1
EXHIBIT 2.4
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.
2
TABLE OF CONTENTS
PAGE
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TABLE OF DEFINITIONS........................................ A-5
ARTICLE I -- THE MERGER..................................... A-8
Section 1.01 The Merger................................. A-8
Section 1.02 Conversion of Shares....................... A-8
Section 1.03 Surrender and Payment...................... A-9
Section 1.04 Stock Option Plans......................... A-11
Section 1.05 DHS Warrants............................... A-11
Section 1.06 DHS Preferred Stock........................ A-12
Section 1.07 Fractional Shares.......................... A-12
ARTICLE II -- THE SURVIVING CORPORATION..................... A-12
Section 2.01 Certificate of Incorporation............... A-12
Section 2.02 By-Laws.................................... A-12
Section 2.03 Directors and Officers..................... A-12
ARTICLE III -- REPRESENTATIONS AND WARRANTEES OF MAI........ A-12
Section 3.01 Organization and Power..................... A-13
Section 3.02 Corporate Authorization.................... A-13
Section 3.03 Governmental Authorization................. A-13
Section 3.04 Non-Contravention.......................... A-13
Section 3.05 Capitalization of MAI...................... A-14
Section 3.06 Capitalization of Subsidiaries............. A-15
Section 3.07 SEC Filings................................ A-15
Section 3.08 Financial Statements....................... A-15
Section 3.09 Information Supplied....................... A-16
Section 3.10 Absence of Certain Changes................. A-16
Section 3.11 No Undisclosed Liabilities................. A-17
Section 3.12 Litigation................................. A-17
Section 3.13 Taxes...................................... A-17
Section 3.14 Employee Benefit Plans; ERISA.............. A-19
Section 3.15 Certain Agreements; Compliance with
Agreements............................................. A-20
Section 3.16 Compliance with Laws and Orders............ A-21
Section 3.17 Environmental Matters...................... A-21
Section 3.18 Assets..................................... A-22
Section 3.19 Intellectual Property Rights............... A-22
Section 3.20 Labor Matters.............................. A-23
Section 3.21 Transactions with Affiliates............... A-23
Section 3.22 Insurance.................................. A-23
Section 3.23 Takeover Statutes.......................... A-23
Section 3.24 Finders' Fees.............................. A-24
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF DHS......... A-24
Section 4.01 Organization and Power..................... A-24
Section 4.02 Corporate Authorization.................... A-24
Section 4.03 Governmental Authorization................. A-24
Section 4.04 Non-Contravention.......................... A-25
Section 4.05 Capitalization of DHS...................... A-25
Section 4.06 Capitalization of Subsidiaries............. A-26
Section 4.07 SEC Filings................................ A-26
Section 4.08 Financial Statements....................... ▇-▇▇
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Section 4.09 Information Supplied....................... A-27
Section 4.10 Absence of Certain Changes................. A-27
Section 4.11 No Undisclosed Liabilities................. A-28
Section 4.12 Litigation................................. A-28
Section 4.13 Taxes...................................... A-28
Section 4.14 Employee Benefits; ERISA................... A-29
Section 4.15 Certain Agreements; Compliance with
Agreements............................................. A-30
Section 4.16 Compliance with Laws and Orders............ A-32
Section 4.17 Environmental Matters...................... A-32
Section 4.18 Assets..................................... A-32
Section 4.19 Intellectual Property Rights............... A-32
Section 4.20 Labor Matters.............................. A-33
Section 4.21 Transactions with Affiliates............... A-33
Section 4.22 Insurance.................................. A-33
Section 4.23 Takeover Statutes.......................... A-34
Section 4.24 Finders' Fees.............................. A-34
ARTICLE V -- COVENANTS...................................... A-34
Section 5.01 Conduct of MAI............................. A-34
Section 5.02 Conduct of DHS............................. A-36
Section 5.03 No Solicitation............................ A-37
Section 5.04 Approval of Stockholders................... A-38
Section 5.05 Preparation of Form S-4 and Proxy
Statement.............................................. A-39
Section 5.06 Access to Information...................... A-40
Section 5.07 Notices of Certain Events.................. A-40
Section 5.08 Regulatory and Other Approvals............. A-41
Section 5.09 Public Announcements....................... A-41
Section 5.10 Further Assurances......................... A-41
Section 5.11 DHS Affiliates............................. A-42
Section 5.12 Obligations of Merger Subsidiary........... A-42
Section 5.13 Listing of Stock........................... A-42
Section 5.14 Antitakeover Statutes...................... A-42
Section 5.15 Tax Treatment.............................. A-42
Section 5.16 Appointment of Directors................... A-42
Section 5.17 Director and Officer Indemnification....... A-42
Section 5.18 Employee Benefits.......................... A-43
Section 5.19 Good Faith Efforts......................... A-43
ARTICLE VI -- GENERAL CONDITIONS PRECEDENT TO THE MERGER.... A-43
Section 6.01 Stockholder Approval....................... A-43
Section 6.02 HSR Act.................................... A-43
Section 6.03 Registration Statements; State Securities
Laws................................................... A-43
Section 6.04 Listing.................................... A-43
Section 6.05 Suits or Other Proceedings................. A-44
ARTICLE VII -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
DHS....................................................... A-44
Section 7.01 Representations and Warranties............. A-44
Section 7.02 Performance of Obligations................. A-44
Section 7.03 No Material Adverse Change................. A-44
Section 7.04 Consents................................... A-44
Section 7.05 Opinion of MAI Counsel..................... A-44
Section 7.06 Proceedings................................ ▇-▇▇
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Section 7.07 Tax Opinion................................ A-44
Section 7.08 Fairness Opinion........................... A-45
ARTICLE VIII -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
MAI AND MERGER
SUBSIDIARY............................... A-45
Section 8.01 Representations and Warranties............. A-45
Section 8.02 Performance of Obligations................. A-45
Section 8.03 No Material Adverse Change................. A-45
Section 8.04 Consents................................... A-45
Section 8.05 Opinion of DHS Counsel..................... A-45
Section 8.06 Proceedings................................ A-45
Section 8.07 Fairness Opinion........................... A-46
