MERGER AGREEMENT
BY AND AMONG
SPECIALTY CARE NETWORK, INC.,
MID-ATLANTIC ORTHOPAEDIC SPECIALISTS, P.C.,
XXXXXX X. XXXXXXXXXX, M.D.,
XXXXXXX X. XXXXXXX, M.D.,
XXXXXXX X. XXXXXXX, M.D.,
AND
XXXXXX X. XXXXXXXXXX, M.D.,
June 30, 1997
TABLE OF CONTENTS
Page
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1. Definitions...............................................................1
2. Basic Transaction.........................................................4
(a) The Merger......................................................4
(b) The Closing.....................................................4
(c) Actions at the Closing..........................................4
(d) Effect of Merger................................................4
(e) No Fractional Shares............................................5
3. Representations and Warranties of MAOS and MAOS Stockholders..............5
(a) Organization, Qualification, and Corporate Power................5
(b) MAOS Stockholder Interests and Capitalization...................5
(c) Authorization of Transaction....................................5
(d) Noncontravention................................................5
(e) Subsidiaries and Investments....................................6
(f) Financial Statement.............................................6
(g) Undisclosed Liabilities.........................................6
(h) Brokers' Fees...................................................6
(i) Material Contracts..............................................6
(j) Insurance; Malpractice..........................................7
(k) No Changes Prior to Closing Date................................7
(l) Title; Condition................................................8
(m) Litigation......................................................8
(n) Permits and Licenses............................................8
(o) Tax Matters.....................................................8
(p) Employee Benefit Plans..........................................8
(q) Third-Party Relations...........................................9
(r) Compliance with Applicable Laws.................................9
(s) Employee Compensation..........................................10
(t) Environmental Matters..........................................10
(u) Healthcare Compliance..........................................10
(v) Fraud and Abuse................................................11
(w) Practice Compliance............................................11
(x) Rates and Reimbursement Policies...............................11
(y) Accounts Receivable............................................11
(z) Guaranties.....................................................11
(aa) Powers of Attorney.............................................12
(bb) Tangible Assets................................................12
(cc) SCN Share Ownership; Investment Intent.........................12
(dd) Full Disclosure................................................13
4. Representations and Warranties of SCN....................................13
(a) Organization....................................................13
(b) Capitalization..................................................13
i
(c) Authorization of Transaction...................................13
(d) Noncontravention...............................................13
(e) Brokers' Fees..................................................14
5. Covenants................................................................14
(a) General........................................................14
(b) Notices and Consents...........................................14
(c) Regulatory Matters and Approvals...............................14
(d) Operation of Business..........................................14
(e) Further Acts and Assurances....................................15
(f) Full Access....................................................15
(g) Notice of Developments.........................................15
(h) Exclusivity....................................................15
(i) Collection of Accounts Receivable..............................15
(j) Payment of Expenses............................................15
(k) Corporate Authorization........................................15
(l) Malpractice Insurance..........................................16
(m) Distribution of Excluded Assets................................16
(n) Satisfaction of Indebtedness...................................16
(o) Conversion into Business Corporation...........................16
(p) Employee Benefit Plans.........................................16
(q) Securities Laws Compliance.....................................16
6. Conditions to Obligation to Close........................................16
(a) Conditions to Obligation of SCN................................16
(b) Conditions to Obligation of MAOS...............................17
7. Items to be Delivered at or Prior to Closing.............................17
(a) By the MAOS Stockholders or MAOS...............................17
(b) By SCN.........................................................18
8. Termination..............................................................18
(a) Termination of Agreement.......................................18
(b) Effect of Termination..........................................19
9. Indemnification..........................................................19
(a) Indemnification by the MAOS Stockholders.......................19
(b) Notice to the MAOS Stockholders; Opportunity to Defend.........19
(c) General Indemnification by SCN.................................19
(d) Notice to SCN; Opportunity to Defend...........................19
(e) Right of Setoff................................................20
10. Miscellaneous...........................................................20
(a) Survival.......................................................20
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(b) No Third-Party Beneficiaries...................................20
(c) Entire Agreement...............................................20
(d) Succession and Assignment......................................20
(e) Counterparts...................................................20
(f) Headings.......................................................20
(g) Notices........................................................20
(h) Governing Law; Venue...........................................21
(i) Amendments and Waivers.........................................21
(j) Severability...................................................21
(k) Expenses.......................................................22
(l) Construction...................................................22
(m) No Referrals Required..........................................22
(n) Incorporation of Exhibits and Schedules........................22
EXHIBIT 1 - AGREEMENT AND PLAN OF MERGER............................Exhibit 1-1
EXHIBIT 2(a)(1) - CERTIFICATE OF MERGER.......................Exhibit 2(a)(1)-1
EXHIBIT 2(a)(2) - MARYLAND ARTICLES OF MERGER.................Exhibit 2(a)(2)-2
EXHIBIT 7(a)(iv) - SERVICE AGREEMENT.................................7(a)(iv)-1
EXHIBIT 7(a)(vi) - MAOS OPINION LETTER.......................Exhibit 7(a)(vi)-1
EXHIBIT 7(b)(iii) - SCN OPINION LETTER......................Exhibit 7(b)(iii)-1
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is entered into as of the 30th day
of June, 1997, by and among SPECIALTY CARE NETWORK, INC., a Delaware corporation
("SCN"), MID-ATLANTIC ORTHOPAEDIC SPECIALISTS, P.C., a Maryland professional
corporation ("MAOS") and XXXXXX X. XXXXXXXXXX, M.D., XXXXXXX X. XXXXXXX, M.D.,
XXXXXXX X. XXXXXXX, M.D., and XXXXXX X. XXXXXXXXXX, M.D. (collectively, the
"MAOS Stockholders"). SCN, MAOS and the MAOS Stockholders are referred to
collectively herein as the "Parties".
W I T N E S S E T H:
WHEREAS, SCN and MAOS have determined that it is desirable and in the best
interests of their respective corporations and stockholders that MAOS merge with
and into SCN, with SCN as the surviving corporation, on the terms and subject to
the conditions set forth in this Agreement and the corresponding Agreement and
Plan of Merger in the form attached hereto as Exhibit 1 (the "Agreement and Plan
of Merger");
WHEREAS, SCN and MAOS intend that the transaction contemplated by this
Agreement shall qualify as a tax-free reorganization under Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended (the "Code") and intend that
this Agreement along with the Agreement and Plan of Merger shall constitute a
"plan of reorganization" within the meaning of Section 368 of the Code;
WHEREAS, the Parties do not intend for this Agreement to be a binding
obligation of any Party unless and until the provisions of Section 6 are
satisfied or waived by the appropriate party; and
WHEREAS, the Parties desire to set forth in writing the terms and
conditions under which said transaction will be consummated.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the Parties, and in accordance with the applicable
provisions of the Delaware General Corporation Law and the Maryland General
Corporation Law, the parties hereby agree as follows:
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preface above.
"Agreement and Plan of Merger" has the meaning set forth in the first
recital above.
"Applicable Laws" has the meaning set forth in Section 3(r).
"Maryland Articles of Merger" has the meaning set forth in Section 2(a)
below.
"Maryland General Corporation Law" means Titles 1 through 3 of the
Corporations and Associations Article of the Annotated Code of Maryland, as
amended.
"Closing Date" has the meaning set forth in Section 2(b) below.
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"Closing" has the meaning set forth in Section 2(b) below.
"Code" has the meaning set forth in the recitals above.
"Conversion Ratio" has the meaning set forth in Section 2(d)(v) below.
"Delaware Certificate of Merger" shall have the meaning set forth in
Section 2(a) below.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"MAOS" has the meaning set forth in the preface above.
"MAOS Share" means any share of the issued and outstanding common stock of
MAOS at the date of this Agreement.
"MAOS Stockholders" has the meaning set forth in the preface above.
"MAOSII" shall mean Mid-Atlantic Orthopaedic Specialists/Drs. Xxxxxxxxxx,
Xxxxxxx, Xxxxxxx and Xxxxxxxxxx, P.C.
"Effective Time" has the meaning set forth in Section 2(d)(i) below.
"Employee Benefit Plans" has the meaning set forth in Section 3(p)(i)
below.
"Environmental Laws" means all federal, state, and local laws, rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder and other governmental requirements relating to pollution,
control of chemicals, storage and handling of petroleum products, management of
waste (including biohazardous or biomedical waste), discharges of materials into
the environment, health, safety, natural resources, and the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" has the meaning set forth in Section 3(p)(i) below.
"Excluded Assets" has the meaning set forth in Section 5(m) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hazardous Materials" has the meaning set forth in Section 3(t) below.
"IRS" means the Internal Revenue Service.
"Knowledge" means actual knowledge after reasonable investigation.
