 of ERISA.
Section 3.15 Certain Agreements; Compliance with Agreements.
(a) Except as disclosed on Schedule 3.15 to the MAI Disclosure
Letter or as provided for in this Agreement, neither MAI nor any of its
Subsidiaries is a party to or bound by any oral or written:
(i) consulting agreement not terminable on thirty (30) days'
or less notice;
(ii) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of the transactions contemplated by this
Agreement;
(iii) agreement with respect to any officer providing any term
of employment or compensation guarantee;
(iv) agreement or plan, including any stock option plan, stock
appreciation rights plan, employee stock ownership plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(v) agreement containing covenants that limit the ability of
MAI or any of its Subsidiaries to compete in any line of business or
with any Person, or that involve any restriction on the geographic area
in which, or method by which, MAI or any of its Subsidiaries may carry
on its business (other than as may be required by law or any regulatory
agency);
(vi) agreement, contract or understanding, other than this
Agreement and the articles of incorporation and by-laws of MAI,
regarding the capital stock of MAI or committing to dispose of some or
all of the capital stock or all or substantially all of the assets of
MAI;
(vii) partnership, joint venture or profit sharing agreement
of MAI or any of its Subsidiaries with any Person;
(viii) agreement, contract, commitment, indenture or other
instrument of MAI or any of its Subsidiaries relating to the borrowing
of money, or the direct or indirect
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guarantee of any obligation for, or an agreement to service the
repayment of, borrowed money, or any other contingent obligation in
respect to indebtedness of any other Person, including without
limitation any agreement or arrangement relating to the maintenance of
compensating balances, any agreement or arrangement with respect to
lines of credit, any agreement or arrangement to purchase or repurchase
obligations of any other Person, any agreement or arrangement to
advance or supply funds to or to invest in any other Person, any
agreement or arrangement to pay for property, products or services of
any other Person even if such property, products or services are not
conveyed, delivered or rendered, or any guarantee with respect to any
lease or other similar periodic payment to be made by any other Person;
(ix) lease of MAI or any of its Subsidiaries with annual
rental payments aggregating $50,000 or more;
(x) agreement, contract or commitment of MAI or any of its
Subsidiaries relating to the disposition or acquisition of any
investment in any Person if such investment has a book value of, or the
disposition or acquisition price of such investment or interest is,
$50,000 or more;
(xi) agreement, contract or commitment which involves payment
or potential payment, pursuant to the terms of such agreement, contract
or commitment, by or to MAI or any of its Subsidiaries of $50,000 or
more within any twelve (12) month period commencing after the date
hereof;
(xii) severance or similar agreement with any employee which
has been entered into or modified at any time since June 30, 1998; or
(xiii) agreement, contract, commitment or arrangement between
MAI or any of its Subsidiaries and any Affiliate of MAI or any of its
Subsidiaries that is not described in or filed as an exhibit to a MAI
SEC Document.
(b) Neither MAI nor any of its Subsidiaries nor, to the
knowledge of MAI, any other party thereto is in breach or violation of or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, is reasonably
expected to result in a default under, (i) the certificates or articles of
incorporation, by-laws or similar organizational documents of MAI or any of its
Subsidiaries, or (ii) any contract, agreement, plan or instrument listed or
required to be listed on Schedule 3.15 to the MAI Disclosure Letter, except in
the case of clause (ii) for breaches, violations or defaults which, individually
or in the aggregate, are not having and are not reasonably expected to have a
Material Adverse Effect on MAI. Except as set forth on Schedule 3.04 to the MAI
Disclosure Letter, no party to any such contract, agreement, plan or instrument
will have the right to terminate any or all of the provisions of any such
contract, agreement, plan or instrument as a result of the transactions
contemplated by this Agreement.
(c) No outstanding purchase commitments of MAI or any of its
Subsidiaries is materially in excess of the reasonable requirements of their
respective business.
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(d) Neither MAI nor any of its Subsidiaries has received
written notice of any existing, announced or anticipated changes in the policies
of any material clients, customers, referral sources or suppliers which could
reasonably be expected to have a Material Adverse Effect on MAI.
Section 3.16 Compliance with Laws and-Orders.
(a) MAI and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Authorities
necessary for the lawful conduct of their respective businesses (the "MAI
PERMITS"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which, individually or in the aggregate, are
not having and are not reasonably expected to have a Material Adverse Effect on
MAI. MAI and its Subsidiaries are in compliance with. the terms of the MAI
Permits, except failures so to comply which, individually or in the aggregate,
are not having and are not reasonably expected to have a Material Adverse Effect
on MAI. MAI and its Subsidiaries are not in violation of or default under any
Laws or Orders, except for such violations or defaults which, individually or in
the aggregate, are not having and are not reasonably expected to have a Material
Adverse Effect on MAI.
(b) Without limitation of Section 3.16(a), MAI and its
Subsidiaries have at all times operated their businesses in compliance with all
applicable federal, state and other fraud and abuse, anti-kickback ("Xxxxx
laws") and other statutes, rules and regulations governing the provision of
medical or related services and/or payments or reimbursements for such services.
Section 3.17 Environmental Matters.
(a) No notice, notification, demand, request for information,
citation, summons or order has been received by, no complaint has been filed
against, no penalty has been assessed against, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of MAI or any
Subsidiary of MAI, is threatened by any Person against, MAI or any Subsidiary of
MAI with respect to any matters relating to or arising out of any Environmental
Law;
(b) No Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or released, in
violation of any Environmental Law, at, on, under or adjacent to any property
now or, to the knowledge of MAI, previously owned, leased or operated by MAI or
any Subsidiary of MAI; and
(c) There are no Environmental Liabilities.
(d) For purposes of this Section 3.17, the following terms
shall have the meanings set forth below:
(i) "MAI" and "SUBSIDIARY OF MAI" shall include any entity
which is, in whole or in part, a predecessor of MAI or any of its
Subsidiaries.
(ii) "ENVIRONMENTAL LAWS" means any and all federal, state,
local and foreign law (including common law), treaty, judicial
decision, regulation, rule, judgment, order,
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decree, injunction, permit, or governmental restrictions or any
agreement with any governmental authority or other third party,
relating to human health and safety, the physical condition of any real
property now or formerly owned, leased or operated by MAI of any of its
Subsidiaries or of any improvements thereon, the environment or to
pollutants, contaminants, wastes or chemicals or toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances,
wastes or materials, including without limitation Hazardous Substances
as defined herein.
(iii) "ENVIRONMENTAL LIABILITIES" means any and all
liabilities of or relating to MAI or any Subsidiary of MAI of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, which (A) arise under or relate to matters
covered by Environmental Laws, and (B) arise from actions occurring or
conditions existing on or prior to the Effective Time.
(iv) "HAZARDOUS SUBSTANCES" means any pollutant, contaminant,
waste or chemical or any toxic, radioactive, corrosive, reactive or
otherwise hazardous substance, waste or material, or any substance
having any constituent elements displaying any of the foregoing
characteristics, including, without limitation, petroleum, its
derivatives, by-products and other hydrocarbons, or any substance,
waste or material regulated under any Environmental Laws.
Section 3.18 Assets. The assets, properties, rights and contracts,
including (as applicable) title or leaseholds thereto, of MAI and its
Subsidiaries, taken as a whole, are sufficient to permit MAI and its
Subsidiaries to conduct their respective businesses as currently being
conducted. Neither MAI nor any of its Subsidiaries owns any real property.
Section 3.19 Intellectual Property Rights.
(a) Except as disclosed in Schedule 3.19 to the MAI Disclosure
Letter, MAI and its Subsidiaries own or have the right to use all Intellectual
Property individually or in the aggregate material to the conduct of the
businesses of MAI and its Subsidiaries. To the knowledge of MAI, (i) neither MAI
nor any Subsidiary of MAI is in default (or with the giving of notice or lapse
of time or both would be in default) under any license to use such Intellectual
Property, (ii) such Intellectual Property (other than patents) is not being
infringed by any third party, and (iii) neither MAI nor any Subsidiary of MAI is
infringing any intellectual property of any third party. For purposes of this
Agreement, "INTELLECTUAL PROPERTY" means patents and patent rights, trademarks
and trademark rights, service marks and service xxxx rights, trade names and
trade name rights, copyrights and copyright rights and other proprietary
intellectual property rights and all pending applications for and registrations
of any of the foregoing that MAI or its Subsidiaries own, license or otherwise
have the right to use. An accurate schedule of all Intellectual Property of MAI
or its Subsidiaries consisting of patents, registered trademarks, registered
service marks, registered trade names and registered copyrights and all pending
applications therefor is set forth on Schedule 3.19 to the MAI Disclosure
Letter.
(b) Either MAI or one of its Subsidiaries is listed in the
records of the appropriate United States, state or foreign agency as the sole
owner of record for each application
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and registration included in the Intellectual Property, other than Intellectual
Property of which MAI or its Subsidiaries is a licensee.
(c) MAI and its Subsidiaries, with respect to all Intellectual
Property owned thereby, have taken or caused to be taken all reasonable steps in
the exercise of reasonable business judgment to obtain and retain valid and
enforceable Intellectual Property rights therein, including the submission of
all necessary filings in accordance with the legal and administrative
requirements of the appropriate jurisdictions. No application or registration
listed on Schedule 3.19 to the MAI Disclosure Letter is the subject of any
pending, existing or, to MAI's knowledge, threatened, opposition, interference,
cancellation proceeding or other legal or governmental proceeding before any
registration authority in any jurisdiction.
(d) The consummation of the transactions contemplated hereby
will not result in the loss or impairment of MAI's or any of its Subsidiaries'
right to own or use any of the Intellectual Property nor will it require the
consent of any Governmental Authority or third party.
Section 3.20 Labor Matters. MAI has previously furnished to DHS true
and complete copies of all labor and collective bargaining agreements (if any)
to which MAI or any of its Subsidiaries is a party and that are currently in
effect, together with all amendments thereto (if any). Since January 1, 1996,
there have been no strikes, slowdowns or other work stoppages or lockouts
involving any employees of MAI or any of its Subsidiaries and there are no
disputes by any labor organization in progress or pending or, to the knowledge
of MAI, threatened against MAI or any of its Subsidiaries that would have a
Material Adverse Effect on MAI. Except as disclosed in Schedule 3.20 to the MAI
Disclosure Letter, MAI and its Subsidiaries are in compliance in all material
respects with all applicable laws and regulations in respect of employment and
employment practices, terms and conditions of employment, wages and hours,
occupational safety, health or welfare conditions relating to premises occupied,
and civil rights. There are no charges of unfair labor practices pending before
any Governmental Authority involving or affecting MAI or any of its
Subsidiaries. As of the date of this Agreement, there is no representation claim
or petition pending before the National Labor Relations Board and, to the
knowledge of MAI, no question concerning representation exists with respect to
the employees of MAI or any of its Subsidiaries. MAI has not received notice
that any customer or supplier of MAI or any or its Subsidiaries is involved in
or threatened with or affected by any strike or other labor disturbance or
dispute, litigation or administrative proceeding or judgment, order, injunction,
decree or award, the consequences of which would have a Material Adverse Effect
on MAI.
Section 3.21 Transactions with Affiliates. Except to the extent
disclosed in the MAI SEC Documents filed prior to the date of this Agreement,
none of the officers or directors of MAI or any of its Subsidiaries nor any of
its Affiliates, and, to MAI's knowledge, none of its key employees or the key
employees of any of its Subsidiaries, is a party to any transaction with MAI or
any of its Subsidiaries (other than for services as an employee, officer or
director and other than transactions between MAI and one or more of its direct
or indirect wholly-owned Subsidiaries or between such Subsidiaries), including,
without limitation, any contract, agreement or other arrangement (a) providing
for the furnishing of services to or by, (b) providing for rental of real or
personal property to or from, or (c) otherwise requiring payments to or from,
any such
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officer, director, Affiliate or key employee, any member of the family of any
such officer, director or key employee or any corporation, partnership, trust or
other entity in which any such officer, director or key employee has substantial
interest (excluding the ownership of not more than two percent (2%) of the
capital stock of a publicly traded corporation) or which is an Affiliate of such
officer, director or key employee.