Section 8.08 Accounting Matters......................... A-46
Section 8.09 Lender Relationships....................... A-46
ARTICLE IX -- TERMINATION................................... A-46
Section 9.01 Termination................................ A-46
Section 9.02 Effect of Termination...................... A-47
ARTICLE X -- MISCELLANEOUS.................................. A-48
Section 10.01 Notices.................................... A-48
Section 10.02 Entire Agreement Non-Survival of
Representations and Warranties: Third Party
Beneficiaries............................ A-48
Section 10.03 Amendment.................................. A-49
Section 10.04 Waiver..................................... A-49
Section 10.05 Expenses................................... A-49
Section 10.06 Successors and Assigns..................... A-49
Section 10.07 Governing Law.............................. A-49
Section 10.08 Jurisdiction............................... A-49
Section 10.09 Counterparts: Effectiveness................ A-49
Section 10.10 Interpretation............................. A-49
Section 10.11 Severability............................... A-50
Section 10.12 Specific Performance....................... A-50
Section 10.13 Performance by Merger Subsidiary........... A-50
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)
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
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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)
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").
WITNESSETH:
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, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (collectively, the "MAI HOLDERS")
and ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ ▇.
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (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 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.
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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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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.
(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
A-8
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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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 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 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.
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(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).
(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 ▇▇▇▇ ▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇) the owner of such lost,
stolen or destroyed certificate (unless such owner is an institutional investor)
to give ▇▇▇ ▇ ▇▇▇▇ 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.
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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 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
▇-▇▇
▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, 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 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 ▇▇▇
▇▇▇ 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
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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 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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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,
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and the consummation by MAI and Merger Subsidiary 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 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 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
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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.
(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
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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,
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;
(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
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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.
(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
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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 $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
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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.
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 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
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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 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;
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(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.
(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 ("▇▇▇▇▇ 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.
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(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, 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 ▇▇▇▇ 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 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
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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 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
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"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 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
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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
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
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of any Subsidiary of DHS, including as 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
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
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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;
(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;
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(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.
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 respect to any DHS Tax
Returns or portions thereof. There are no pending or, to DHS' knowledge,
threatened actions or
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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 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
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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.
(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
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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;
(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.
(c) No outstanding purchase commitments of DHS or any of its Subsidiaries
is materially in excess of the reasonable requirements of their respective
business.