"Medical Waste" includes, but is not limited to, pathological waste, blood,
sharps, wastes from surgery or autopsy, dialysis waste, including contaminated
disposable equipment and supplies, cultures and stock of infectious
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agents and associated biological agents, contaminated animals, isolation wastes,
contaminated equipment, laboratory waste, various other biological waste and
discarded materials contaminated with or exposed to blood, excretion or
secretion from human beings or animals, and any substance, pollutant, material
or contaminant listed or regulated under the Medical Waste Tracking Act of 1988,
42 U.S.C. (section)(section) 6992, et seq.
"Medical Waste Law" means the Medical Waste Tracking Act of 1988, as
amended, the U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33
U.S.C.A. (section)(section) 2501, et seq., the Marine Protection, Research and
Sanctuaries Act of 1972, 33 U.S.C.A. (section)(section) 1401, et seq., the
Occupational Safety and Health Act, 29 U.S.C.A. (section)(section) 651, et seq.,
the United States Department of Health and Human Services, National Institute
for Occupational Self-Safety and Health Infectious Waste Disposal Guidelines,
Publication No. 88-119, all regulations and orders issued pursuant to any of the
foregoing, and any other federal, state, regional, county, municipal or other
local laws, regulations and ordinances insofar as they purport to regulate
Medical Waste or impose requirements relating to Medical Waste.
"Merger" has the meaning set forth in Section 2(a) below.
"Merger Consideration" means the number (7) multiplied by the Base Service
Fee (as such term is defined in the Service Agreement) less Two Hundred
Seventy-four Thousand Fifty Dollars ($274,050).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Parties" has the meaning set forth in the preface above.
"PBGC" has the meaning set forth in Section 3(p)(ii) below.
"PCBs" has the meaning set forth in Section 3(t) below.
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Practice Assets" has the meaning set forth in Section 3(l) below.
"SCN Share" means any share of the common stock, $.001 par value per share,
of SCN.
"SCN Share Price" means the average of the closing asking price for one (1)
share of SCN common stock as reported on the Nasdaq National Market System for
the ten (10) trading days immediately preceding June 30, 1997.
"SCN" has the meaning set forth in the preface above.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge
or other security interest other than (a) mechanic's, materialmen's, and similar
liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
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"Service Agreement" shall mean that certain Service Agreement dated as of
the Closing Date by and among SCN, MAOSII, and the MAOS Stockholders to be
executed and delivered at the Closing.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, MAOS will merge with and into SCN (the "Merger") at the Effective
Time. SCN shall enter into the Agreement and Plan of Merger upon adoption of the
Agreement and Plan of Merger by the Board of Directors of SCN and the
satisfaction or waiver of the conditions precedent to SCN's obligations set
forth in this Agreement. MAOS shall enter into the Agreement and Plan of Merger
upon adoption of the Agreement and Plan of Merger by the Board of Directors of
MAOS and the MAOS Stockholders and the satisfaction or waiver of the conditions
precedent to MAOS's obligation set forth in this Agreement. Upon all other
conditions herein being satisfied or waived in accordance with the terms of this
Agreement, a Certificate of Merger in substantially the form attached hereto as
Exhibit 2(a)(1) (the "Delaware Certificate of Merger") shall be executed and
filed with the Secretary of State of the State of Delaware and Articles of
Merger in substantially the form attached hereto as Exhibit 2(a)(2) (the
"Maryland Articles of Merger")shall be executed and filed with the State
Department of Assessments and Taxation of the State of Maryland , together with
all certificates or documents as may be required to be filed under the laws of
the State of Delaware and the State of Maryland to effect the Merger.
Thereafter, the separate corporate existence of MAOS shall cease and MAOS shall
be merged with and into SCN (the "Surviving Corporation").
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of MAOS, Xxxxxx &
Xxxxxxx, 000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, XX, 00000 commencing at 9:00
A.M. local time on the second business day following the day on which the last
of the conditions set forth in Section 6 have been fulfilled or waived, or such
other date or place as the Parties may mutually determine (the "Closing Date").
(c) Actions at the Closing. At the Closing, (i) MAOS will deliver to SCN
the various certificates, instruments, and documents referred to in Section 7(a)
below, (ii) SCN will deliver to MAOS the various certificates, instruments, and
documents referred to in Section 7(b) below, (iii) SCN and MAOS will file with
the Secretary of State of the State of Delaware the Delaware Certificate of
Merger, and (iv) SCN and MAOS will file with the State Department of Assessments
and Taxation of the State of Maryland the Maryland Articles of Merger.
(d) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") SCN and MAOS file the Delaware Certificate of Merger with
the Secretary of State of the State of Delaware and file the Maryland
Articles of Merger with the State Department of Assessments and Taxation of
the State of Maryland. The Merger shall have the effect set forth in the
Delaware General Corporation Law and the Maryland General Corporation Law.
The Surviving Corporation may, at any time after the Effective Time, take
any action (including executing and delivering any document) in the name
and on behalf of either SCN or MAOS in order to carry out and effectuate
the transactions contemplated by this Agreement.
(ii) Certificate of Incorporation. The Certificate of Incorporation of
SCN in effect at and as of the Effective Time will remain the Certificate
of Incorporation of the Surviving Corporation without any modification or
amendment as a result of the Merger.
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(iii) Bylaws. The Bylaws of SCN in effect at and as of the Effective
Time will remain the Bylaws of the Surviving Corporation without any
modification or amendment as a result of the Merger.
(iv) Directors and Officers. The directors and officers of SCN in
office at and as of the Effective Time will remain the directors and
officers of the Surviving Corporation (retaining their respective positions
and terms of office).
(v) Conversion of MAOS Shares. At and as of the Effective Time, SCN
shall issue to the MAOS Stockholders one-half (1/2) of the Merger
Consideration in SCN Shares and shall pay to the MAOS Stockholders the
balance of the Merger Consideration in cash. At and as of the Effective
Time, each of the issued and outstanding MAOS Shares shall be converted
into the right to receive (A) a number of SCN Shares equal to (i) the
dollar amount of the portion of the Merger Consideration payable in SCN
Shares, divided by the SCN Share Price, further divided by (ii) the number
of MAOS Shares issued and outstanding at the Effective Time (the
"Conversion Ratio") and (B) cash in an amount equal to the portion of the
Merger Consideration payable by SCN in cash divided by the number of MAOS
Shares issued and outstanding at the Effective Time. The Conversion Ratio
shall be subject to equitable adjustment in the event of any stock split,
stock dividend, reverse stock split, or other change in the number of MAOS
Shares or SCN Shares outstanding.
(vi) SCN Shares. Each SCN Share issued and outstanding at and as of
the Effective Time will remain issued and outstanding and shall be
unaffected by the Merger.
(e) No Fractional Shares. No fractional SCN Shares shall be issued pursuant
to the Merger. In lieu of the issuance of any such fractional SCN Shares, cash
adjustments will be paid to holders in respect of any fractional SCN Shares that
would otherwise be issuable. The amount of such adjustment shall be the product
of such fraction of a SCN Share multiplied by the SCN Share Price.
3. Representations and Warranties of MAOS and MAOS Stockholders. MAOS and
each of the MAOS Stockholders severally, with respect to himself and MAOS only,
represent and warrant to SCN that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the disclosure schedule (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 3. The parties acknowledge and
agree that the Disclosure Schedule will not be delivered until two (2) days
prior to the date upon which the parties intend to consummate the transactions
contemplated by this Agreement.
(a) Organization, Qualification, and Corporate Power. MAOS is a
professional corporation duly organized, validly existing, and in good standing
under the laws of the State of Maryland . MAOS is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction in which
the character or location of the properties owned or the business conducted by
MAOS makes such qualification necessary. MAOS has the full corporate power and
authority to carry on the business in which it is engaged and to own and use the
properties owned and used by it.
(b) MAOS Stockholder Interests and Capitalization. The capital stock of
MAOS is owned in the manner set forth in Section 3(b) of the Disclosure
Schedule. All of the issued and outstanding MAOS Shares have been duly
authorized and are validly issued, fully paid, and nonassessable. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require MAOS to issue, sell or otherwise cause to become outstanding
any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to MAOS. As of the date of this Agreement, the authorized capital stock
of MAOS consists of 5,000 shares of MAOS common stock, of which 1,200 shares
were issued and outstanding.
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(c) Authorization of Transaction. MAOS has the full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of MAOS and the MAOS Stockholders, enforceable in accordance with its terms and
conditions.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency, professional regulatory organization or court to which MAOS
is subject or any provision of the charter or bylaws of MAOS or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which MAOS is a party or by which it is bound
or to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). MAOS is not required to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(e) Subsidiaries and Investments. MAOS does not own, directly or
indirectly, any capital stock or other equity ownership or proprietary interest
in any other corporation, partnership, association, limited liability company,
trust, joint venture or other entity.