Section 3.22 Insurance. Schedule 3.22 to the MAI Disclosure Letter sets
forth a complete and accurate list of all primary, excess and umbrella policies,
bonds and other forms of insurance currently owned or held by or on behalf of or
providing insurance coverage to MAI or any of its Subsidiaries and their
respective businesses, properties and assets (or its directors, officers, agents
or employees). All such policies are in full force and effect. Neither MAI nor
any of its Subsidiaries has received notice of default under any such policy, or
has received written notice of any pending or threatened termination or
cancellation, coverage limitation or reduction, or material premium increase
with respect to any such policy, the failure of which to maintain has a Material
Adverse Effect on MAI. Schedule 3.22 to the MAI Disclosure Letter sets forth a
complete and accurate summary of all of the self-insurance coverage provided by
MAI or any of its Subsidiaries and no letters of credit have been posted in
respect thereof.
Section 3.23 Takeover Statutes. Except for the Business Combination Act
set forth in Article 13 of the Texas Business Corporation Act, no "fair price",
"moratorium", "control share acquisition" or other similar antitakeover statute
or regulation enacted under state or federal laws in the United States (each, a
"TAKEOVER STATUTE") applicable to MAI or any of its Subsidiaries is applicable
to the Merger or the other transactions contemplated hereby.
Section 3.24 Finders' Fees. Except as disclosed in Schedule 3.24 to the
MAI Disclosure Letter, no investment banker, broker, finder, other intermediary
or other Person is entitled to any fee or commission from MAI or any Subsidiary
of MAI upon consummation of the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DHS
DHS represents and warrants to MAI that:
Section 4.01 Organization and Power. Each of DHS and its Subsidiaries
is a corporation, partnership or other entity duly organized, validly existing
and, except as disclosed on Schedule 4.01 to the disclosure letter delivered by
DHS to MAI concurrently with the execution and delivery of this Agreement (the
"DHS DISCLOSURE LETTER"), in good standing under the laws of the jurisdiction of
its incorporation or organization, and has the requisite corporate or other
power and authority and governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted. Each of DHS and
its Subsidiaries is duly qualified or licensed to do business and, except as
disclosed on Schedule 4.01 to the DHS Disclosure Letter, is in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have a Material
Adverse Effect on DHS. Schedule 4.01 to the
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DHS Disclosure Letter sets forth (a) the name and jurisdiction of incorporation
of each Subsidiary of DHS, (b) its authorized capital stock, (c) the number of
issued and outstanding shares of its capital stock, and (d) the record and
beneficial owners of such shares. Except as set forth on Schedule 4.01 to the
DHS Disclosure Letter, DHS does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any Person. DHS has
heretofore delivered to MAI true and complete copies of the certificate or
articles of incorporation and by-laws as currently in effect of DHS and its
Subsidiaries.
Section 4.02 Corporate Authorization. The execution, delivery and
performance by DHS of this Agreement and the consummation by DHS of the
transactions contemplated hereby are within the corporate powers of DHS and,
except as set forth in the second succeeding sentence of this Section 4.02, have
been duly authorized by all necessary corporate action, including, without
limitation, authorization and approval of its Board of Directors. As of the date
of this Agreement, the Board of Directors of DHS has recommended approval and
adoption of this Agreement by the stockholders of DHS and directed that this
Agreement be submitted to the stockholders of DHS for their approval. The
affirmative vote of the holders of at least a majority of the outstanding Shares
is the only vote of any class or series of DHS' capital stock necessary to
approve and adopt this Agreement, the Merger and the transactions contemplated
by this Agreement. This Agreement has been duly executed and delivered by DHS
and, subject to the receipt of the approval described in the immediately
preceding sentence, constitutes a legal, valid and binding agreement of DHS,
enforceable against DHS in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, regardless of whether in a
proceeding in equity or at law).
Section 4.03 Governmental Authorization. The execution, delivery and
performance by DHS of this Agreement, and the consummation by DHS of the
transactions contemplated hereby, require no action by or in respect of, or
filing with or notice to, any Governmental Authority, other than (a) the filing
of a certificate of merger with respect to the Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which DHS is qualified to do business; (b) compliance with any
applicable requirements of the HSR Act, provided that nothing contained in this
Agreement shall be deemed to constitute an acknowledgment that any requirements
under the HSR Act are applicable to the transactions contemplated by this
Agreement; (c) compliance with any applicable requirements of the 1933 Act; (d)
compliance with any applicable requirements of the 1934 Act; and (e) compliance
with any other applicable securities laws.
Section 4.04 Non-Contravention. Except as set forth on Schedule 4.04 to
the DHS Disclosure Letter, the execution, delivery and performance by DHS of
this Agreement do not, and the consummation by DHS of the transactions
contemplated hereby will not, require the consent of any other Person, or
conflict with, result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, result in or give to any
Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien on any of the assets or properties of DHS or any of its Subsidiaries under,
any of the terms, conditions or provisions of (a) the certificate or articles of
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incorporation, by-laws or similar organizational documents of DHS or any of its
Subsidiaries, (b) assuming receipt of the approval of stockholders referred to
in Section 4.02, and compliance with the matters referred to in Section 4.03,
any Laws or Orders binding upon or applicable to DHS or any Subsidiary of DHS or
any of their respective assets or properties, or (c) any note, bond, mortgage,
security agreement, indenture, lease, contract, instrument or other agreement of
any kind to which DHS or any Subsidiary of DHS is a party or by which DHS or any
Subsidiary of DHS or any of their respective assets or properties is bound (a
"DHS AGREEMENT") or any license, franchise, permit or other similar
authorization held by DHS or any Subsidiary of DHS.
Section 4.05 Capitalization of DHS.
(a) The authorized capital stock of DHS consists of 50,000,000
shares of DHS Common Stock, par value $0.001 per share, and 10,000,000 share of
preferred stock, par value $0.001 per share (the "DHS PREFERRED STOCK"). As of
the close of business on April 30, 1999, (i) 11,483,136 shares of DHS Common
Stock were issued and outstanding, 233,259 shares of DHS Common Stock were
issued and held in the treasury of DHS, and an aggregate of 2,319,475 shares of
DHS Common Stock were reserved for issuance under DHS' 1992 Stock Option Plan,
1995 Non-Qualified Stock Option Plan, 1995 Incentive Stock Option Plan and 1997
Non-Qualified Stock Option Plan (collectively, the "DHS PLANS"); (ii) options to
purchase 1,818,551 shares of DHS Common Stock under the DHS Plans ("DHS
OPTIONS") were outstanding, and warrants to purchase 60,000 shares of DHS Common
Stock were outstanding under the DHS Warrants; and (iii) 746,500 shares of DHS
Preferred Stock were outstanding (exclusive of additional in-kind dividends
accrued subsequent to January 1, 1999). All of the outstanding shares of DHS
Common Stock are, and all shares reserved for issuance will be, when issued in
accordance with the terms specified in the instruments or agreements pursuant to
which they are issuable, duly authorized, validly issued, fully paid and
non-assessable. Except (A) as set forth in this Section 4.05 or in Schedule 4.05
to the DHS Disclosure Letter, (B) for DHS Common Stock that may be issued as
provided in Section 5.02(f), and (C) for the transactions contemplated by this
Agreement (including those permitted in Article II), there are outstanding (w)
no shares of capital stock or other voting securities of DHS, (x) no securities
of DHS convertible into or exchangeable for shares of capital stock or voting
securities of DHS, (y) no options, warrants or other rights to acquire from DHS,
and no preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, obligating
DHS to issue, transfer or sell, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of DHS or obligating DHS to grant, extend or enter into any such
option, warrant, subscription or other right, convertible security, agreement,
arrangement or commitment, and (z) no restricted stock awards, stock
appreciation rights, performance share agreements or stock unit awards of DHS
(the items in clauses (w), (x), (y) and (z) being referred to collectively as
the "DHS SECURITIES").
(b) Except as set forth on Schedule 4.05 to the DHS Disclosure
Letter, (i) there are no voting trusts or other agreements or understandings to
which DHS or any Subsidiary of DHS is a party with respect to the voting of the
capital stock of DHS or any Subsidiary of DHS, (ii) no Person has or is entitled
to any registration rights in respect of any DHS Securities, and (iii) none of
DHS or its Subsidiaries has any contractual obligation to redeem, repurchase or
otherwise acquire any DHS Securities or any capital stock of any Subsidiary of
DHS, including as
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a result of the transactions contemplated by this Agreement, or to provide funds
to, or to make any investment in, any Subsidiary of DHS or any other Person.
Except as permitted by this Agreement, following the Merger, neither DHS nor any
of its Subsidiaries will have any obligation to issue, transfer or sell any
shares of its capital stock pursuant to any employee benefit plan or otherwise.
Section 4.06 Capitalization of Subsidiaries. Except as set forth on
Schedule 4.06 to the DHS Disclosure Letter, all of the outstanding shares of
capital stock of, or other ownership interests in, each Subsidiary of DHS, are
duly authorized, validly issued, fully paid and non-assessable and are owned
beneficially, and of record, by DHS, directly or indirectly, free and clear of
any consensual Lien (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests). There are
no (a) outstanding securities of DHS or any Subsidiary of DHS convertible into
or exchangeable for shares of capital stock or other voting securities or
ownership interests in any Subsidiary of DHS, or (b) options, warrants or other
rights to acquire from DHS or any Subsidiary of DHS, and no other obligation of
DHS or any Subsidiary of DHS to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or exchangeable
for, any capital stock, voting securities or ownership interests in, any
Subsidiary of DHS (the items in clauses (a) and (b) being referred to
collectively as the "DHS SUBSIDIARY SECURITIES").
Section 4.07 SEC Filings.
(a) DHS has filed all reports, schedules, forms, statements
and other documents with the SEC required to be filed by DHS since January 1,
1996 (the "DHS SEC DOCUMENTS").
(b) As of its filing date, each DHS SEC Document filed
pursuant to the 1934 Act complied as to form in all material respects with the
1934 Act and did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(c) Each DHS SEC Document that is a registration statement, as
amended or supplemented, if applicable, filed pursuant to the 1933 Act as of the
date such registration statement or amendment became effective complied as to
form in all material respects with the requirements of the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.08 Financial Statements.
(a) The audited consolidated financial statements included in
DHS' Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the
"DHS 10-K") and the unaudited consolidated interim financial statements of DHS
included in the DHS SEC Documents filed after such date (collectively, the "DHS
FINANCIAL STATEMENTS") complied, or will comply, as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP applied on a consistent
basis during the
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periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of DHS and its consolidated
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to footnote
disclosures and normal year-end adjustments in the case of any unaudited interim
financial statements). The DHS Financial Statements have been prepared from and
are consistent with the books and records of DHS, which reflect all material
transactions of DHS and its Subsidiaries. For purposes of this Agreement, "DHS
BALANCE SHEET" means the consolidated balance sheet of DHS as of December 31,
1998 set forth in the DHS 10-K and "DHS BALANCE SHEET DATE" means December 31,
1998.
(b) Without limitation of Section 4.08(a), (i) DHS or its
Subsidiaries has good and marketable title to all of the assets reflected in the
balance sheet of DHS included in its quarterly report on Form 10-Q for the
quarter ended March 31, 1999 (the "MOST RECENT DHS BALANCE SHEET") free and
clear of all liens, security interests, encumbrances or other adverse claims
other than liens of secured lenders disclosed in the footnotes to the Most
Recent DHS Balance Sheet and interests of lessors in respect of capitalized
leases, (ii) the reserve for doubtful accounts reflected in the Most Recent DHS
Balance Sheet is adequate and in accordance with GAAP, (iii) the inventories
reflected in the Most Recent DHS Balance Sheet have been valued at the lower of
cost or market, and are not materially in excess of the normal requirement of
DHS' business, and (iv) all equipment and other fixed assets reflected in the
Most Recent DHS Balance Sheet are in good operating condition (reasonable wear
and tear excepted); all of the representations in this Section 4.08(b) being
subject to the collection of accounts receivable, sale and use of inventory, and
disposition of obsolete equipment, in the ordinary course of business.