▇-▇▇
▇▇
(▇) ▇▇▇▇▇▇▇ 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 ("▇▇▇▇▇ 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."
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.
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(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 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
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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.
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;
(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
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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
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.
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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 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
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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 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,
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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 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 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
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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.
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
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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.
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
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(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.
(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 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
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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 ▇▇▇▇
▇▇▇) 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.
SECTION 5.16 Appointment of Directors. Immediately following the Closing,
MAI shall cause all existing directors other than ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇ ▇▇▇▇▇▇▇ 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 ▇▇▇▇ ▇. ▇▇▇▇▇▇ 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 ▇▇▇▇ ▇. ▇▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇ (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
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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.
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.
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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):
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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇▇
Traurig, in form and substance reasonably satisfactory to DHS, on the basis of
certain facts, representations and assumptions set
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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 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.
SECTION 8.05 Opinion of DHS Counsel. At the Closing, MAI shall have
received from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 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.
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SECTION 8.07 Fairness Opinion. MAI shall have received a written opinion
of ▇▇▇▇▇▇▇ & 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
▇▇▇▇▇▇▇ & 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:
(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;
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(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
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.
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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:
If to DHS, to:
Diagnostic Health Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ Traurig
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to MAI or Merger Subsidiary, to:
Medical Alliance, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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 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).
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(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 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
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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.
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/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
DHS ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
DIAGNOSTIC HEALTH SERVICES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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FIRST AMENDMENT TO AMENDED AND
RESTATED AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
(this "Amendment"), dated as of June 1, 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").
WITNESSETH:
WHEREAS, MAI, Merger Subsidiary and DHS are parties to an Amended and
Restated Agreement and Plan of Merger, dated as of May 18, 1999 (the
"Agreement"), pursuant to which among other things, subject to the satisfaction
of the conditions precedent set forth therein, Merger Subsidiary is to merge
with and into DHS; and
WHEREAS, the parties to the Agreement wish to amend the Agreement in order
to assure that the Merger will qualify as a "reorganization" within the meaning
of Section 368 of the Code; and
WHEREAS, the parties are entering into this Amendment in order to
memorialize the required amendments to the Agreement;
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
herein contained, the parties hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition have
the respective meanings ascribed to them in the Agreement.
2. Amendment of Agreement. Section 1.06 of the Agreement is hereby amended
so as to read in full as follows:
"SECTION 1.06. DHS Preferred Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any DHS
Preferred Stock, each share of DHS Preferred Stock outstanding immediately
prior to the Effective Time (including, without limitation, shares accrued
but not yet issued as in-kind dividends on the issued and outstanding DHS
Preferred Stock), shall automatically be converted into the right to
receive one (1) share of fully paid and non-assessable Series A preferred
stock, par value $0.002 per share, of MAI (the "Series A Preferred Stock"),
which shall have relative rights, powers, preferences and limitations as
nearly equivalent as possible to the DHS Preferred Stock immediately prior
to the Effective Time, but after application of the exchange ratio applied
pursuant to Section 1.02(a)(iii). In furtherance thereof, the board of
directors of MAI has adopted and approved resolutions setting forth the
terms of such Series A Preferred Stock as set forth in the Certificate of
Designations, Number, Voting Powers, Preferences and Rights of Series A
Preferred Stock, a copy of which is attached hereto as Exhibit F (the
"Certificate of Designations"), and MAI shall file the Certificate of
Designations immediately prior to the Effective Time."
3. Implementation of Amendment. The provisions of the Agreement relating to
the rights of the holders of DHS Common Stock upon the Merger, and the exchange
of certificates representing Shares for the Merger Consideration, shall be
applied, mutatis mutandis to the greatest extent possible, to establish the
rights of the holders of DHS Preferred Stock from and after the Effective Time,
and the procedures for exchanging the certificates representing the DHS
Preferred Stock for certificates representing Series A Preferred Stock (except
that MAI may act as the exchange agent with respect to such preferred shares).
4. Ongoing Force and Effect. Except as set forth in this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.
5. Miscellaneous Provisions. The provisions of Article X of the Agreement
are hereby incorporated herein by reference, to be applicable to this Amendment
as if set forth at length herein.
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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/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
DHS ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
DIAGNOSTIC HEALTH SERVICES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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