(f) Financial Statements. MAOS has furnished SCN with unaudited balance
sheets dated December 31, 1995 and 1996 and May 31, 1997 and unaudited income
statements for the twelve (12) month periods ending December 31, 1996 and 1995
and the five (5) months ended May 31, 1997. Such financial statements, including
the notes thereto, except as indicated therein, were prepared on a basis
consistent with past accounting practices of MAOS and fairly present the results
of operations for the periods noted therein. The balance sheets of MAOS
delivered by MAOS to SCN fairly present the financial condition of MAOS at the
date thereof, and except as indicated therein, reflect all claims against and
all debts and liabilities of MAOS, fixed or contingent, as of the date thereof.
(g) Undisclosed Liabilities. MAOS has no uninsured liability (whether known
or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and whether due or to become due),
including any liability for taxes, except for (i) liabilities set forth on the
face of the balance sheet dated as of December 31, 1996 and (ii) liabilities
which have arisen after December 31, 1996 in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(h) Brokers' Fees. MAOS does not have any liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(i) Material Contracts. Section 3(i) of the Disclosure Schedule lists the
following contracts and other material agreements to which MAOS is a party:
(i) any agreement (or group of related agreements) for the lease of
real or personal property to or from any Person;
(ii) any agreement (or group of related agreements) for the purchase
or sale of supplies, products, or other personal property or for the
furnishing or receipt of services;
(iii) any agreement concerning a partnership, limited liability
company or joint venture;
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(iv) any agreement (or group of related agreements) under which MAOS
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation pursuant to which it has imposed
a Security Interest in respect of any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of MAOS's current or former directors,
officers, and employees;
(vii) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits;
(viii) any agreement pursuant to which MAOS has advanced or loaned any
amount to any of its directors, officers, and employees;
(ix) any agreement pursuant to which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of MAOS;
or
(x) any other agreement (or group of related agreements) outside the
ordinary course of MAOS's business or operations the performance of which
involves consideration in excess of $15,000.
MAOS has delivered or given SCN access to a correct and complete copy of each
written agreement listed in Section 3(i) of the Disclosure Schedule (as amended
through the Closing Date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 3(i) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) except as set
forth in Section 3(i) of the Disclosure Schedule, no notice of this Agreement or
consent of any third party is required in order for MAOS to execute and deliver
this Agreement or to consummate the transactions contemplated hereby, and, after
assignment to SCN at Closing, the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(j) Insurance; Malpractice. Section 3(j) of the Disclosure Schedule
contains a list and brief description of all policies or binders of fire,
liability, product liability, workers compensation, health and other forms of
insurance policies or binders currently in force insuring against risks which
will remain in full force and effect at least through the Closing Date. Section
3(j) of the Disclosure Schedule contains a description of all current
malpractice liability insurance policies of MAOS Stockholders, MAOS and MAOS's
professional employees and all predecessor policies in effect since February 1,
1990. Neither MAOS, the MAOS Stockholders, nor MAOS's professional employees
have, in the last seven (7) years, filed a written application for any insurance
coverage relating to MAOS's business or property which has been denied by an
insurance agency or carrier. MAOS, MAOS's professional employees and the MAOS
Stockholders have been continuously insured for professional malpractice claims
during the same period. Section 3(j) of the Disclosure Schedule also sets forth
a list of all claims for any insured loss in excess of Five Thousand Dollars
($5,000.00) per occurrence filed by or against MAOS, MAOS's professional
employees or the MAOS Stockholders during the three (3) year period immediately
preceding the date hereof, including workers compensation, general liability,
environmental liability and professional malpractice liability claims. None of
MAOS, MAOS's professional employees or the MAOS Stockholders is in material
default with respect to any provision contained in any such policy and none of
them has failed to give any notice or present any claim under any such policy in
due and timely fashion.
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(k) No Changes Prior to Closing Date. During the period from December 31,
1996 through the date hereof, MAOS has not (i) incurred any liability or
obligation of any nature (whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated and
whether due or to become due), except in the Ordinary Course of Business, (ii)
written off as uncollectible any notes or accounts receivable, except write-offs
in the Ordinary Course of Business charged to applicable reserves, none of which
individually or in the aggregate is material to MAOS, (iii) conducted its
business in such a manner so as to materially increase its accounts payable or
so as to materially decrease its accounts receivable, (iv) granted any increase
in the rate of wages, salaries, bonuses, or other remunerations of any employee,
except in the Ordinary Course of Business, (v) canceled or waived any claims or
rights of substantial value, (vi) made any change in any method of accounting,
(vii) otherwise conducted its business or entered into any transaction, except
in the usual and ordinary manner and in the Ordinary Course of Business, (viii)
agreed, whether or not in writing, to do any of the foregoing, or (ix) disposed
of its assets other than in the Ordinary Course of Business.
(l) Title; Condition. Section 3(l) of the Disclosure Schedule contains a
complete, true and correct list of those assets which are material to the
business or operations of MAOS (the "Practice Assets"). Except as set forth in
Section 3(l) of the Disclosure Schedule, MAOS has good and marketable title to
all of the Practice Assets subject to no mortgage, pledge, lien, lease,
conditional sales agreement, option, right of first refusal or any other
encumbrance or charge, including taxes. MAOS agrees to remove all security
interests reflected on any search of public records, if any, prior to the
Effective Time and remove any other security interest filed with respect to the
Practice Assets between the date of such search of public records and the
Effective Time.
(m) Litigation. There is no suit, action, proceeding at law or in equity,
arbitration, administrative proceeding or other proceeding or investigation by
any governmental entity pending, or threatened against, or affecting MAOS or any
of the Practice Assets, or any physician or other health care professional
engaged or employed by MAOS, and to the Knowledge of MAOS and the MAOS
Stockholders there is no basis for any of the foregoing. None of the actions,
suits, proceedings, hearings, and investigations set forth in Section 3(m) of
the Disclosure Schedule could result in any material adverse change in the
operations, results of operations, or future prospects of the business assets to
be operated by SCN after the Closing.
(n) Permits and Licenses. MAOS and all physicians and other health care
professionals engaged or employed by MAOS have all permits and licenses required
by all applicable laws; have made all regulatory filings necessary for the
conduct of MAOS's business; and are not in violation of any of said permitting
or licensing requirements.
(o) Tax Matters. All federal, state and other tax returns of MAOS required
by law to be filed have been timely filed, and MAOS has paid or adequately
provided for all taxes (including taxes on properties, income, franchises,
licenses, sales and payrolls) which have become due pursuant to such returns or
pursuant to any assessment, except for any taxes and assessments, the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which MAOS has set aside on its
books adequate reserves. There are no tax liens on any of MAOS's assets except
those with respect to taxes not yet due and payable. There are no pending tax
examinations of MAOS's tax returns nor has MAOS received a revenue agent's
report asserting a tax deficiency in the last twelve (12) months. There are not
and will not be at the Closing Date, any claims pending or asserted against MAOS
for unpaid taxes by any federal, state or other governmental body. MAOS has
withheld from each payment made to employees of MAOS the amount of all taxes
(including, but not limited to, federal, state and local income taxes and
Federal Insurance Contribution Act taxes) required to be withheld therefrom and
all amounts customarily withheld therefrom, and has set aside all other employee
contributions or payments customarily set aside with respect to such wages and
has paid or will pay the same to, or has deposited or will deposit such payment
with, the proper tax receiving officers or other appropriate authorities.
- 8 -
(p) Employee Benefit Plans.
(i) List of Plans. Section 3(p) of the Disclosure Schedule contains an
accurate and complete list of all employee benefit plans ("Employee Benefit
Plans") within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not any
Employee Benefit Plans are otherwise exempt from the provisions of ERISA,
established, maintained or contributed to by MAOS (including all employers
(whether or not incorporated) which by reason of common control are treated
together with MAOS and/or the MAOS Stockholders as a single employer within
the meaning of Section 414 of the Code) since September 2, 1974.
(ii) Status of Plans. MAOS has never maintained and does not now
maintain or contribute to any Employee Benefit Plan subject to ERISA which
is not in substantial compliance with ERISA, or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of
the Code, or which has applied for or obtained a waiver from the Internal
Revenue Service of any minimum funding requirement under Section 412 of the
Code or which is subject to Title IV of ERISA. MAOS has not incurred any
liability to the Pension Benefit Guaranty Corporation ("PBGC") in
connection with any Employee Benefit Plan covering any employees of MAOS or
ceased operations at any facility or withdrawn from any such Plan in a
manner which could subject it to liability under Section 4062(f), 4063 or
4064 of ERISA, and knows of no facts or circumstances which might give rise
to any liability of MAOS to the PBGC under Title IV of ERISA which could
reasonably be anticipated to result in any claims being made against MAOS
by the PBGC. MAOS has not incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of
Sections 4201 and 4202 of ERISA, to any Employee Benefit Plan which is a
Multiemployer Plan (as defined in Section 4001 of ERISA), and no event has
occurred, and there exists no condition or set of circumstances, which
represent a material risk of the occurrence of any withdrawal from or the
partition, termination, reorganization or insolvency of any Multiemployer
Plan which would result in any liability of MAOS.