Section 4.09 Information Supplied. None of the information supplied or
to be supplied by DHS for inclusion or incorporation by reference in and none of
the statements based on such information contained in (a) the Proxy Statement
will, at the date the Proxy Statement is first mailed to stockholders and at the
time of the meetings of such stockholders in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or (b) the Form S-4 will, at the
time the Form S-4 becomes effective under the 1933 Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Section 4.10 Absence of Certain Changes. Except as disclosed in the DHS
SEC Documents filed prior to the date of this Agreement or as disclosed on
Schedule 4.10 to the DHS Disclosure Letter, since December 31, 1998, DHS and its
Subsidiaries have conducted their respective businesses in the ordinary course
consistent with past practice and there has not been:
(a) Any material transaction of DHS or any of its Subsidiaries
outside of the normal course of business, any damage or destruction (whether or
not covered by insurance) of any material assets of DHS or any of its
Subsidiaries, or any event, occurrence or development which, individually or in
the aggregate, has had or would be reasonably likely to have a Material Adverse
Effect on DHS;
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(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of DHS, any
issuance of DHS Common Stock other than upon exercise of DHS Warrants or DHS
Options outstanding on December 31, 1998, or any repurchase, redemption or other
acquisition by DHS or any Subsidiary of DHS of any amount of outstanding shares
of capital stock or other equity securities of, or other ownership interests in,
DHS or any Subsidiary of DHS;
(c) any amendment of any term of any DHS Securities or any DHS
Subsidiary Securities;
(d) (i) any incurrence or assumption by DHS or any Subsidiary
of DHS of any indebtedness for borrowed money other than under existing credit
facilities in the ordinary course of business consistent with past practices, or
(ii) any guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by DHS or any Subsidiary of DHS
for the obligations of any other Person (other than any wholly-owned Subsidiary
of DHS);
(e) any creation or assumption by DHS or any Subsidiary of DHS
of any consensual Lien on any material asset of DHS or any Subsidiary of DHS;
(f) any making of any loan, advance or capital contribution to
or investment in any Person by DHS or any Subsidiary of DHS other than (i)
loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries of DHS, or (ii) loans or advances to employees of DHS or any
Subsidiary of DHS made in the ordinary course of business consistent with past
practice;
(g) (i) any contract or agreement entered into by DHS or any
Subsidiary of DHS on or prior to the date hereof relating to any material
acquisition or disposition of any assets or business, or (ii) any modification,
amendment, assignment, termination or relinquishment by DHS or any Subsidiary of
DHS of any contract, license or other right (including any insurance policy
naming it as a beneficiary or a loss payable payee) that would be reasonably
likely to have a Material Adverse Effect on DHS, other than those contemplated
by this Agreement;
(h) any change in any method of accounting or accounting
principles or practices by DHS or any Subsidiary of DHS, except for any such
change required by reason of a change in GAAP; or
(i) any (i) grant of any severance or termination pay to any
director, officer or employee of DHS or any of its Subsidiaries, (ii) entering
into of any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of DHS or any of its Subsidiaries, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, or (iv)
increase in rates of compensation or bonus in excess of five (5%) percent or
increase in other benefits payable to officers or employees of DHS or any of its
Subsidiaries or increase in compensation, bonus or other benefits payable to
directors of DHS or any of its Subsidiaries.
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Section 4.11 No Undisclosed Liabilities. Neither DHS nor any Subsidiary
of DHS has any material liabilities or obligations (whether pursuant to
contracts or otherwise) of any kind whatsoever whether, accrued, contingent,
absolute, determined, determinable or otherwise, except:
(a) those liabilities and obligations set forth on the DHS
Balance Sheet and not heretofore paid or discharged;
(b) those liabilities and obligations incurred since December
31, 1998 in the ordinary course of business consistent with past practice; and
(c) those liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby.
Section 4.12 Litigation. Except as disclosed on Schedule 4.12 to the
DHS Disclosure Letter, (a) there are no actions, suits, arbitrations, or
proceedings pending or, to the knowledge of DHS, threatened against, relating to
or affecting, nor are there any Governmental Authority investigations or audits
pending or, to the knowledge of DHS, threatened against, relating to or
affecting, DHS or any of its Subsidiaries or any of their respective assets or
properties nor, to the knowledge of DHS, is there any valid basis for any such
action, suit, arbitration, proceeding, investigation or audit, which if
adversely determined, would have a Material Adverse Effect on DHS, and (b)
neither DHS nor any of its Subsidiaries is subject to any order of any
Governmental Authority which adversely affects the ability of DHS to consummate
the transactions contemplated by this Agreement.
Section 4.13 Taxes.
(a) All Tax Returns required to be filed by DHS, any of its
Subsidiaries, or any corporation that was included in the filing of a return
with DHS or its Subsidiaries on a consolidated, combined or unitary basis have
been filed (the "DHS TAX RETURNS") and all Taxes required to be shown on the DHS
Tax Returns, or a subsequent assessment with respect thereto, or otherwise due
or payable (to the extent in excess of $50,000 in the aggregate) have been paid
and any penalties and interest relating to such Taxes have been paid. No other
Taxes (to the extent in excess of $50,000 in the aggregate) are payable by the
DHS Group with respect to items or periods covered by such Tax Returns or with
respect to Tax periods prior to the date of this Agreement. None of the DHS Tax
Returns contain, or are required to contain, a disclosure statement under
Section 6662 of the Code, or any similar provision of state, local or foreign
law, with respect to any items that relate to DHS or its Subsidiaries in order
to avoid a penalty for any taxable year. All DHS Tax Returns are true, correct
and complete in all material respects. DHS has made available to MAI correct and
complete copies of all DHS Tax Returns for all periods which are not closed by
the statute of limitations.
(b) No adjustment relating to any DHS Tax Return has been
proposed formally or, to DHS' knowledge, informally by any Governmental
Authority (to the extent in excess of $50,000 in the aggregate), and no basis
exists for any such adjustment that would have a Material Adverse Effect on DHS.
There are no outstanding subpoenas or requests for information with
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respect to any DHS Tax Returns or portions thereof. There are no pending or, to
DHS' knowledge, threatened actions or proceedings for the assessment or
collection of Taxes for which DHS or its Subsidiaries may be liable (to the
extent in excess of $50,000 in the aggregate). There are no Tax liens on any
assets of DHS or its Subsidiaries, except with respect to Taxes which are not
yet due and payable.
(c) No consent under Section 341(f) of the Code has been filed
with respect to DHS or any of its Subsidiaries. Neither DHS nor any of its
Subsidiaries is or has been subject to the dual consolidated loss provisions of
Section 1503 of the Code.
(d) DHS and its Subsidiaries are members of an affiliated
group (within the meaning of Section 1504 of the Code) that is eligible to file
a consolidated return. No other entity is or has been eligible to file a
consolidated or combined return with DHS and its Subsidiaries, and neither DHS
nor its Subsidiaries have filed or consented to the filing of any Federal or
state consolidated or combined return with any entity not a member of the DHS
Group. Neither DHS nor any of its Subsidiaries has been at any time a member of
any partnership or joint venture or the holder of a beneficial interest in any
trust for any Person for which the statute of limitations for any Tax
potentially applicable as a result of such membership or holding has not
expired.
(e) DHS and its Subsidiaries have properly accrued all current
or contested Taxes (to the extent in excess of $50,000 in the aggregate) on
their books and records, and their books and records reflect reserves that are
adequate for the payment of all Taxes (to the extent in excess of $50,000 in the
aggregate) not yet due and payable that are properly accruable thereon through
the date of this Agreement (including Taxes being contested). Neither DHS nor
any of its Subsidiaries have any liability for any Taxes which, in the
aggregate, are more than $50,000 in excess of amounts accrued or the reserves
established. All Taxes (to the extent in excess of $50,000 in the aggregate)
required to be withheld, collected or deposited in connection with the
operations and activities of DHS or its Subsidiaries have been timely withheld,
collected or deposited and, to the extent required, have been paid to the
relevant taxing authority.
(f) DHS does not own, nor has it owned during the past five
(5) years, any capital stock of MAI. At the Effective Time, the fair market
value of the assets of DHS will exceed the sum of its liabilities, plus the
amount of other liabilities, if any, to which the assets are subject.
(g) There are no requests for rulings, determinations or
information currently outstanding with any Taxing Authority that could
reasonably be expected to affect the Taxes of DHS or any of its Subsidiaries.
(h) The DHS Tax Returns have not been audited by the Service.
There are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which DHS or any of its
Subsidiaries may be liable.
(i) The term "DHS GROUP" shall mean, individually and
collectively, (i) DHS, (ii) its Subsidiaries, and (iii) any trust, corporation,
partnership or any other entity as to which DHS or its Subsidiaries is liable
for Taxes incurred by such entity either as a transferee, or
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pursuant to Treasury Regulations Section 1.1502-6, or pursuant to any other
provision of federal, state, local or foreign law or regulations.
(j) DHS has made available to MAI a true and complete copy of
any (i) elections, letter rulings and determination letters relating to Taxes
with respect to DHS or its Subsidiaries which were in effect or affected Taxes
for any periods which are not closed by the statute of limitations, and (ii)
examination reports, closing agreements and statements of deficiencies for Taxes
assessed against or agreed to by DHS or any of its Subsidiaries which were in
effect or affected Taxes for any periods which are not closed by the statute of
limitations.
Section 4.14 Employee Benefits; ERISA.
(a) Except as set forth on Schedule 4.14 to the DHS Disclosure
Letter, there are no employee benefit plans (including any plans for the benefit
of directors or former directors), contracts or agreements (including employment
agreements and severance agreements, incentive compensation, bonus, stock
option, stock appreciation rights and stock purchase plans) of any type
(including plans described in Section 3(3) of ERISA), maintained by DHS, any of
its Subsidiaries or any trade or business, whether or not incorporated (an "DHS
ERISA AFFILIATE"), that together with DHS would be deemed a "controlled group"
within the meaning of Section 4001(a)(14) of ERISA, or with respect to which DHS
or any of its Subsidiaries has or may have a liability (the "DHS BENEFIT
PLANS"). Except as disclosed on Schedule 4.14 to the DHS Disclosure Letter (or
as otherwise permitted by this Agreement), (i) neither DHS nor any ERISA
Affiliate has any plan or commitment, whether legally binding or not, to create
any additional DHS Benefit Plan or modify or change any existing DHS Benefit
Plan that would affect any employee or terminated employee of DHS or any ERISA
Affiliate, and (ii) since December 31, 1997, there has been no change,
amendment, modification to, or adoption of, any DHS Benefit Plan.
(b) With respect to each DHS Benefit Plan: (i) if intended to
qualify under Section 401(a), 401(k) or 403(a) of the Code, each such plan so
qualifies, and its trust is exempt from taxation under Section 501(a) of the
Code; (ii) no failures to administer such plan in accordance with its terms and
applicable law have occurred that have had or would reasonably be expected to
have a Material Adverse Effect on DHS; (iii) no breaches of fiduciary duty have
occurred; (iv) no prohibited transaction within the meaning of Section 406 of
ERISA has occurred; (v) as of the date of this Agreement, no lien imposed under
the Code or ERISA exists; and (vi) all contributions and premiums due (including
any extensions for such contributions and premiums) have been made in full or
adequate provision has been made therefor in the DHS Financial Statements.
(c) None of the DHS Benefit Plans has incurred any
"accumulated funding deficiency," as such term is defined in Section 412 of the
Code, whether or not waived.
(d) Neither DHS nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA (including Sections 4063-4064 and 4069 of
ERISA) since the effective date of ERISA that has not been satisfied in full.
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(e) With respect to each DHS Benefit Plan that is a "welfare
plan" (as defined in Section 3(l) of ERISA), no such plan provides medical or
death benefits with respect to current or former employees of DHS or any of its
Subsidiaries beyond their termination of employment, other than as required by
law or on an employee-pay-all basis.
(f) The consummation of the Merger pursuant to this Agreement
will not (i) entitle any individual to severance pay or any tax "gross-up"
payments with respect to the imposition of any tax pursuant to Section 4999 of
the Code or accelerate the time of payment or vesting, or increase the amount,
of compensation or benefits due to any individual with respect to any DHS
Benefit Plan, or (ii) constitute or result in a prohibited transaction under
Section 4975 of the Code or Section 406 or 407 of ERISA with respect to any DHS
Benefit Plan.
(g) There is no DHS Benefit Plan that is a "multiemployer
plan," as such term is defined in Section 3(37) of ERISA, or which is covered by
Section 4063 or 4064 of ERISA.
Section 4.15 Certain Agreements; Compliance with Agreements.
(a) Except as disclosed on Schedule 4.15 to the DHS Disclosure
Letter or as provided for in this Agreement, neither DHS nor any of its
Subsidiaries is a party to or bound by any oral or written:
(i) consulting agreement not terminable on thirty (30) days'
or less notice;
(ii) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of the transactions contemplated by this
Agreement;
(iii) agreement with respect to any officer providing any term
of employment or compensation guarantee;
(iv) agreement or plan, including any stock option plan, stock
appreciation rights plan, employee stock ownership plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(v) agreement containing covenants that limit the ability of
DHS or any of its Subsidiaries to compete in any line of business or
with any Person, or that involve any restriction on the geographic area
in which, or method by which, DHS or any of its Subsidiaries may carry
on its business (other than as may be required by law or any regulatory
agency);
(vi) agreement, contract or understanding, other than this
Agreement and the certificate of incorporation and by-laws of DHS,
regarding the capital stock of DHS or committing to dispose of some or
all of the capital stock or all or substantially all of the assets of
DHS;
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(vii) partnership, joint venture or profit sharing agreement
of DHS or any of its Subsidiaries with any Person;
(viii) agreement, contract, commitment, indenture or other
instrument of DHS or any of its Subsidiaries relating to the borrowing
of money, or the direct or indirect guarantee of any obligation for, or
an agreement to service the repayment of, borrowed money, or any other
contingent obligation in respect to indebtedness of any other Person,
including without limitation any agreement or arrangement relating to
the maintenance of compensating balances, any agreement or arrangement
with respect to lines of credit, any agreement or arrangement to
purchase or repurchase obligations of any other Person, any agreement
or arrangement to advance or supply funds to or to invest in any other
Person, any agreement or arrangement to pay for property, products or
services of any other Person even if such property, products or
services are not conveyed, delivered or rendered, or any guarantee with
respect to any lease or other similar periodic payment to be made by
any other Person;
(ix) lease of DHS or any of its Subsidiaries with annual
rental payments aggregating $50,000 or more;
(x) agreement, contract or commitment of DHS or any of its
Subsidiaries relating to the disposition or acquisition of any
investment in any Person if such investment has a book value of, or the
disposition or acquisition price of such investment or interest is,
$50,000 or more;
(xi) agreement, contract or commitment which involves payment
or potential payment, pursuant to the terms of such agreement, contract
or commitment, by or to DHS or any of its Subsidiaries of $50,000 or
more within any twelve (12) month period commencing after the date
hereof;
(xii) severance or similar agreement entered into or amended
at any time since June 30, 1998; or
(xiii) agreement, contract, commitment or arrangement between
DHS or any of its Subsidiaries and any Affiliate of DHS or any of its
Subsidiaries that is not described in or filed as an exhibit to a DHS
SEC Document.
(b) Neither DHS nor any of its Subsidiaries nor, to the
knowledge of DHS, any other party thereto is in breach or violation of or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, is reasonably
expected to result in a default under, (i) the certificates or articles of
incorporation, by-laws or similar organizational documents of DHS or any of its
Subsidiaries, or (ii) any contract, agreement, plan or instrument listed or
required to be listed on Schedule 4.15 to the DHS Disclosure Letter, except in
the case of clause (ii) for breaches, violations or defaults which, individually
or in the aggregate, are not having and are not reasonably expected to have a
Material Adverse Effect on DHS. No party to any such contract, agreement, plan
or instrument will have the right to terminate any or all of the provisions of
any such contract, plan or instrument as a result of the transactions
contemplated by this Agreement.
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(c) No outstanding purchase commitments of DHS or any of its
Subsidiaries is materially in excess of the reasonable requirements of their
respective business.
(d) Neither DHS nor any of its Subsidiaries has received
written notice of any existing, announced or anticipated changes in the policies
of any material clients, customers, referral sources or suppliers which could
reasonably be expected to have a Material Adverse Effect on DHS.
Section 4.16 Compliance with Laws and Orders.
(a) DHS and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Authorities
necessary for the lawful conduct of their respective businesses (the "DHS
PERMITS"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which, individually or in the aggregate, are
not having and are not reasonably expected to have a Material Adverse Effect on
DHS. DHS and its Subsidiaries are in compliance with the terms of the DHS
Permits, except failures so to comply which, individually or in the aggregate,
are not having and are not reasonably expected to have a Material Adverse Effect
on DHS. DHS and its Subsidiaries are not in violation of or default under any
Laws or Orders, except for such violations or defaults which, individually or in
the aggregate, are not having and are not reasonably expected to have a Material
Adverse Effect on DHS.
(b) Without limitation of Section 4.16(a), DHS and its
Subsidiaries have at all times operated their businesses in compliance with all
applicable federal, state and other fraud and abuse, anti-kickback ("Xxxxx
laws") and other statutes, rules and regulations governing the provision of
medical or related services and/or payments or reimbursements for such services.
Section 4.17 Environmental Matters.
(a) No notice, notification, demand, request for information,
citation, summons or order has been received by, no complaint has been filed
against, no penalty has been assessed against, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of DHS or any
Subsidiary of DHS, is threatened by any Person, against DHS or any Subsidiary of
DHS with respect to any matters relating to or arising out of any Environmental
Law;
(b) No Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or released, in
violation of any Environmental Law, at, on, under or adjacent to any property
now or, to the knowledge of DHS, previously owned, leased or operated by DHS or
any Subsidiary of DHS; and
(c) There are no Environmental Liabilities.
(d) For purposes of this Section 4.17, capitalized terms used
shall have the meanings assigned to them in Section 3.17(b), except that in all
cases the word "DHS" shall be substituted for the word "MAI".
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Section 4.18 Assets. The assets, properties, rights and contracts,
including (as applicable) title or leaseholds thereto, of DHS and its
Subsidiaries, taken as a whole, are sufficient to permit DHS and its
Subsidiaries to conduct their respective businesses as currently being
conducted. Neither DHS nor any of its Subsidiaries owns any real property.
Section 4.19 Intellectual Property Rights.
(a) DHS and its Subsidiaries own or have the right to use all
Intellectual Property individually or in the aggregate material to the conduct
of the businesses of DHS and its Subsidiaries. To the knowledge of DHS, (i)
neither DHS nor any Subsidiary of DHS is in default (or with the giving of
notice or lapse of time or both would be in default) under any license to use
such Intellectual Property, (ii) such Intellectual Property (other than patents)
is not being infringed by any third party, and (iii) neither DHS nor any
Subsidiary of DHS is infringing any intellectual property of any third party. An
accurate schedule of all Intellectual Property of DHS or its Subsidiaries
consisting of patents, registered trademarks, registered service marks,
registered trade names and registered copyrights and all pending applications
therefor is set forth on Schedule 4.19 to the DHS Disclosure Letter.
(b) Either DHS or one of its Subsidiaries is listed in the
records of the appropriate United States, state or foreign agency as the sole
owner of record for each application and registration included in the
Intellectual Property, other than Intellectual Property of which DHS or its
Subsidiaries is a licensee.
(c) DHS and its Subsidiaries, with respect to all Intellectual
Property owned thereby, have taken or caused to be taken all reasonable steps in
the exercise of reasonable business judgement to obtain and retain valid and
enforceable Intellectual Property rights therein, including the submission of
all necessary filings in accordance with the legal and administrative
requirements of the appropriate jurisdictions. No application or registration
listed on Schedule 4.19 to the DHS Disclosure Letter is the subject of any
pending, existing or, to DHS' knowledge, threatened, opposition, interference,
cancellation proceeding or other legal or governmental proceeding before any
registration authority in any jurisdiction.
(d) The consummation of the transactions contemplated hereby
will not result in the loss or impairment of DHS' or any of its Subsidiaries'
right to own or use any of the Intellectual Property nor will it require the
consent of any Governmental Authority or third party.
Section 4.20 Labor Matters. DHS has previously furnished to MAI true
and complete copies of all labor and collective bargaining agreements (if any)
to which DHS or any of its Subsidiaries is a party and that are currently in
effect, together with all amendments thereto (if any). Since January 1, 1996,
there have been no strikes, slowdowns or other work stoppages or lockouts
involving any employees of DHS or any of its Subsidiaries and there are no
disputes by any labor organization in progress or pending or, to the knowledge
of DHS, threatened against DHS or any of its Subsidiaries that would have a
Material Adverse Effect on DHS. DHS and its Subsidiaries are in compliance in
all material respects with all applicable laws and regulations in
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respect of employment and employment practices, terms and conditions of
employment, wages and hours, occupational safety, health or welfare conditions
relating to premises occupied, and civil rights. There are no charges of unfair
labor practices pending before any Governmental Authority involving or affecting
DHS or any of its Subsidiaries. As of the date of this Agreement, there is no
representation claim or petition pending before the National Labor Relations
Board and, to the knowledge of DHS, no question concerning representation exists
with respect to the employees of DHS or any of its Subsidiaries. DHS has not
received notice that any customer or supplier of DHS or any or its Subsidiaries
is involved in or threatened with or affected by any strike or other labor
disturbance or dispute, litigation or administrative proceeding or judgment,
order, injunction, decree or award, the consequences of which would have a
Material Adverse Effect on DHS.
Section 4.21 Transactions with Affiliates. Except to the extent
disclosed in the DHS SEC Documents filed prior to the date of this Agreement,
none of the officers or directors of DHS or any of its Subsidiaries nor any of
its Affiliates, and, to DHS' knowledge, none of its key employees or the key
employees of any of its Subsidiaries, is a party to any transaction with DHS or
any of its Subsidiaries (other than for services as an employee, officer or
director and other than transactions between DHS and one or more of its direct
or indirect wholly owned Subsidiaries or between such Subsidiaries), including,
without limitation, any contract, agreement or other arrangement (a) providing
for the furnishing of services to or by, (b) providing for rental of real or
personal property to or from, or (c) otherwise requiring payments to or from,
any such officer, director, Affiliate or key employee, any member of the family
of any such officer, director or key employee or any corporation, partnership,
trust or other entity in which any such officer, director or key employee has
substantial interest (excluding the ownership of not more than two percent (2%)
of the capital stock of a publicly traded corporation) or which is an Affiliate
of such officer, director or key employee.
Section 4.22 Insurance. Schedule 4.22 to the DHS Disclosure Letter sets
forth a complete and accurate list of all primary, excess and umbrella policies,
bonds and other forms of insurance currently owned or held by or on behalf of or
providing insurance coverage to DHS or any of its Subsidiaries and their
respective businesses, properties and assets (or its directors, officers, agents
or employees). All such policies are in full force and effect. Neither DHS nor
any of its Subsidiaries has received notice of default under any such policy, or
has received written notice of any pending or threatened termination or
cancellation, coverage limitation or reduction, or material premium increase
with respect to any such policy, the failure of which to maintain has a Material
Adverse Effect on DHS. Schedule 4.22 to the DHS Disclosure Letter sets forth a
complete and accurate summary of all of the self-insurance coverage provided by
DHS or any of its Subsidiaries and no letters of credit have been posted in
respect thereof.
Section 4.23 Takeover Statutes. The Board of Directors of DHS has duly
and validly approved the Merger, this Agreement and the transactions
contemplated by this Agreement and such approval is sufficient to render
inapplicable to the Merger, this Agreement, and the transactions contemplated by
this Agreement and the Voting Agreement, the provisions of Section 203 of the
Delaware General Corporation Law (the "Delaware Law"). No other Takeover Statute
applicable to DHS or any of its Subsidiaries is applicable to the Merger or the
other transactions contemplated hereby.
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Section 4.24 Finders' Fees. Except for a fee payable to Prudential
Securities Incorporated, a copy of whose engagement agreement has been provided
to MAI, no investment banker, broker, finder, other intermediary or other Person
is entitled to any fee or commission from DHS or any Subsidiary of DHS upon
consummation of the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
Section 5.01 Conduct of MAI. From the date hereof until the Effective
Time, except as otherwise expressly required by this Agreement or with the prior
written consent of DHS, MAI shall conduct, and shall cause its Subsidiaries to
conduct, their respective businesses in the ordinary course consistent with past
practice and shall use commercially reasonable efforts to preserve intact
commercially reasonable organizations and relationships with customers,
suppliers, creditors and business partners and shall use their reasonable
efforts to keep available the services of their present officers and employees.