(iii) Contributions. Full payment has been made of all amounts which
MAOS is required, under applicable law or under any Employee Benefit Plan
or any agreement relating to any Employee Benefit Plan to which MAOS is a
party, to have paid as contributions thereto as of the last day of the most
recent plan year of such Employee Benefit Plan ended prior to the date
hereof. MAOS has made adequate provision for reserves to meet contributions
that have not been made because they are not yet due under the terms of any
Employee Benefit Plan or related agreements. Benefits under all Employee
Benefit Plans are as represented and have not been increased subsequent to
the date as of which documents have been provided.
(iv) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service and nothing has occurred since
the date of the last such determination which resulted or is likely to
result in the revocation of such determination.
(v) Transactions. MAOS has not engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a material tax,
penalty or liability for prohibited transactions under ERISA or the Code
nor have any of its directors, officers or employees to the extent they or
any of them are fiduciaries with respect to such plans, breached any of
their responsibilities or obligations imposed upon fiduciaries under Title
I of ERISA which would result in any material claim being made under or by
or on behalf of any such plans by any party with standing to make such
claim.
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(vi) Other Plans. MAOS presently does not maintain any Employee
Benefit Plans or any other foreign pension, welfare or retirement benefit
plans other than those listed on Section 3(p) of the Disclosure Schedule.
(vii) Documents. MAOS has delivered or caused to be delivered to SCN
true and complete copies of (i) all Employee Benefit Plans as in effect,
together with all amendments thereto which will become effective at a later
date, as well as the latest IRS determination letter obtained with respect
to any such Employee Benefit Plan qualified under Section 401 or 501 of the
Code, and (ii) the most recently filed Form 5500 for each Employee Benefit
Plan required to file such form.
(q) Third-Party Relations. MAOS has not received any notice that any
material patient, supplier, employee or associated physician intends to cease
doing business with MAOS.
(r) Compliance with Applicable Laws. MAOS has operated in compliance with
all federal, state, county and municipal laws, constitutions, ordinances,
statutes, rules, regulations and orders applicable thereto ("Applicable Laws").
Neither MAOS nor any physician associated with or employed by MAOS has received
payment or any remuneration whatsoever to induce or encourage the referral of
patients or the purchase of goods and/or services as prohibited under 42 U.S.C.
(section) 1320a-7b(b), or otherwise perpetrated any Medicare or Medicaid fraud
or abuse nor has any fraud or abuse been alleged within the last five (5) years
by any government agency.
(s) Employee Compensation. MAOS has paid or discharged or will pay or
discharge or assume all liabilities for compensation and benefits to which all
employees, including physician employees, are entitled through the Closing Date,
including but not limited to all salaries, wages, bonuses, incentive
compensation, payroll taxes, hospitalization and medical expenses, deferred
compensation, and vacation and sick pay, as well as any severance pay becoming
due as a result of the termination of MAOS's employees.
(t) Environmental Matters.
(i) MAOS is in full compliance with all applicable Environmental Laws.
(ii) MAOS has not authorized or conducted the disposal or release, or
other handling of any hazardous substance, Medical Waste, hazardous waste,
hazardous material, hazardous constituent, toxic substance, pollutant,
contaminant, asbestos, radon, polychlorinated biphenyls ("PCBs"), petroleum
product or waste (including crude oil or any fraction thereof), natural
gas, liquefied gas, synthetic gas, biohazardous or biomedical material, or
other material defined, regulated controlled or potentially subject to any
remediation requirement under any Environmental Law (collectively
"Hazardous Materials"), on, in, under or affecting any property owned or
leased by MAOS.
(iii) MAOS has been, and is in compliance with, all licenses, permits,
registrations, and government authorizations necessary to operate under all
applicable Environmental Laws. Section 3(t) of the Disclosure Schedule
lists all such licenses, permits, registrations and government
authorizations required by any Environmental Law.
(iv) MAOS has not received any written or oral notice from any
governmental agency or entity or any other Person and there is no pending
or threatened claim, litigation or any administrative agency proceeding
that: (a) alleges a violation of any Environmental Law(s) by MAOS or, with
respect to the Practice Assets or any property owned or leased by MAOS (b)
alleges that MAOS is a liable party or potentially responsible party under
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. (section) 9601, et seq., or any analogous state law, (c) has
resulted or could result in the attachment of an environmental lien on any
of the Practice Assets or property owned or leased by MAOS, or (d) alleges
that
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MAOS is liable for any contamination of the environment, contamination of
any property owned or leased by MAOS, damage to natural resources, property
damage, or personal injury based on its activities or the activities of any
predecessor or third parties involving Hazardous Materials, whether arising
under the Environmental Laws, common law principles, or other legal
standards.
(v) With respect to the generation, transportation, treatment, storage
and disposal or other handling of Medical Waste, MAOS has complied with all
Medical Waste Laws.
(u) Healthcare Compliance. MAOS is participating in or otherwise authorized
to receive reimbursement from Medicare and Medicaid and is a party to other
third-party payor agreements if any, discussed in Section 3(i) of the Disclosure
Schedule. All necessary certifications and contracts required for participation
in such programs are in full force and effect and have not been amended or
otherwise modified, rescinded, revoked or assigned, and no condition exists or
event has occurred which in itself or with the giving of notice or the lapse of
time or both would result in the suspension, revocation, impairment, forfeiture
or non-renewal of any such third-party payor program. MAOS is in compliance in
all material respects with the requirements of all such third-party payors.
MAOS, the MAOS Stockholders, and MAOS's physician employees do not have any
financial relationship (whether investment interest, compensation interest, or
otherwise) with any entity to which any of the foregoing refer patients, except
for such financial relationships that qualify for exceptions to state and
federal laws restricting physician referrals to entities in which they have a
financial interest.
(v) Fraud and Abuse. MAOS, the MAOS Stockholders and persons and entities
providing professional services for MAOS have not engaged in any activities
which are prohibited under 42 U.S.C. (section) 1320a-7b, or the regulations
promulgated thereunder pursuant to such statutes, or related state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including the following: (a) knowingly and willfully making or causing
to be made a false statement or representation of a material fact in any
application for any benefit or payment; (b) knowingly and willfully making or
causing to be made any false statement or representation of a material fact for
use in determining rights to any benefit or payment; (c) failing to disclose
knowledge by a claimant of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on behalf of
another, with intent to fraudulently secure such benefit or payment; or (d)
knowingly and willfully soliciting or receiving any remuneration (including any
kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in
cash or in kind or offering to pay or receive such remuneration (1) in return
for referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or (2) in return for purchasing, leasing, or
ordering or arranging for or recommending purchasing, leasing, or ordering any
good, facility, service or item for which payment may be made in whole or in
part by Medicare or Medicaid.
(w) Practice Compliance. MAOS is lawfully operated in accordance with the
requirements of all Applicable Laws and has all necessary authorizations for the
use and operation of a medical practice, all of which are in full force and
effect. There are no outstanding notices of deficiencies relating to MAOS issued
by any governmental authority or third-party payor requiring conformity or
compliance with any applicable law or condition for participation with such
governmental authority or third-party payor, and after reasonable and
independent inquiry and due diligence and investigation, MAOS has neither
received notice nor has any Knowledge or reason to believe that such necessary
authorizations may be revoked or not renewed in the Ordinary Course of Business.
(x) Rates and Reimbursement Policies. The jurisdiction in which MAOS is
located does not currently impose any restrictions or limitations on rates which
may be charged to private pay patients receiving services provided by MAOS. MAOS
does not have any rate appeal currently pending before any governmental
authority or any administrator of any third-party payor program. No Applicable
Law which affects rates or reimbursement procedures has been enacted,
promulgated or issued within the eighteen (18) months preceding the date of this
Agreement and to the Knowledge of MAOS and the MAOS Stockholders no such legal
requirement is proposed or currently pending in the
- 11 -
jurisdiction in which MAOS is located, which could have a material adverse
effect on MAOS or may result in the imposition of additional Medicaid, Medicare,
charity, free care, welfare, or other discounted or government assisted patients
at MAOS or require MAOS to obtain any necessary authorization which MAOS does
not currently possess.