Without limiting the generality of the foregoing, from the date hereof until the
Effective Time, except as described in Schedule 5.01 to the MAI Disclosure
Letter, without the prior written approval of DHS (which approval will not be
unreasonably withheld or delayed with respect to (c), (d), (h), (i), (j), (n) or
(o), or (k) as it applies to filing any amended Tax Return):
(a) MAI will not adopt or propose any change in its articles
of incorporation or any change in its by-laws, except to the extent required to
consummate the Merger;
(b) MAI will not, and will not permit any Subsidiary of MAI
to, adopt a plan or agreement of complete or partial liquidation, or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of MAI or
any of its Subsidiaries (other than a liquidation or dissolution of any
Subsidiary or a merger or consolidation between wholly-owned Subsidiaries);
(c) MAI will not, and will not permit any Subsidiary of MAI
to, make any investment in or any acquisition of the business of any Person or
any material amount of assets (other than inventory);
(d) MAI will not, and will not permit any Subsidiary of MAI
to, sell or otherwise dispose of any assets (other than inventory) in an amount
that would be material to MAI and its Subsidiaries, taken as a whole, except in
the ordinary course of business consistent with past practice;
(e) MAI will not, and will not permit any Subsidiary of MAI
to, declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock other than dividends
paid by any Subsidiary of MAI to MAI or any other Subsidiary of MAI, or split,
combine, reclassify or take similar action with respect to any of its capital
stock or MAI Securities or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or MAI Securities;
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(f) MAI will not, and will not permit any Subsidiary of MAI
to, issue, deliver, sell, transfer, pledge, dispose of or encumber any shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital stock
of any class or series of MAI or its Subsidiaries, or issue or grant any
restricted stock awards, stock appreciation rights, performance share agreements
or stock unit awards, other than (i) the issuance of options with an exercise
price at least equal to the fair market value of the MAI Common Stock on the
date of grant for up to 150,000 shares of MAI Common Stock under the MAI Option
Plan as in effect on the date hereof, and (ii) issuances of MAI Common Stock
pursuant to the exercise of options granted pursuant to the MAI Option Plan and
the exercise of MAI Warrants described in Section 3.05(a) which are outstanding
on the date hereof or are hereafter issued pursuant to the foregoing clause (i);
and MAI will not amend the terms of any option, warrant, right or other security
outstanding on the date hereof;
(g) MAI will not, and will not permit any Subsidiary of MAI
to, redeem, purchase or otherwise acquire directly or indirectly any of MAI's
capital stock or any MAI Securities;
(h) MAI will not, and will not permit any Subsidiary of MAI
to, enter into or amend in any material respect any employment contract with any
of its officers, directors or employees earning annual compensation of more than
$50,000, adopt or amend any MAI Benefit Plan in any material respect or make any
payments, awards or distributions under any MAI Benefit Plan or otherwise not
consistent with past practice or custom except (i) as required by a contract in
existence on the date hereof and listed on Schedule 3.15 to the MAI Disclosure
Letter, or (ii) as necessary to make any MAI Benefit Plan listed on Schedule
3.14 to the MAI Disclosure Letter meet the requirements of ERISA to the extent
such amendment is described in such Schedule or is approved by DHS;
(i) MAI will not, and will not permit any Subsidiary of MAI
to, (i) enter into (or commit to enter into) any new lease or renew any existing
lease of real property (except pursuant to commitments for such lease or lease
renewal entered into prior to the date hereof), or (ii) purchase or acquire or
enter into any agreement to purchase or acquire any real estate;
(j) MAI will not, and will not permit any Subsidiary of MAI
to, make or commit to make any capital expenditures in excess of $500,000 in the
aggregate;
(k) MAI will not, and will not permit any Subsidiary of MAI
to, change any tax election, change any annual tax accounting period, change any
method of tax accounting, file any amended Tax Return, enter into any closing
agreement relating to any Tax, settle any Tax claim or assessment, surrender any
right to claim a Tax refund or consent to any extension or waiver (other than a
reasonable extension or waiver) of the limitations period applicable to any Tax
claim or assessment, if any such action would have the effect of increasing the
aggregate Tax liability or reducing the aggregate tax assets of MAI and its
Subsidiaries, taken as a whole;
(l) MAI will not, and will not permit any Subsidiary of MAI
to, (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness other than in the ordinary course of its business consistent with
past practice, or (ii) voluntarily purchase, cancel, prepay or
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otherwise provide for a complete or partial discharge in advance of a scheduled
repayment date with respect to, or waive any right under, any indebtedness for
borrowed money;
(m) MAI will not, and will not permit any Subsidiary of MAI
to, enter into any contract or amend or modify any existing contract, or engage
in any new transaction outside the ordinary course of business consistent with
past practice or not on an arm's length basis, with any Affiliate of such party
or any of its Subsidiaries;
(n) MAI will not, and will not permit any Subsidiary of MAI
to, agree or commit to do any of the foregoing; and
(o) MAI will not, and will not permit any Subsidiary of MAI
to, take or agree or commit to take any action that would make any
representation or warranty of MAI in this Agreement inaccurate at, or as of any
time prior to, the Effective Time.
Section 5.02 Conduct of DHS. From the date hereof until the Effective
Time, except as otherwise expressly required by this Agreement or with the prior
written consent of MAI, DHS shall conduct, and shall cause its Subsidiaries to
conduct, their respective businesses in the ordinary course consistent with past
practice and shall use commercially reasonable efforts to preserve intact their
business organizations and relationships with customers, suppliers, creditors
and business partners and shall use their reasonable efforts to keep available
the services of their present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until the Effective Time,
without the prior written approval of MAI (which approval will not be
unreasonably withheld or delayed with respect to (c), (d), (h), (i), (j), (n) or
(o), or (k) as it applies to filing any amended Tax Return):
(a) DHS will not adopt or propose any change in its
certificate of incorporation or any change in its by-laws;
(b) DHS will not, and will not permit any Subsidiary of DHS
to, adopt a plan or agreement of complete or partial liquidation, or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of DHS or
any of its Subsidiaries (other than a liquidation or dissolution of any
Subsidiary or a merger or consolidation between wholly-owned Subsidiaries);
(c) DHS will not, and will not permit any Subsidiary of DHS
to, make any investment in or any acquisition of the business of any Person or
any material amount of assets (other than inventory);
(d) DHS will not, and will not permit any Subsidiary of DHS
to, sell or otherwise dispose of any assets (other than inventory) in an amount
that would be material to DHS and its Subsidiaries, taken as a whole, except in
the ordinary course of business consistent with past practice;
(e) DHS will not, and will not permit any Subsidiary of DHS
to, declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock, other than dividends
paid by any Subsidiary of DHS to DHS or any other
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Subsidiary of DHS, or split, combine, reclassify or take similar action with
respect to any of its capital stock or DHS Securities or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or DHS Securities;
(f) DHS will not, and will not permit any Subsidiary of DHS
to, issue, deliver, sell, transfer, pledge, dispose of or encumber any shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital stock
of any class or series of DHS or its Subsidiaries, or issue or grant any
restricted stock awards, stock appreciation rights, performance share agreements
or stock unit awards, other than (i) the issuance of options with an exercise
price at least equal to the fair market value of the DHS Common Stock on the
date of grant for up to 150,000 shares of DHS Common Stock under the DHS Plans
as in effect on the date hereof, and (ii) issuances pursuant to the exercise of
options granted pursuant to the DHS Plans described in Section 4.05(a) which are
outstanding on the date hereof or are hereafter issued pursuant to the foregoing
clause (i); and DHS will not amend the terms of any option, warrant, right or
other security outstanding on the date hereof, except for the extension of stock
options held by outgoing directors of DHS (provided that such extensions shall
not cause the expiration dates of such options to extend beyond the later of the
third anniversary of the Effective Time or the tenth (10th) anniversary of the
date of issuance of the subject options);
(g) DHS will not, and will not permit any Subsidiary of DHS
to, redeem, purchase or otherwise acquire directly or indirectly any of DHS'
capital stock or any DHS Securities;
(h) DHS will not, and will not permit any Subsidiary of DHS
to, enter into or amend in any material respect any employment contract with any
of its officers, directors or employees earning annual compensation of more than
$50,000 (other than as contemplated by Section 6.06), adopt or amend any DHS
Benefit Plan in any material respect or make any payments, awards or
distributions under any DHS Benefit Plan or otherwise not consistent with past
practice or custom except (i) as required by a contract in existence on the date
hereof and listed on Schedule 4.15 to the DHS Disclosure Letter, or (ii) as
necessary to make any DHS Benefit Plan listed on Schedule 4.14 to the DHS
Disclosure Letter meet the requirements of the Code or ERISA to the extent such
amendment is described in such Schedule or is approved by MAI;
(i) DHS will not, and will not permit any Subsidiary of DHS
to, (i) enter into (or commit to enter into) any new lease or renew any existing
lease of real property (except pursuant to commitments for such lease or lease
renewal entered into prior to the date hereof), or (ii) purchase or acquire or
enter into any agreement to purchase or acquire any real estate;
(j) DHS will not, and will not permit any Subsidiary of DHS
to, make or commit to make any capital expenditures in excess of $750,000 in the
aggregate;
(k) DHS will not, and will not permit any Subsidiary of DHS
to, change any tax election, change any annual tax accounting period, change any
method of tax accounting, file
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any amended Tax Return, enter into any closing agreement relating to any Tax,
settle any Tax claim or assessment, surrender any right to claim a Tax refund or
consent to any extension or waiver (other than a reasonable extension or waiver)
of the limitations period applicable to any Tax claim or assessment, if any such
action would have the effect of increasing the aggregate Tax liability or
reducing the aggregate tax assets of MAI and its Subsidiaries, taken as a whole;
(l) DHS will not, and will not permit any Subsidiary of DHS
to, (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness other than in the ordinary course of its business consistent with
past practice or other than in connection with the transactions contemplated by
this Agreement, or (ii) voluntarily purchase, cancel, prepay or otherwise
provide for a complete or partial discharge in advance of a scheduled repayment
date with respect to, or waive any right under, any indebtedness for borrowed
money;
(m) DHS will not, and will not permit any Subsidiary of DHS
to, enter into any contract or amend or modify any existing contract, or engage
in any new transaction outside the ordinary course of business consistent with
past practice or not on an arm's length basis, with any Affiliate of such party
or any of its Subsidiaries;
(n) DHS will not, and will not permit any Subsidiary of DHS
to, agree or commit to do any of the foregoing; and
(o) DHS will not, and will not permit any Subsidiary of DHS
to, take or agree or commit to take any action that would make any
representation or warranty of DHS in this Agreement inaccurate at, or as of any
time prior to, the Effective Time.
Section 5.03 No Solicitation.
(a) From the date hereof until the earlier of the Effective
Time or the termination of this Agreement, DHS agrees that: (i) it will not, and
will use its best efforts to cause its Subsidiaries and the officers, directors,
employees, investment bankers, consultants and other agents of DHS and its
Subsidiaries and the Affiliates of DHS not to, directly or indirectly, initiate,
solicit, encourage or facilitate or take any action to initiate, solicit,
encourage or facilitate any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, consolidation or other business
combination including DHS or any of its Subsidiaries or any acquisition or
similar transaction (including, without limitation, a tender or exchange offer)
involving the purchase of (A) all or any significant portion of the assets of
DHS and its Subsidiaries taken as a whole, (B) 20% or more of the outstanding
shares of DHS Common Stock, or (C) 20% of the outstanding shares of the capital
stock of any Subsidiary of DHS (any such proposal or offer being hereinafter
referred to as an "ALTERNATIVE PROPOSAL"), or engage in any discussions or
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Person or group relating to an Alternative
Proposal (excluding the transactions contemplated by this Agreement) or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal; (ii) it will immediately cease and cause to be terminated and will
cause its Subsidiaries and the officers, directors, employees, investment
bankers, consultants and other agents of DHS and its Subsidiaries and the
Affiliates of DHS to immediately cease and terminate, any existing
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activities, discussions or negotiations with any parties with respect to any of
the foregoing, and it will take the necessary steps to inform such parties of
its obligations under this Section 5.03(a); and (iii) it will notify MAI
immediately (and in no event later than 24 hours after receipt of any
Alternative Proposal) if any such inquiries, proposals or offers are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it or any of such
Persons; provided, however, that nothing contained in this Section 5.03 shall
prohibit the Board of Directors of DHS from (x) furnishing information to (but
only pursuant to a confidentiality agreement in customary form and having terms
and conditions substantially comparable to the Confidentiality Agreement) or
entering into discussions or negotiations with any Person or group that makes an
unsolicited bona fide Alternative Proposal, if, and only to the extent that, (i)
the Board of Directors of DHS, based upon the written opinion of outside
counsel, determines in good faith that such action is required for the Board of
Directors to comply with its fiduciary duties to stockholders imposed by
applicable law, (ii) prior to furnishing such information to, or entering into
discussions or negotiations with, such Person or group, DHS provides written
notice to MAI to the effect that it is furnishing information to, or entering
into discussions or negotiations with such Person or group (without being
required to identify such Person or group), and (iii) DHS keeps MAI informed
(which notice shall be provided orally and in writing) of the status of such
discussions or negotiations (provided that DHS will not be required to inform
MAI of the substantive terms of such discussions or negotiations, other than the
aggregate consideration being offered to DHS and/or its stockholders), and (y)
to the extent required, complying with Rule 14e-2 promulgated under the 1934 Act
with regard to an Alternative Proposal. Except for MAI's termination rights
pursuant to Section 9.01, MAI will not utilize any of the information provided
to it by DHS pursuant to this Section 5.03(a) in any manner which could
reasonably be expected to undermine DHS' discussions or negotiations with any
Person or group identified to MAI by DHS hereunder.
(b) From the date hereof until the earlier of the Effective
Time or the termination of this Agreement, MAI agrees that: (i) it will not, and
will use its best efforts to cause its Subsidiaries and the officers, directors,
employees, investment bankers, consultants and other agents of MAI and its
Subsidiaries and Affiliates of MAI not to, directly or indirectly, initiate,
solicit, encourage or facilitate or take any action to initiate, solicit,
encourage or facilitate any inquiries or the making or implementation of any
proposal or offer with respect to any transaction such as would constitute an
Alternative Proposal with respect to MAI or would cause ownership or voting
control of MAI to be vested in any Person or group, or with respect to a
material acquisition in any line of business not substantially related to the
existing line of business of MAI and its Subsidiaries (a "MAI PROPOSAL"); (ii)
it will immediately cease and cause to be terminated and will cause its
Subsidiaries and the officers, directors, employees, investment bankers,
consultants and other agents of MAI and its Subsidiaries and the Affiliates of
MAI to immediately cease and terminate, any existing activities, discussions or
negotiations with any parties with respect to any of the foregoing, and it will
take the necessary steps to inform such parties of its obligations under this
Section 5.03(b); and (iii) it will notify DHS immediately (and in no event later
than 24 hours after receipt of any proposal with respect to any such
transaction) if any inquiries, proposals, or offers are received by, or any
information is requested in respect of, any transaction of the type described in
this Section 5.03(b). MAI shall be permitted to conduct unsolicited negotiations
and discussions with respect to any such transaction, and shall be required
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to report thereon to DHS, in the same manner and to the same extent as is
applicable under Section 5.03(a) with respect to any Alternative Proposal as
described therein. Except for DHS' termination rights pursuant to Section 9.01,
DHS will not utilize any information provided to it by MAI pursuant to this
Section 5.03(b) in any manner which could reasonably be expected to undermine
MAI's discussions or negotiations with any Person or group identified to DHS by
MAI hereunder.
Section 5.04 Approval of Stockholders.
(a) DHS shall, through its Board of Directors, duly call, give
notice of, convene and hold a meeting of its stockholders (the "DHS
STOCKHOLDERS' MEETING") for the purpose of voting on the approval and adoption
of this Agreement and the Merger (the "DHS STOCKHOLDERS' APPROVAL") as soon as
reasonably practicable after the date hereof. Except as provided in the next
sentence, the Board of Directors of DHS shall recommend approval and adoption of
this Agreement and the Merger by the holders of DHS Common Stock and shall use
all commercially reasonable efforts to obtain such approval and adoption. The
Board of Directors of DHS shall be permitted to (i) not recommend to the holders
of DHS Common Stock that they give the DHS Stockholders' Approval, or (ii)
withdraw or modify in a manner adverse to DHS its recommendation to the holders
of DHS Common Stock that they give the DHS Stockholders' Approval, but in each
of cases (i) and (ii) only if and to the extent that a Superior Proposal is
pending at the time the DHS Board of Directors determines to take any such
action or inaction; provided, however, that no such failure to recommend,
withdrawal or modification shall be made unless DHS shall have delivered to MAI
a written notice (a "NOTICE OF SUPERIOR PROPOSAL") advising MAI that the Board
of Directors of DHS has received a Superior Proposal and identifying the Person
or group making such Superior Proposal; and further provided, that nothing
contained in this Agreement shall prevent the Board of Directors of DHS from
complying with Rule 14e-2 under the 1934 Act with regard to an Alternative
Proposal. For purposes of this Agreement, "SUPERIOR PROPOSAL" means any bona
fide Alternative Proposal for at least a majority of the outstanding Shares on
terms that the Board of Directors of DHS determines in its good faith judgment
(based on the advice of an independent reputable financial advisor, taking into
account all the terms and conditions of the Alternative Proposal, including any
break-up fees, expense reimbursement provisions and conditions to consummation)
are more favorable and provide greater value to all holders of DHS Common Stock
than this Agreement and the Merger taken as a whole.
(b) MAI shall, through its Board of Directors, duly call, give
notice of, convene and hold a meeting of its stockholders (the "MAI
SHAREHOLDERS' MEETING" and, together with the DHS Stockholders' Meeting, the
"SHAREHOLDERS' MEETINGS") for the purpose of voting on the issuance of MAI
Common Stock in the Merger (the "MAI SHAREHOLDERS' APPROVAL"), as soon as
reasonably practicable after the date hereof. The Board of Directors of MAI
shall recommend that the shareholders of MAI approve such issuances of MAI
Common Stock, and shall use its best efforts to obtain such approval.
(c) DHS and MAI shall coordinate and cooperate with respect to
the timing of the Shareholders' Meetings and shall use their best efforts to
cause the Shareholders' Meetings to be held on the same day and as soon as
practicable after the date hereof.
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Section 5.05 Preparation of Form S-4 and Proxy Statement.
(a) MAI and DHS shall prepare and file with the SEC as soon as
reasonably practicable after the date hereof, the Proxy Statement, and MAI shall
prepare and file with the SEC as soon as reasonably practicable after such date,
a registration statement on Form S-4 with respect to the MAI Common Stock
issuable in the Merger, and in which the Proxy Statement will be included within
the prospectus. MAI and DHS shall use all reasonable efforts to have the Form
S-4 declared effective by the SEC as promptly as practicable after such filing.
Prior to the Effective Date, MAI shall also take any action (other than
qualifying as a foreign corporation or taking any action which would subject it
to service of process in any jurisdiction where MAI is not now so qualified or
subject) required to be taken under applicable state blue sky or securities laws
in connection with the issuance of MAI Common Stock in connection with the
Merger and will pay all expenses incident thereto. If at any time prior to the
Effective Time any event shall occur that should be set forth in an amendment of
or a supplement to the Form S-4, MAI shall prepare and file with the SEC such
amendment or supplement as soon thereafter as is reasonably practicable. MAI,
Merger Subsidiary and DHS shall cooperate with each other in the preparation of
the Form S-4 and the Proxy Statement and any amendment or supplement thereto,
and each shall notify the other of the receipt of any comments of the SEC with
respect to the Form S-4 and any amendment or supplement thereto or for
additional information, and shall provide to the other promptly copies of all
correspondence between MAI or DHS, as the case may be, and the SEC with respect
to the Form S-4 or the Proxy Statement. MAI shall give DHS and its counsel the
opportunity to review and comment on the Form S-4 and all responses to requests
for additional information by and replies to comments of the SEC before their
being filed with, or sent to, the SEC. Each of MAI, Merger Subsidiary and DHS
agrees to use its best efforts, after consultation with the other parties
hereto, to respond promptly to all such comments of and requests by the SEC and
to cause (i) the Form S-4 to be declared effective by the SEC at the earliest
practicable time and to be kept effective as long as is necessary to consummate
the Merger, and (ii) the Proxy Statement to be mailed to the holders of DHS
Common Stock and MAI Common Stock entitled to vote at the meetings of the
stockholders of DHS and MAI at the earliest practicable time.
(b) MAI agrees that the Form S-4, when declared effective by
the SEC, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by MAI in reliance upon and in conformity with written
information concerning DHS or any of its Affiliates furnished to MAI by DHS or
any of its Affiliates. DHS agrees that the information provided by it for
inclusion in the Proxy Statement, when the Proxy Statement is mailed to
stockholders, will not include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No amendment or supplement to the Form S-4 will be made by MAI
until it has consulted with DHS and its counsel. MAI will advise DHS, promptly
after it receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, or the suspension of the qualification of MAI Common Stock issuable
in connection with the Merger for offering or sale in any jurisdiction or any
request by the SEC for amendment of the Proxy Statement or the Form S-4 or
comments thereon and responses thereto or requests for additional information.
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Section 5.06 Access to Information.
(a) To the extent permitted by applicable law, from the date
hereof until the Effective Time, MAI will give DHS, its counsel, financial
advisors, auditors and other authorized representatives reasonable access during
normal business hours to the offices, properties, books and records of MAI and
its Subsidiaries, will furnish to DHS, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct MAI's
employees, auditors, counsel and financial advisors to cooperate with DHS in its
investigation of the business of MAI and its Subsidiaries; provided, however,
that no investigation pursuant to this Section 5.06(a) shall affect any
representation or warranty made by MAI to DHS hereunder. The foregoing
information shall be held in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement between DHS and
MAI (the "CONFIDENTIALITY AGREEMENT").
(b) To the extent permitted by applicable law, from the date
hereof until the Effective Time, DHS will give MAI, its counsel, financial
advisors, auditors and other authorized representatives reasonable access during
normal business hours to the offices, properties, books and records of DHS and
its Subsidiaries, will furnish to MAI, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct DHS'
employees, auditors, counsel and financial advisors to cooperate with MAI in its
investigation of the business of DHS and its Subsidiaries; provided, however,
that no investigation pursuant to this Section 5.06(b) shall affect any
representation or warranty made by DHS to MAI hereunder. Such information shall
be held in confidence to the extent required by, and in accordance with, the
Confidentiality Agreement.
Section 5.07 Notices of Certain Events.
(a) MAI and DHS shall promptly notify each other of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; and
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement.
(b) MAI shall promptly notify DHS of any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting MAI or any Subsidiary
of MAI which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 3.12 or Section 3.17 or which relate
to the consummation of the transactions contemplated by this Agreement.
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(c) DHS shall promptly notify MAI of any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting DHS or any Subsidiary
of DHS which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 4.12 or Section 4.17 or which relate
to the consummation of the transactions contemplated by this Agreement.
Section 5.08 Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement, each of MAI and DHS will proceed diligently and in
good faith to, as promptly as practicable, (a) obtain all consents, approvals or
actions of, make all filings with and give all notices to Governmental
Authorities or any other public or private third parties required of DHS, MAI or
any of their respective Subsidiaries to consummate the Merger and the other
transactions contemplated hereby, and (b) provide such other information and
communications to such Governmental Authorities or other public or private third
parties as the other party or such Governmental Authorities or other public or
private third parties may reasonably request in connection therewith. In
addition to and not in limitation of the foregoing, each of the parties will (i)
take promptly all actions necessary to make any filings (if any) legally
required of DHS and MAI or their respective Affiliates under the HSR Act as soon
as practicable but in no event later than thirty (30) days after the date
hereof, (ii) comply at the earliest practicable date with any request for
additional information received by such party or its Affiliates from the Federal
Trade Commission (the "FTC") or the Antitrust Division of the Department of
Justice (the "ANTITRUST DIVISION") pursuant to the HSR Act, and (iii) cooperate
with the other party in connection with such party's filings (if any) under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the Merger or the other transactions contemplated by this Agreement
commenced by either the FTC or the Antitrust Division or state attorneys
general. Without limiting the generality of the foregoing, DHS and MAI shall
together, or pursuant to an allocation of responsibility to be agreed between
them, coordinate and cooperate in determining whether any action by or in
respect of, or filing with, any Governmental Authorities is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any contracts, in connection with the consummation of the transactions
contemplated by this Agreement, and in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 5.09 Public Announcements. So long as this Agreement is in
effect, DHS and MAI will consult with each other before issuing any press
release or making any SEC filing or other public statement with respect to this
Agreement or the Voting Agreement or the transactions contemplated hereby or
thereby and, except as may be required by applicable law, court process or any
listing agreement with any national securities exchange or with NASDAQ, will not
issue any such press release or make any such SEC filing or other public
statement prior to such consultation and providing the other party with a
reasonable opportunity to comment thereon and approve the same (such approval
not to be unreasonably withheld or delayed).