(y) Accounts Receivable. All accounts receivable, unbilled invoices and
other debts due or recorded in the respective records and books of account of
MAOS, as being due to MAOS, (i) are valid and existing, (ii) have arisen in the
Ordinary Course of Business, and (iii) none of such accounts receivable or other
debts is or will at the Closing Date be subject to any counterclaim or set-off.
There has been no material adverse change since May 31, 1997, in the amount of
accounts receivable or other debts due MAOS, the allowances with respect
thereto, or accounts payable of MAOS from that reflected in the most recent
balance sheet previously delivered by MAOS to SCN.
(z) Guaranties. MAOS is not a guarantor and otherwise is not liable for any
liability or obligation (including indebtedness) of any other Person.
(aa) Powers of Attorney. There are no outstanding powers of attorney
executed by MAOS, except as may be contained in financing documents or security
agreements listed in Section 3(i) of the Disclosure Schedule.
(bb) Tangible Assets. MAOS owns or leases all land, buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. To the Knowledge of MAOS and the MAOS Stockholders each
tangible asset is free from defects, has been maintained in accordance with
normal industry practice, and is in good operating condition and repair (subject
to normal wear and tear).
(cc) SCN Share Ownership; Investment Intent.
(i) Neither MAOS nor the MAOS Stockholders owns, beneficially or
otherwise, any SCN Shares.
(ii) SCN Shares issuable in the Merger are being acquired by the MAOS
Stockholders solely for their own account for investment and not with a
view to the distribution thereof, and the MAOS Stockholders acknowledge and
understand that the certificate(s) representing such SCN Shares will bear a
legend in substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES ACT AND CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER SUCH ACTS OR UNLESS EXEMPTIONS
FROM REGISTRATION ARE AVAILABLE.
(iii) The MAOS Stockholders represent and warrant as follows:
(A) Each MAOS Stockholder is an "accredited investor" as defined
under Rule 501 of Regulation D promulgated under the Securities Act.
(B) The MAOS Stockholders confirm that SCN has made available to
them or to their representatives the opportunity to ask questions of
SCN officers and directors and to acquire such information about the
SCN Shares and the business and financial condition of SCN as the MAOS
Stockholders requested, which additional information has been
received.
-12-
(C) In deciding to acquire SCN Shares pursuant to this Agreement,
the MAOS Stockholders consulted with their legal, financial, and tax
advisors with respect to the Merger and the nature of the investment
together with any additional information provided under subsection (B)
above.
(D) Each MAOS Stockholder has adequate means of providing for his
current needs and personal contingencies and has no need for liquidity
in his investment in SCN. Each MAOS Stockholder, either alone or with
his representatives, has such knowledge and experience in financial
and business matters that they are capable of evaluating the merits
and risks of the Merger.
(E) The MAOS Stockholders understand and acknowledge that the
investment in the SCN Shares is a speculative investment which
involves a high degree risk of loss of such MAOS Stockholders'
investment therein; that there are substantial restrictions on the
transferability of the SCN Shares under the applicable provisions of
the Securities Act and the rules and regulations promulgated
thereunder and applicable state securities or "blue sky" laws; and,
accordingly, that it may not be possible to liquidate an investment in
the SCN Shares.
(F) The MAOS Stockholders have been advised and understand that
(i) the offer and sale of the SCN Shares have not been registered
under the Securities Act; (ii) the SCN Shares must be held
indefinitely and the MAOS Stockholders must continue to bear the
economic risk of the investment in the SCN Shares until the offer or
sale of the SCN Shares is subsequently registered under the Securities
Act or any "blue sky" laws or an exemption from such registration is
available; (iii) Rule 144 promulgated under the Securities Act is not
presently available with respect to the sale of any securities of SCN,
including the SCN Shares, and when and if the SCN Shares may be
disposed of without registration in reliance on Rule 144, such
disposition can be made only in accordance with the terms and
conditions of such Rule; (iv) the restrictive legends described in
Section 3(cc)(ii) shall be placed on the certificates representing the
SCN Shares; and (v) a notation shall be made in the appropriate
records of SCN indicating that the SCN Shares are subject to
restrictions on transfer and appropriate stop-transfer instructions
will be issued to any transfer agent with respect to the SCN Shares.
(dd) Full Disclosure. No representation or warranty made by MAOS in this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
4. Representations and Warranties of SCN. SCN represents and warrants to
MAOS that the statements contained in this Section 4 are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Section 4).
(a) Organization. SCN is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware.
(b) Capitalization. As of the date of this Agreement, the entire authorized
capital stock of SCN consists of fifty million (50,000,000) SCN Shares, of which
Fourteen Million Six Hundred Sixty-Two Thousand Five Hundred Seventy-Five
(14,662,575) SCN Shares are issued and outstanding and two million (2,000,000)
shares of preferred stock, none of which are issued and outstanding. All of the
SCN Shares to be issued in the Merger have been duly authorized and, upon
consummation of the Merger, will be validly issued, fully paid, and
nonassessable.
(c) Authorization of Transaction. SCN has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement, to issue the SCN Shares and otherwise to perform its obligations
- 13 -
hereunder; provided, however, that SCN cannot consummate the transaction unless
and until the Merger receives the approval of the SCN Board of Directors. Except
as set forth in the preceding sentence, this Agreement constitutes the valid and
legally binding obligation of SCN, enforceable in accordance with its terms and
conditions.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency, professional regulatory organization or court to which SCN
is subject or may become subject as a result of the transaction contemplated by
this Agreement, or any provision of the charter or bylaws of SCN or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which SCN is a party or by which it is bound
or to which any of its assets is subject. Other than state and federal filings
required by the Securities Act and similar state statutes, SCN does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(e) Brokers' Fees. SCN does not have any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which SCN could become liable or
obligated.
5. Covenants. The Parties agree as follows with respect to the period from
and after the execution of this Agreement.
(a) General. Each of the Parties will use its or his best efforts to take
all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction of the closing conditions set forth in Section 6 below) to be
satisfied by him or it. This paragraph shall not be construed to obligate any of
the Parties to waive any condition precedent to his or its obligations to
perform hereunder.
(b) Notices and Consents. MAOS will give any notices to third parties, and
will use its best efforts to obtain any third party consents necessary or
required to consummate the Merger or that SCN reasonably may request in
connection with the matters referred to in Section 3(i) above.
(c) Regulatory Matters and Approvals. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any necessary authorizations, consents, and approvals of governments and
governmental agencies in connection with the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing:
(i) Tax Reporting. The Merger is intended to qualify as a
reorganization under Code Section 368(a)(1)(A). Each of the parties agrees
to report this transaction for all purposes in accordance with the
foregoing.
(ii) Licenses and Permits. Each of the Parties shall have obtained all
licenses and permits necessary to operate their respective businesses.
(d) Operation of Business. From the date of this Agreement through the
Closing Date, MAOS will not engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing:
(i) MAOS will not authorize or effect any change in its charter
documents or bylaws;
-14-
(ii) MAOS will not grant any options, warrants, or other rights to
purchase or obtain any of its capital stock or issue, sell or otherwise
dispose of any of its capital stock (except upon the conversion or exercise
of options, warrants, and other rights currently outstanding);
(iii) MAOS will not declare, set aside, or pay any dividend or
distribution with respect to its capital stock (whether in cash or in
kind), or redeem, repurchase, or otherwise acquire any of its capital stock
in either case outside the Ordinary Course of Business without the consent
of SCN, which consent shall not be unreasonably withheld;
(iv) MAOS will not issue any note, bond or other debt security or
create, incur, assume or guarantee any indebtedness for borrowed money or
capitalized lease obligation outside the Ordinary Course of Business;
(v) MAOS will not impose any Security Interest upon any of its assets
outside the Ordinary Course of Business;
(vi) MAOS will not make any capital investment in, make any loan to,
or acquire the securities or assets of any other Person outside the
Ordinary Course of Business;
(vii) MAOS will not make any change in employment terms for any of its
directors, officers or employees outside the Ordinary Course of Business;
and
(viii) MAOS will not commit to do any of the foregoing.
(e) Further Acts and Assurances. MAOS and the MAOS Stockholders shall, at
any time and from time to time at and after the Effective Time, upon request of
SCN, take any and all steps necessary to place SCN in possession and operating
control of the Practice Assets and to effectuate the Merger, and will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney, and assurances as may be required
for better transferring and confirming to SCN or its successors and assigns, or
for better reducing to possession, any or all of the Practice Assets or
consummating the Merger.
(f) Full Access. Upon three (3) days prior notice, MAOS will permit
representatives of SCN to have full access to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to MAOS during normal business hours. SCN will treat and hold as
such any confidential information it receives from MAOS in the course of the
reviews contemplated by this Section 5(f), will not use any of the confidential
information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, agrees to return to MAOS all tangible
embodiments (and all copies) thereof which are in its possession or control.