Section 5.10 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of DHS or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of DHS or Merger Subsidiary, any other actions and things
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to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets of DHS acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
Section 5.11 DHS Affiliates. At least thirty (30) days prior to the
Effective Time, DHS shall deliver a letter to MAI identifying all persons who,
at the time of the DHS Stockholders' Meeting, may, in DHS' reasonable judgment,
be deemed to be "affiliates" (as such term is used in Rule 145 under the 0000
Xxx) of DHS ("DHS AFFILIATES"). DHS shall use its reasonable efforts to cause
each DHS Affiliate to deliver to MAI at or prior to the Effective Time a letter
substantially in the form and to the effect of Exhibit B hereto (an "AFFILIATE
LETTER"). MAI shall be entitled to issue appropriate stop transfer instructions
to the transfer agent for the MAI Common Stock to be issued to DHS Affiliates
pursuant to the Merger, consistent with the terms of such Affiliate Letters. At
the Closing, unless the shares of MAI Common Stock issuable to the DHS
Affiliates are included for resale in the Form S-4 registration statement
contemplated by Section 5.05 and are freely tradeable upon the effectiveness of
such Form S-4, MAI and the DHS Affiliates will enter into a Registration Rights
Agreement in substantially the form attached hereto as Exhibit C; and, in the
event that the shares of MAI Common Stock issuable to the DHS Affiliates are
included for resale in the Form S-4 and are freely tradeable upon the
effectiveness of such Form S-4, MAI shall file such amendments to such Form S-4
as may be required to keep such registration statement and the resale prospectus
therein current and effective for a period of two years following the effective
date thereof (or, if sooner, until such date as all such MAI Common Stock has
been disposed of by the DHS Affiliates).
Section 5.12 Obligations of Merger Subsidiary. MAI will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
Section 5.13 Listing of Stock. MAI shall use its best efforts to cause
the shares of MAI Common Stock to be issued in connection with the Merger to be
approved for listing on the NASDAQ National Market System at or prior to the
Effective Time, subject to official notice of issuance.
Section 5.14 Antitakeover Statutes. If any Takeover Statute is or may
become applicable to the Merger, each of DHS and MAI shall take such actions as
are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of any Takeover Statute on
the Merger.
Section 5.15 Tax Treatment. Each of DHS and MAI shall not take any
action and shall not fail to take any action which action or failure to act
would cause, or would be reasonably likely to cause, DHS, MAI or their
respective stockholders to recognize gain or loss for federal income tax
purposes (other than in respect of any cash paid in lieu of fractional shares)
as a result of the issuance of MAI Common Stock in the Merger, and DHS shall use
its reasonable efforts to obtain the opinion of counsel referred to in Section
8.07.
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Section 5.16 Appointment of Directors. Immediately following the
Closing, MAI shall cause all existing directors other than Xxxx Xxxxxxxx, Xxx
Xxxxxxxxxx and Xxx Xxxxxxx to resign, and shall cause two individuals (at least
one of whom shall be an independent director) designated by the MAI Board of
Directors to be continuing directors, and Xxxx X. Xxxxxx and two other
individuals designated by DHS (at least one of whom shall be an independent
director), to become members of the Board of Directors of MAI immediately
following the Effective Time, and shall cause Xxxx X. Xxxxxx to be elected as
the Chairman and Chief Executive Officer of MAI. If, from and after the
Effective Time, any director shall die, resign or agree not to be nominated for
reelection to the Board of Directors of MAI, then MAI shall invite Xxxx Xxxx
(unless he is then already a director of MAI) to become a member of the Board of
Directors of MAI to fill the vacancy thereby created.
Section 5.17 Director and Officer Indemnification. MAI agrees that all
rights to indemnification and advancement of expenses existing in favor of the
current and former directors and officers of DHS (the "Indemnified Persons")
under the provisions existing on the date hereof of the certificate of
incorporation and by-laws of DHS shall survive the Effective Time for six (6)
years thereafter, and MAI agrees to indemnify and advance expenses to the
Indemnified Persons to the same extent as would be required or permitted by DHS
under the provisions existing on the date hereof of the certificate of
incorporation, by-laws and indemnification agreements of DHS. Until the sixth
(6th) anniversary of the Effective Time, MAI shall cause the Surviving
Corporation to maintain in effect with respect to matters occurring prior to the
Effective Time, to the extent available, the policies of directors' and
officers' liability insurance currently maintained by DHS (or may cause similar
coverage to be included in MAI's directors' and officers' liability coverage).
Section 5.18 Employee Benefits.
(a) MAI hereby agrees to cause the Surviving Corporation to
(i) pay, in accordance with their terms as in effect on the date hereof, all
amounts due and payable under the terms of all written employment, severance and
termination contracts, agreements, plans, policies and commitments of DHS and
its Subsidiaries with or with respect to its current or former employees,
officers and directors as set forth in the DHS Disclosure Letter to the extent
vested on or prior to the date of this Agreement or which become vested as a
result of the transactions contemplated hereby, and (ii) assume and continue to
honor the terms of such agreements and commitments.
(b) MAI hereby acknowledges that the consummation of the
Merger will constitute a "friendly" change of control of DHS (to the extent
relevant) for all benefit plans, employee agreements, stock option plans and
other compensation arrangements of DHS, and DHS hereby acknowledges that the
consummation of the Merger will (to the extent applicable) constitute a
"friendly" change of control of MAI (to the extent relevant) for all benefit
plans, employee agreements, stock option plans and other compensation
arrangements of MAI.
Section 5.19 Good Faith Efforts. Each party will use its good faith
efforts to satisfy or cause to be satisfied the conditions precedent to the
parties' performance hereunder as set forth in Articles VI, VII and VIII,
subject to applicable legal requirements and limitations.
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ARTICLE VI
GENERAL CONDITIONS PRECEDENT TO THE MERGER
The obligations of DHS, MAI and Merger Subsidiary to consummate the
Merger pursuant to this Agreement and the other transactions required to be
consummated by such date by this Agreement are subject to the satisfaction (or
waiver by the party for whose benefit the applicable condition exists) of each
of the following conditions:
Section 6.01 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the stockholders of
DHS in accordance with Delaware Law. The shareholders of MAI shall have approved
the issuance of MAI Common Stock in the Merger by the requisite vote under
applicable law and under the applicable rules of the NASDAQ National Market
System, as the case may be.
Section 6.02 HSR Act. Any applicable waiting period under the HSR Act
relating to the transactions contemplated by this Agreement shall have expired
or been terminated.
Section 6.03 Registration Statements; State Securities Laws. The Form
S-4 shall have become effective in accordance with the provisions of the 1933
Act, and no stop order suspending such effectiveness shall have been issued and
remain in effect and no proceeding seeking such an order shall be pending or
threatened. MAI shall have received all state securities or blue sky permits and
other authorizations necessary to issue the MAI Common Stock pursuant to this
Agreement.
Section 6.04 Listing. The shares of MAI Common Stock to be issued in
the Merger shall have been approved for listing on the NASDAQ National Market
System, subject to official notice of issuance.
Section 6.05 Suits or Other Proceedings. There shall not be pending or
threatened in writing (on any basis which DHS or MAI may reasonably deem
credible and not of mere nuisance value) any suit, action or proceeding by any
Governmental Authority or other Person, (a) seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, or seeking to obtain from DHS or MAI any damages the amount of which
would be reasonably likely to have a Material Adverse Effect on MAI or DHS, or
(b) seeking to prohibit or limit the ownership or operation by DHS, MAI or any
of their respective Subsidiaries of, or to compel DHS, MAI or any of their
respective Subsidiaries to dispose of or hold separate, any material portion of
the business or assets of DHS, MAI or any of their respective Subsidiaries, as a
result of the Merger or any of the other transactions contemplated by this
Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF DHS
The obligations of DHS to consummate the Merger pursuant to this
Agreement and the other transactions required to be consummated by such date by
this Agreement are further subject to the satisfaction, at or prior to the
Effective Time, of each of the following conditions (all or any of which may be
waived in whole or in part by DHS in its sole discretion):
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Section 7.01 Representations and Warranties. The representations and
warranties made by MAI and Merger Subsidiary in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and as
of the Closing Date or, in the case of representations and warranties made as of
a specified date earlier than the Closing Date, on and as of such earlier date,
and MAI and Merger Subsidiary shall each have delivered to DHS a certificate,
dated the Closing Date and executed by MAI's President and by Merger
Subsidiary's President to such effect.
Section 7.02 Performance of Obligations. MAI and Merger Subsidiary
shall have performed and complied with each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by MAI or Merger
Subsidiary at or prior to the Closing, and MAI and Merger Subsidiary shall each
have delivered to DHS a certificate, dated the Closing Date and executed by
MAI's President and by Merger Subsidiary's President to such effect.
Section 7.03 No Material Adverse Change. Except as otherwise disclosed
in this Agreement or the MAI Disclosure Letter, there shall not have been any
change in the consolidated business, results of operations, financial condition
or prospects of MAI and its Subsidiaries, taken as a whole, between December 31,
1998 and the Closing Date which would have a Material Adverse Effect on MAI.
Section 7.04 Consents. DHS shall have received consents or waivers from
such Persons as are necessary for DHS to consummate the transactions
contemplated by this Agreement. In connection with the foregoing, if and to the
extent required by any of DHS' lenders, MAI shall have caused Xxxxxx Xxxxxxxxxx
and/or his Affiliates to provide to Chase Bank of Texas, National Association, a
replacement undertaking for the agreement of MAI described in Item 1 of Schedule
3.05 to the MAI Disclosure Letter.
Section 7.05 Opinion of MAI Counsel. At the Closing, DHS shall have
received from Xxxxxxx Xxxxxx L.L.P., counsel to MAI, a written opinion
reasonably satisfactory to DHS, dated as of the Closing Date, substantially to
the effect as set forth in Exhibit D hereto.
Section 7.06 Proceedings. All proceedings to be taken on the part of
MAI in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to DHS, and DHS shall have received copies of all such documents and
other evidences as DHS may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
Section 7.07 Tax Opinion. DHS shall have received an opinion of
Xxxxxxxxx Traurig, in form and substance reasonably satisfactory to DHS, on the
basis of certain facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Effective
Time, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that neither DHS nor any of its stockholders shall recognize gain or loss
for U.S. federal income tax purposes as a result of
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the Merger (other than in respect of any cash paid in lieu of fractional
shares). In rendering the opinions described in the preceding sentence, such
counsel may rely upon the opinions described in Sections 7.08 and 8.07 and may
require and rely upon representations contained in this Agreement and in
certificates of officers and principal stockholders of MAI, DHS and their
respective Subsidiaries.
Section 7.08 Fairness Opinion.DHS shall have received a written opinion
of Prudential Securities Incorporated, dated as of a date reasonably prior to
the date of mailing of the Proxy Statement to DHS' stockholders, to the effect
that the Merger Consideration to be received by the holders of Shares in the
Merger is fair to DHS from a financial point of view, such fairness opinion to
be in form and substance reasonably acceptable to DHS and its Board of
Directors; and, at the date of such mailing of the Proxy Statement, no event or
circumstance shall exist such as has caused Prudential Securities Incorporated
to withdraw or materially adversely modify such fairness opinion.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MAI AND MERGER SUBSIDIARY
The obligations of MAI and Merger Subsidiary to consummate the
Merger pursuant to this Agreement and the other transactions required to be
consummated by such date by this Agreement are further subject to the
satisfaction, at or prior to the Effective Time, of each of the following
conditions (all or any of which may be waived in whole or in part by MAI and
Merger Subsidiary in their sole discretion):
Section 8.01 Representations and Warranties. The representations and
warranties made by DHS in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date or, in the case of representations and warranties made as of a specified
date earlier than the Closing Date, on and as of such earlier date, and DHS
shall have delivered to MAI a certificate, dated the Closing Date and executed
by its President to such effect.
Section 8.02 Performance of Obligations. DHS shall have performed and
complied with each agreement, covenant and obligation required by this Agreement
to be so performed or complied with by DHS at or prior to Closing, and DHS shall
have delivered to MAI a certificate, dated the Closing Date and executed by its
President to such effect.
Section 8.03 No Material Adverse Change. Except as otherwise disclosed
in this Agreement or the DHS Disclosure Letter, there shall not have been any
change in the consolidated business, results of operations, financial condition
or prospects of DHS and its Subsidiaries, taken as a whole, between December 31,
1998 and the Closing Date which would have a Material Adverse Effect on DHS. The
delisting of DHS Common Stock from Nasdaq shall not be deemed to have a Material
Adverse Effect.
Section 8.04 Consents. MAI shall have received consents or waivers from
such Persons as are necessary for MAI to consummate the transactions
contemplated by this Agreement.
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Section 8.05 Opinion of DHS Counsel. At the Closing, MAI shall have
received from Xxxxxxxxx Xxxxxxx, counsel to DHS, a written opinion reasonably
satisfactory to MAI, dated as of the Closing Date, substantially to the effect
as set forth in Exhibit E hereto.
Section 8.06 Proceedings. All proceedings to be taken on the part of
DHS in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to MAI, and MAI shall have received copies of all such documents and
other evidences as MAI may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
Section 8.07 Fairness Opinion. MAI shall have received a written
opinion of Xxxxxxx & Company, Inc., dated as of a date reasonably prior to the
date of mailing of the Proxy Statement to MAI's shareholders, to the effect that
the exchange ratio set forth in Section 1.02(a)(iii) is fair to MAI from a
financial point of view. Such fairness opinion to be in form and substance
reasonably acceptable to MAI and its Board of Directors; and, at the date of
such mailing of the Proxy Statement, no event or circumstance shall exist such
as has caused Xxxxxxx & Company, Inc. to withdraw or materially adversely modify
such fairness opinion.
Section 8.08 Accounting Matters. There shall not be pending any
unresolved dispute or objection by the SEC with respect to the implementation of
the accounting changes and write-offs described in the DHS 10-K; and to the
extent that the SEC shall have requested any material modification to such
changes or write-offs, such changes or modifications shall be reasonably
satisfactory to MAI.
Section 8.09 Lender Relationships. On or prior to June 22, 1999, (a)
the loan arrangements between DHS and Chase Bank of Texas, N.A., as in effect on
the date hereof, shall have been amended or refinanced on terms and conditions
reasonably satisfactory to MAI, and there shall be no outstanding defaults
(unless waived to MAI's reasonable satisfaction) under such amended or
refinanced loan arrangements, and (b) the subordinated note agreements between
DHS and The Prudential Insurance Company of America shall have been renegotiated
and restructured on terms and conditions reasonably satisfactory to MAI, and
there shall be no outstanding defaults (unless waived to MAI's reasonable
satisfaction) under such renegotiated and restructured subordinated note
agreements.
ARTICLE IX
TERMINATION
Section 9.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time whether prior to or after DHS Stockholders' Approval or MAI
Shareholders' Approval:
(a) By mutual written agreement of MAI and DHS duly authorized
by action taken by or on behalf of their respective Boards of Directors;
(b) By either MAI or DHS upon notification to the
non-terminating party by the terminating party:
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(i) at any time after August 10, 1999 if the Merger shall not
have been consummated on or prior to such date and such failure to
consummate the Merger is not caused by or substantially attributable to
a breach of this Agreement by the terminating party;
(ii) if (A) MAI Shareholders' Approval (under Texas Law and
under the applicable NASDAQ regulations), or (B) DHS Stockholders'
Approval (under Delaware Law), as the case may be, shall not be
obtained by reason of the failure to obtain the requisite vote upon a
vote held at a meeting of stockholders, or any adjournment thereof,
called therefor;
(iii) if (A) there has been a material breach of any
representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement, which breach is not
curable or, if curable, has not been cured within thirty (30) days
following receipt by the non-terminating party of notice of such breach
from the terminating party (or, if sooner and the terminating party has
not delayed giving notice of such breach, August 10, 1999), or (B) any
condition precedent to the terminating party's obligations set forth in
Article VII, with respect to DHS, or Article VIII, with respect to MAI,
of this Agreement has not been met or waived by such party by August
10, 1999; or
(iv) if any court of competent jurisdiction or other competent
Governmental Authority shall have issued an order making illegal or
otherwise restricting, preventing or prohibiting the Merger and such
order shall have become final and nonappealable;
(c) By DHS if: (i) the Board of Directors of DHS determines in
good faith to accept a Superior Proposal; or (ii) the Board of Directors of MAI
shall have withdrawn or modified in a manner materially adverse to DHS its
approval or recommendation of this Agreement or the Merger;
(d) By MAI if the Board of Directors of DHS (i) shall have
withdrawn or modified in a manner materially adverse to MAI its approval or
recommendation of this Agreement or the Merger, or (ii) shall have recommended a
Superior Proposal to the stockholders of DHS or shall have entered into a
definitive agreement providing for a Superior Proposal with a Person other than
MAI; or
(e) By DHS if MAI is engaged in ongoing active negotiations
for, or has accepted and there remains in effect, a MAI Proposal.
Section 9.02 Effect of Termination.
(a) If this Agreement is validly terminated by either MAI or
DHS pursuant to Section 9.01, this Agreement will forthwith become null and void
and there will be no liability or obligation on the part of either MAI or DHS
(or any of their respective representatives or Affiliates), except that (i) the
provisions of Sections 10.05 and 10.08, this Section 9.02 and the
Confidentiality Agreement will continue to apply following any such termination,
and (ii) nothing
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contained herein shall relieve any party hereto from liability for willful
breach of its representations, warranties, covenants or agreements contained in
this Agreement.
(b) (i) If this Agreement is terminated by (A) DHS pursuant to
Section 9.01(c)(i), or (B) by MAI pursuant to Section 9.01(d)(i) (unless any of
the conditions precedent set forth in Articles VI and/or VII above (other than
Sections 6.01, 7.05, or 7.08, or Section 7.04 to the extent that any consent is
contingent only upon stockholder approval or the Closing, or Section 7.06 to the
extent that the MAI Shareholders' Meeting is held subsequent to the DHS
Stockholders' Meeting) shall not have been satisfied, after due notice and
opportunity to cure, at the time of the DHS Stockholders' Meeting held to
consider approval of the transactions contemplated herein) or Section
9.01(d)(ii), then DHS shall pay or cause to be paid to MAI, by wire transfer of
same day funds on the day of such termination, a termination fee of $1,000,000.
(ii) If this Agreement is terminated by DHS pursuant to
Section 9.01(e), then MAI shall pay or cause to be paid to DHS, by wire
transfer of same day funds on the day of such termination, a
termination fee of $1,000,000.
(iii) In the event that either DHS or MAI shall fail or refuse
to consummate the transactions contemplated by this Agreement for no
reason, or for any reason which would not give such party the right to
terminate this Agreement in accordance with this Article IX, then the
party which is prepared to consummate the transactions hereunder may,
so long as it is not in material breach of any representation,
warranty, covenant or agreement on its part hereunder, terminate this
Agreement by written notice to the non-performing party, whereupon the
non-performing party shall pay or cause to be paid to the terminating
party, by wire transfer of same day funds on the day of such
termination, a termination fee of $375,000; and the payment of such
termination fee shall relieve the party making payment from any
liability under Section 9.02(a)(ii) above.
(c) The parties acknowledge that the agreements contained in
this Section 9.02 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties hereto would not
enter into this Agreement; accordingly, if either party fails promptly to pay
any amount due pursuant to this Section 9.02, and in order to obtain such
payment, either party commences a suit which results in a judgment against the
non-paying party for any fee or expense reimbursement set forth in this Section
9.02, the non-paying party shall pay to the other party its costs and expenses
(including reasonable attorneys' fees and expenses) in connection with such
suit, together with interest on the amount of the fee at the publicly announced
prime rate of Citibank, N.A. in effect on the date such payment was required to
be made.
ARTICLE X
MISCELLANEOUS
Section 10.01 Notices. All notices, requests and other communications
to any party hereunder shall be in writing and will be deemed to have been duly
given only if delivered personally or by facsimile transmission or mailed (first
class mail postage prepaid), or by overnight express courier (charges prepaid or
billed to the account of the sender) to the parties at the following addresses
or facsimile numbers:
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If to DHS, to:
Diagnostic Health Services, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxx
with a copy to:
Xxxxxxxxx Traurig
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
If to MAI or Merger Subsidiary, to:
Medical Alliance, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxx
with a copy to:
Xxxxxxx Xxxxxx L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (a) if delivered personally, upon
delivery, (b) if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 10.01 and the appropriate facsimile
confirmation is received, (c) if given by mail in the manner described above, on
the third business day after mailing, or (d) if delivered by overnight express
courier, on the next business day.
Section 10.02 Entire Agreement Non-Survival of Representations and
Warranties: Third Party Beneficiaries.
(a) This Agreement (including any exhibits hereto), the other
agreements referred to in this Agreement and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior
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agreements, understandings and negotiations, both written and oral, between the
parties with respect to such subject matter (including, without limitation, the
Original Agreement and all documents, instruments and agreements executed in
connection therewith). None of this Agreement, the Confidentiality Agreement or
any other agreement contemplated hereby or thereby (or any provision hereof or
thereof) is intended to confer on any Person other than the parties hereto or
thereto any rights or remedies (except that Article I is intended to confer
rights and remedies on the Persons specified therein).
(b) The MAI Disclosure Letter, the DHS Disclosure Letter and
any Exhibits attached to this Agreement and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
(c) The representations and warranties contained herein or in
any schedule, instrument or other writing delivered pursuant hereto shall not
survive the Effective Time.
Section 10.03 Amendment. This Agreement may be amended, supplemented or
modified by action taken by or on behalf of the respective Boards of Directors
of the parties hereto at any time prior to the Effective Time, whether prior to
or after the DHS Stockholders' Approval and/or MAI Shareholders' Approval shall
have been obtained, but after such adoption and approval only to the extent
permitted by applicable law. No such amendment, supplement or modification shall
be effective unless set forth in a written instrument duly executed by or on
behalf of each party hereto.
Section 10.04 Waiver. At any time prior to the Effective Time, any
party hereto may, to the extent permitted by applicable law (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties of the
other parties hereto contained herein or in any document delivered pursuant
hereto, or (c) waive compliance with any of the covenants, agreements or
conditions of the other parties hereto contained herein. No such extension or
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party extending the time of performance or waiving any
such inaccuracy or non-compliance. No waiver by any party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to be
or construed as a waiver of the same or any other term or condition of this
Agreement on any fixture occasion.
Section 10.05 Expenses. Except as otherwise specified in Section 9.02
or agreed in writing by the parties, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement, whether or not the Merger is consummated, shall be paid by the party
incurring such cost or expense.
Section 10.06 Successors and Assigns. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns; provided, however, that no
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the written consent of the other
parties hereto except that Merger Subsidiary may (subject to Section 5.15)
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any direct wholly-owned
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Subsidiary of MAI, it being understood that no such assignment shall relieve
Merger Subsidiary from any of its obligations hereunder.
Section 10.07 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas (without regard
to principles of conflict of laws).
Section 10.08 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated by this Agreement may be
brought against any of the parties in any state or federal court sitting in
Dallas County, Texas, and each of the parties hereto hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and waives any objection to
venue laid therein. Each party hereto agrees that service of process upon such
party at the address referred to in Section 10.01, together with written notice
of such service to such party, shall be deemed effective service of process upon
such party.
Section 10.09 Counterparts: Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 10.10 Interpretation When a reference is made in this Agreement
to a Section or Schedule, such reference shall be to a Section of this Agreement
or a Schedule to the subject Disclosure Letter unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to May 18, 1999.
Section 10.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against public policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. Upon such determination that any term, provision, covenant or
restriction of this Agreement is invalid, void, unenforceable or against public
policy, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
Section 10.12 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, in
addition to any other remedy to which they are entitled at law or in equity.
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Section 10.13 Performance by Merger Subsidiary. MAI shall cause Merger
Subsidiary to perform each of Merger Subsidiary's duties and obligations under
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
date first set forth above.
MEDICAL ALLIANCE, INC.
By: /s/ XXXX XXXXXXXX
Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer
DHS ACQUISITION CORP.
By: /s/ XXXX XXXXXXXX
Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer
DIAGNOSTIC HEALTH SERVICES, INC.
By: /s/ XXXX X. XXXXXX
Name: Xxxx X. Xxxxxx
Title: President
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