(g) Notice of Developments. Each Party will give prompt written notice to
the other Parties of any material adverse development causing a breach of any of
its own representations and warranties in Section 3 or Section 4 above, as
applicable. No disclosure by any Party pursuant to this Section 5(g), however,
shall be deemed to amend or supplement the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
(h) Exclusivity. Until the earlier of (i) June 30, 1997, or (ii) the
Effective Time, MAOS will not solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of MAOS (including any
acquisition structured as a merger, consolidation, or share exchange). MAOS
shall notify SCN immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
-15-
(i) Collection of Accounts Receivable. The MAOS Stockholders agree to
cooperate with SCN in the collection of accounts receivable owned by MAOS as of
the Effective Time acquired pursuant to this Agreement. SCN, at its option,
shall have the right to require the collection of said accounts receivable
through a lockbox or bank account sweep arrangement. In connection therewith,
the MAOS Stockholders agree to execute the necessary documents and follow the
necessary procedures as described in the Service Agreement to accommodate the
collection of the accounts receivable in such manner.
(j) Payment of Expenses. On or before the Effective Time, MAOS shall have
paid or discharged any and all liabilities or charges for costs or fees owed as
a result of the transaction contemplated by this Agreement.
(k) Corporate Authorization. By execution of this Agreement, the MAOS
Stockholders agree to take any and all steps necessary and will do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged and
delivered, all such acts, deeds and assurances required in order to consummate
the Merger, including voting as directors of MAOS in favor of the Merger and
voting as stockholders of MAOS in favor of the Merger at any meetings (or in any
action by written consent) required by the Maryland General Corporation Law.
(l) Malpractice Insurance. On or before the Effective Time, all physicians
and employees of MAOS must be covered by medical malpractice insurance and, if
required by SCN, medical malpractice tail insurance to cover prior occurrences
shall be procured by MAOS.
(m) Distribution of Excluded Assets. Prior to the Effective Time, MAOS
shall have distributed to the MAOS Stockholders all of the assets listed on
Schedule 5(m), which constitute the entirety of the assets owned by MAOS not
being acquired by SCN (the "Excluded Assets").
(n) Satisfaction of Indebtedness. Prior to the Effective Time, MAOS shall
have caused the payoff of all liabilities owed to third-parties (with the
exception of trade payables due for less than thirty (30) days) and all
indebtedness owed to banks or other financial institutions or lenders (with the
exception of furniture and equipment related indebtedness owed to Farmers and
Merchants Bank) or shall have caused the assumption thereof by a new entity
organized by the MAOS Stockholders. Notwithstanding any contrary provision
contained herein, SCN shall not be deemed to have assumed, nor shall SCN assume:
(i) any liability which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred prior to
the Closing Date; (ii) any liability for any employee benefits payable to
employees of MAOS, including, but not limited to, liabilities arising under any
Employee Benefit Plan or accrued vacation or sick pay; (iii) any liability based
upon or arising out of a violation of any laws by MAOS, including, without
limiting the generality of the foregoing, any such liability which may arise in
connection with agreements, contracts, commitments or provision of services by
MAOS; nor (iv) any liability based upon or arising out of any tortious or
wrongful actions of MAOS or any Physician Owner, or any liability for the
payment of any taxes imposed by law on MAOS arising from or by reason of the
transactions contemplated by this Agreement. In addition, the MAOS Stockholders
shall cause to be filed on behalf of MAOS all final tax returns required by
Applicable Law to be filed and shall pay all Taxes owed by MAOS for the tax
period ended as of the Effective Time.
(o) Conversion into Business Corporation. If required by the Maryland
General Corporation Law, prior to the Effective Time, the MAOS Stockholders
shall have caused the conversion of MAOS to a Maryland business corporation.
(p) Employee Benefit Plans. Prior to the Effective Time, all Employee
Benefit Plans shall be terminated in accordance with Applicable Law.
(q) Securities Laws Compliance. No MAOS Stockholder shall dispose of the
SCN Shares received as a result of the Merger except in accordance with the
provisions of the Securities Act, the provisions of any rule adopted by the
Securities and Exchange Commission pursuant to the Securities Act and the "blue
sky" laws of any applicable state.
-16-
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of SCN. The obligation of SCN to consummate
the Merger is subject to satisfaction of the following conditions or before the
Closing Date:
(i) MAOS shall have procured all of the third party consents specified
in Section 5(b) above;
(ii) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the Closing
Date;
(iii) MAOS shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, or (C) affect adversely the right
of the Surviving Corporation to own the former assets or to operate the
former business of MAOS;
(v) SCN shall have received the resignations, effective as of the
Closing, of each director and officer of MAOS other than those whom SCN
shall have specified in writing at least five (5) business days prior to
the Closing;
(vi) all actions to be taken by MAOS and/or the MAOS Stockholders in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby have been taken or delivered to
SCN and are satisfactory in form and substance to SCN;
(vii) the issuance of the SCN Shares to the MAOS Stockholders will not
violate federal securities laws or the securities laws of any state of the
United States;
(viii) SCN shall have completed and be satisfied with its due
diligence review, including SCN's review of the Disclosure Schedule; and
(ix) SCN's Board of Directors shall have approved the Merger in their
sole and absolute discretion.
SCN may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of MAOS. The obligation of MAOS to consummate
the Merger is subject to satisfaction of the following conditions:
(i) This Agreement and the Merger shall have received the MAOS
directors and MAOS Stockholders' approval required by the Maryland General
Corporation Law.
(ii) the representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(iii) SCN shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing; and
-17-
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, or (C) affect adversely the right
of the Surviving Corporation to own the former assets of MAOS.
MAOS may waive any condition specified in this Section 6(b) if it executes
a writing so stating at or prior to the Closing.
7. Items to be Delivered at or Prior to Closing.
(a) By the MAOS Stockholders or MAOS. The MAOS Stockholders or MAOS, as
applicable, shall deliver to SCN, prior to or at the Closing:
(i) Certified resolutions of the directors and stockholders of MAOS
authorizing the execution of all documents and the consummation of all
transactions contemplated hereby;
(ii) The Maryland Articles of Merger which shall be in the form
required by SCN's legal counsel and in accordance with the Maryland General
Corporation Law;
(iii) Stock Certificates representing ownership of all shares of MAOS,
duly endorsed to SCN;
(iv) A fully executed Service Agreement in substantially the form
attached hereto as Exhibit 7(a)(iv);
(v) A certificate duly executed by the President of MAOS and the MAOS
Stockholders stating as of the Closing Date, all representations and
warranties are true, all covenants and agreements contained in the
Agreement to be performed by MAOS and the MAOS Stockholders have been
performed or complied with and all conditions to closing have been complied
with;
(vi) An opinion from MAOS's counsel in substantially the form attached
hereto as Exhibit 7(a)(vi);
(vii) Such other instruments as may be reasonably requested by SCN in
order to effect or carry out the intent of this Agreement.
(b) By SCN. SCN shall deliver to MAOS at or prior to the Closing:
(i) Stock Certificates representing the SCN Shares being issued to the
MAOS Stockholders pursuant to Section 2(d)(v);
(ii) The Delaware Certificate of Merger in substantially the form
attached hereto as Exhibit 2(a)(1);
(iii) An opinion from SCN's counsel in substantially the form attached
hereto as Exhibit 7(b)(iii);
(iv) A certificate, duly executed by an authorized officer of SCN,
stating as of the Closing Date, all representations and warranties of SCN
are true, all covenants and agreements contained in the Agreement to be
performed by SCN have been performed or complied with and all conditions to
Closing have been satisfied;
(v) A fully executed Service Agreement in substantially the form
attached hereto as Exhibit 7(a)(iv); and
-18-
(vi) Such other instruments as may be reasonably requested by MAOS or
the MAOS Stockholders in order to effect to or carry out the intent of this
Agreement.
8. Termination.
(a) Termination of Agreement. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
(i) the Parties may terminate this Agreement by mutual written consent
at any time prior to the Effective Time;
(ii) SCN may terminate this Agreement by giving written notice to MAOS
at any time prior to the Effective Time (A) in the event MAOS has breached
any representation, warranty, or covenant contained in this Agreement in
any material respect, SCN has notified MAOS of the breach, and the breach
has continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before July 15,
1997 by reason of the failure of any condition precedent under Section 6(a)
hereof (unless the failure results primarily from SCN breaching any
representation, warranty, or covenant contained in this Agreement); or
(iii) MAOS may terminate this Agreement by giving written notice to
SCN at any time prior to the Effective Time (A) in the event SCN has
breached any representation, warranty, or covenant contained in this
Agreement in any material respect, MAOS has notified SCN of the breach, and
the breach has continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred on or before
July 15, 1997 by reason of the failure of any condition precedent under
Section 6(b) hereof (unless the failure results primarily from MAOS
breaching any representation, warranty, or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 8(a) above, all rights and obligations of the Parties hereunder shall
terminate without any liability of any party to any other Party (except for any
liability of any Party then in breach).
9. Indemnification.
(a) Indemnification by the MAOS Stockholders. Each MAOS Stockholder,
severally, with respect to himself and MAOS only, agrees to and shall defend,
indemnify and hold harmless SCN, its successors and assigns, officers and
directors against any and all losses, liabilities, expenses (including, but
without limitation, reasonable attorneys fees) and damages resulting from or
arising out of the breach, untruth or inaccuracy of any representation, warranty
or covenant of MAOS or such MAOS Stockholder set forth in this Agreement or from
any loss, liability or expense resulting from or related to MAOS's operation of
its business prior to the Effective Time. No MAOS Stockholder shall be liable to
SCN for any claims against the MAOS Stockholder under this Section 9(a) unless
and until the aggregate of all claims against the MAOS Stockholders exceeds the
sum of $25,000.00, whereupon SCN shall be entitled to recover the full amount of
all claims, including the initial $25,000.00.
(b) Notice to the MAOS Stockholders; Opportunity to Defend. SCN agrees to
give prompt notice to the MAOS Stockholders of the assertion of any claim, or
the commencement of any suit, action or proceeding, in respect of which
indemnity may be sought under Section 9(a). The MAOS Stockholders may
participate in and at their election, or at the request of SCN, assume the
defense of any such suit, action or proceeding at the MAOS Stockholders'
expense. The MAOS Stockholders shall not be liable under Section 9(a) for any
settlement effected without their consent of any claim, litigation or proceeding
in respect of which indemnity may be sought under Section 9(a) which consent
shall not be unreasonably withheld.
-19-
(c) General Indemnification by SCN. SCN agrees to and shall defend,
indemnify and hold harmless the MAOS Stockholders, their heirs and assigns
against any and all losses, liabilities, expenses (including, but without
limitation, reasonable attorneys fees) and damages resulting from the material
breach, untruth or inaccuracy of any representation, warranty or covenant of SCN
set forth in this Agreement. SCN shall not be liable to the MAOS Stockholders
for any claims against SCN under this Section 9(c) unless and until the
aggregate of all claims against SCN exceeds the sum of $25,000.00, whereupon the
MAOS Stockholders shall be entitled to recover the full amount of all claims,
including the initial $25,000.00.
(d) Notice to SCN; Opportunity to Defend. The MAOS Stockholders agree to
give prompt notice to SCN of the assertion of any claim, or the commencement of
any suit, action or proceeding in respect of which indemnity may be sought under
Section 9(c). SCN may participate in and at its election, or at the request of
the MAOS Stockholders, assume the defense of any such suit, action or proceeding
at SCN's expense. SCN shall not be liable under Section 9(c) for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder, which consent shall not be
unreasonably withheld.
(e) Right of Setoff. In the event of any breach of warranty,
representation, covenant or agreement by MAOS or the MAOS Stockholders giving
rise to indemnification to SCN under Section 9(a) hereof, SCN shall be entitled
to offset the amount of damages incurred by it as a result of such breach of
warranty, representation, covenant or agreement against the amounts payable to
the MAOS Stockholders or MAOSII under the Service Agreement. In the event that
SCN determines that an amount is to be so offset, as a condition precedent to
such right of setoff, SCN shall give the MAOS Stockholders written notice of the
amount of such proposed setoff and the basis therefor within thirty (30) days
after the date on which such amount is finally determined. If SCN shall not have
received written notice from the MAOS Stockholders contesting such setoff within
twenty (20) days of their receipt of such written notice from SCN, the setoff
shall be deemed to have been consented to by the MAOS Stockholders, and SCN
shall be entitled to deduct the entire amount claimed as a setoff from the next
succeeding amounts payable under the Service Agreement. In the event that the
MAOS Stockholders shall object to the proposed setoff by written notice received
by SCN during such twenty (20) day period, the entitlement of SCN to the claimed
setoff shall be determined as set forth in Section 10.4.3 and Section 10.4.4 of
the Service Agreement.
10. Miscellaneous.
(a) Survival. The representations and warranties of the MAOS Stockholders,
MAOS and SCN (with the exception of the representation and warranty contained in
Section 3(o)) contained in this Agreement and the indemnifications contained
herein shall survive the Closing for a period of two (2) years. The
representation and warranty contained in Section 3(o) and any indemnifications
related thereto shall survive for the applicable statute of limitations period.
No claim for indemnification with respect to any alleged misrepresentation or
breach of warranty or covenant may be made after three (3) years following the
Closing Date. Any matter to which indemnification pertains and with respect to
which a claim has been asserted or threatened following the Closing Date shall
continue to be subject to the indemnification under this Agreement until finally
terminated, settled, resolved or adjudicated; and all terms, conditions and
stipulations of this Agreement shall likewise continue to apply.
(b) No Third-Party Beneficiaries. Except as provided in Section 9(e), this
Agreement shall not confer any rights or remedies upon any Person other than the
parties and their respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the parties and supersedes any
prior understandings, agreements, or representations by or between the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
-20-
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to MAOS: Copy to:
Xxxxxx X. Xxxxxxxxxx, M.D. Xxxxxxx X. Xxxxxxx
1120A Professional Court Xxxxxx & Xxxxxxx, P.C.
Xxxxxxxxxx, Xxxxxxxx 00000-0000 000 Xxxx Xxxxxxxxxx, Xxx. 000
Facsimile: (000)000-0000 Xxxxxxxxxx, Xxxxxxxx, 00000
Facsimile: (000)000-0000
If to SCN: Copy to:
Xxxxx X. Xxxxx, President Xxxxx X. Xxxxxxx, Esq.
Specialty Care Network, Inc. Baker, Donelson, Bearman & Xxxxxxxx
00 Xxxxx Xxxxxxxxx, Xxxxx 000 165 Madison Ave, Suite 2100
Lakewood, Colorado 80228 Xxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
(h) Governing Law; Venue. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware. Each of the parties
submits to the jurisdiction of any state or federal court sitting in Denver,
Colorado, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other party with respect
thereto.
-21-
(i) Amendments and Waivers. The parties may mutually amend any provision of
this Agreement at any time prior to the Effective Time with the prior
authorization of their respective boards of directors; provided, however, that
any amendment effected subsequent to MAOS stockholder approval will be subject
to the restrictions contained in the Maryland General Corporation Law. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by both of the parties. No waiver by any party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(m) No Referrals Required. The Parties agree that no part of this Agreement
shall be construed to induce or encourage the referral of patients or the
purchase of health care services or supplies. The Parties acknowledge that there
is no requirement under this Agreement or any other agreement between MAOS II
and SCN that any party refer any patients to any health care provider or
purchase any health care goods or services from any source. Additionally, no
payment under this Agreement is in return for the referral of patients, if any,
or in return for purchasing, leasing or ordering services from SCN or any of
SCN's affiliates. The Parties may refer patients to any company or person
providing services and will make such referrals, if any, consistent with
professional medical judgment and the needs and wishes of the relevant patients.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
* * * * *
- 22 -
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SPECIALTY CARE NETWORK, INC.
By:
--------------------------------------
Title:
-----------------------------------
MID-ATLANTIC ORTHOPAEDIC SPECIALISTS, P.C.
By:
--------------------------------------
Title:
-----------------------------------
------------------------------------------
Xxxxxx X. Xxxxxxxxxx, M.D., Stockholder
------------------------------------------
Xxxxxxx X. Xxxxxxx, M.D., Stockholder
------------------------------------------
Xxxxxxx X. Xxxxxxx, M.D., Stockholder
------------------------------------------
Xxxxxx X. Xxxxxxxxxx, M.D., Stockholder
- 23 -
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
OF
MID-ATLANTIC ORTHOPAEDIC SPECIALISTS, P.C.
(a Maryland professional corporation)
WITH AND INTO
SPECIALTY CARE NETWORK, INC.
(a Delaware corporation)
AGREEMENT AND PLAN OF MERGER (the "Agreement and Plan of Merger"), dated as
of ______________, 1997, by and between Mid-Atlantic Orthopaedic Specialists,
P.C., a professional corporation organized and existing under the laws of the
State of Maryland ("MAOS") and SPECIALTY CARE NETWORK, INC., a corporation
organized and existing under the laws of the State of Delaware ("SCN"), with
reference to the following recitals:
WITNESSETH:
WHEREAS, MAOS is a professional corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland . The
entire authorized capital stock of MAOS consists of five thousand (5,000) shares
of common stock, without par value (the "MAOS Common Stock"), of which one
thousand two hundred (1,200) shares are issued and outstanding.
WHEREAS, SCN is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The entire authorized capital
stock of SCN consists of fifty million (50,000,000) shares of common stock, par
value $.001 per share (the "SCN Common Stock"), of which Fourteen Million Six
Hundred Sixty-Two Thousand Five Hundred Seventy-Five (14,662,575) shares are
issued and outstanding and two million (2,000,000) shares of preferred stock,
none of which are issued or outstanding; and
WHEREAS, the Board of Directors of each of MAOS and SCN and the
shareholder(s) of MAOS have adopted resolutions approving this Agreement and
Plan of Merger in accordance with the General Corporation Law of the State of
Maryland (the "MGCL") and the General Corporation Law of the State of Delaware
(the "DGCL").
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants herein contained and intending to be legally bound, agree as follows:
1. Parties to Merger. MAOS and SCN (such corporate parties to the merger
being hereinafter sometimes collectively referred to as the "Constituent
Corporations") shall effect a merger (the "Merger") in accordance with and
subject to the terms and conditions of this Agreement and Plan of Merger.
2. Merger: Service of Process. At the Effective Time (as defined in Section
3 hereof), MAOS shall be merged with and into SCN, which latter corporation
shall be, and is hereinafter sometimes referred to as, the "Surviving
Corporation". The Surviving Corporation, which shall continue to be governed by
the laws of the State of Delaware, hereby agrees that it may be served with
process in the State of Maryland in any proceeding for enforcement of any
obligation of MAOS, as well as for enforcement of any obligation of the
Surviving Corporation arising from the Merger, and the Surviving Corporation
hereby irrevocably appoints the State Department of Assessments and Taxation
("SDAT") of the State of Maryland as its agent to accept service of process in
any such suit or other proceedings. A
Exhibit 1-1
copy of such process shall be mailed by the SDAT of the State of Maryland to the
Surviving Corporation at 00 Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx
00000.
3. Filing and Effective Time. A Certificate of Merger to be filed with the
Secretary of the State of Delaware and Articles of Merger to be filed with the
SDAT of the State of Maryland and such other documents and instruments as are
required by, and complying in all respects with, the MGCL and the DGCL shall be
delivered to the appropriate state officials for filing. The Merger shall become
effective immediately at 11:59 p.m. on ____________________, 1997 (the
"Effective Time").
4. Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of SCN shall be and thereafter remain the Certificate of
Incorporation of the Surviving Corporation, until amended in accordance with
applicable law, and the Surviving Corporation shall continue to be a corporation
organized and governed by the laws of the State of Delaware.
5. Bylaws. At the Effective Time, the Bylaws of SCN shall be and thereafter
remain the Bylaws of the Surviving Corporation until altered, amended or
repealed in the manner therein provided in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation and applicable law.
6. Directors and Officers. At the Effective Time, the directors and the
officers of SCN shall be the directors and the officers of the Surviving
Corporation; each such director and officer shall hold office until his
resignation or removal, in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation and applicable law.
7. Effect of Merger. At the Effective Time, the Merger shall have the
effect set forth in the MGCL and the DGCL.
8. Further Assurances. Each of the Constituent Corporations shall use their
best efforts to take action and to do all things necessary in order to
consummate and make effective the actions contemplated in this Agreement and
Plan of Merger. If at any time the Surviving Corporation, or its successors or
assigns, shall consider any further assignments or assurances in law or any
other acts to be necessary or desirable to (a) vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation its rights, title or interest
in, to or under any of the rights, properties or assets of MAOS acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the merger, or (b) otherwise carry out the purposes of this Agreement and Plan
of Merger, MAOS and its proper officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to execute
and deliver all such proper deeds, assignments and assurances in law and to do
all acts necessary or proper to vest, perfect or confirm title to and possession
of such rights, properties or assets in the Surviving Corporation and otherwise
to carry out the purposes of this Agreement and Plan of Merger, and the proper
officers and directors of the Surviving Corporation are fully authorized in the
name of MAOS or otherwise to take any and all such action.
9. Capital Stock. At the Effective Time:
(a) Each share of Common Stock of MAOS (other than any dissenting
shares), without any action on the part of the holder thereof, shall be
converted into the right to receive (i) ___________ (_________) shares of
SCN Common Stock (the "Conversion Ratio") and (ii) a cash payment of
______________________________ Dollars ($______________). SCN shall deliver
the shares of SCN Common Stock at, or as soon as practicable after, the
Effective Time. Each dissenting share shall be converted into the right to
receive payment from the Surviving Corporation with respect thereto in
accordance with the provisions of the MGCL. The Conversion Ratio shall be
subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split, or other change in number of shares of MAOS
Common Stock
Exhibit 1-2
or shares of SCN Common Stock outstanding. For all purposes, each share of
SCN Common Stock is agreed to have a value of ____________________ Dollars
($_________) per share.
(b) On and after the Effective Date, the holders of MAOS Common Stock
shall cease to have any rights as shareholders of MAOS except for the right
to surrender their stock in exchange for payment of the merger
consideration.
(c) Each share of Common Stock of SCN issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding.
10. No Fractional Shares. No fractional shares of SCN Common Stock shall be
issued pursuant to the Merger. In lieu of the issuance of any such fractional
shares of SCN Common Stock, cash adjustments will be paid to holders in respect
of any fractional shares of SCN Common Stock that would otherwise be issuable.
The amount of such adjustment shall be the product of such fraction of a share
of SCN Common Stock multiplied by $___________.
11. Dissenting Shares. Notwithstanding anything herein to the contrary,
shares of MAOS Common Stock that are outstanding immediately prior to the
Effective Date and that are held by shareholders, if any, who are entitled to
assert a right to dissent from the merger and who demand and validly perfect
their rights to receive the "fair value" of their shares with respect to the
merger under Sections 3-201 et seq. of the MGCL (the "Dissenting Shares") shall
be entitled solely to the payment of the "fair value" of such shares in
accordance with the provisions of the MGCL; except that (i) if such demand to
receive "fair value" shall be withdrawn upon the consent of the Surviving
Corporation, (ii) if this Agreement and Plan of Merger shall be terminated, or
the merger shall not be consummated, (iii) if no demand or petition for the
determination of "fair value" by a court shall have been made or filed within
the time provided in the provisions of the MGCL or (iv) if a court of competent
jurisdiction shall determine that such holder of Dissenting Shares is not
entitled to the relief provided by the provisions of the MGCL, then the right of
such holder of Dissenting Shares to be paid the "fair value" of his shares of
MAOS Common Stock shall cease and, with respect to clauses (i), (ii) and (iv)
above, such Dissenting Shares shall thereupon be deemed to have been converted
into and to have become exchangeable for, as of the Effective Date, the right to
receive the merger consideration with respect thereto, without any interest
thereon, and with respect to clause (ii) above, the status of such shareholder
shall be restored retroactively without prejudice to any corporate proceeding
which may have been taken during the interim.
12. Amendment or Termination. Notwithstanding shareholder approval of this
Agreement and Plan of Merger, this Agreement and Plan of Merger may be amended
or terminated at any time on or before the Effective Date by agreement of the
Boards of Directors of the Constituent Corporations, provided that no amendment
may be made which decreases the Conversion Ratio.
13. Counterparts. This Agreement and Plan of Merger may be executed in
counterparts each of which shall be deemed an original and all of which together
shall be considered one and the same agreement. The parties agree that a
facsimile may be executed as an original.
Exhibit 1-3
IN WITNESS WHEREOF, the parties hereto, pursuant to the approval and
authority duly given by resolutions adopted by their respective Boards of
Directors and the MAOS Stockholders, have duly executed this Agreement and Plan
of Merger as of the day and year first written above.
MID-ATLANTIC ORTHOPAEDIC SPECIALISTS, P.C.
By:
--------------------------------------
Title:
-----------------------------------
ATTEST:
By:
-------------------------
SPECIALTY CARE NETWORK, INC.
By:
--------------------------------------
Title:
-----------------------------------
ATTEST:
By:
-------------------------
Exhibit 1-4
EXHIBIT 2(a)(1)
CERTIFICATE OF MERGER
OF
MID-ATLANTIC ORTHOPAEDIC SPECIALISTS, P.C.
INTO
SPECIALTY CARE NETWORK, INC.
(PURSUANT TO SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
THE UNDERSIGNED CORPORATION HEREBY CERTIFIES THAT:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) Specialty Care Network, Inc., a Delaware corporation; and
(b) Mid-Atlantic Orthopaedic Specialists, P.C., a Maryland
professional corporation.
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged on ______________________, 1997, by Mid-Atlantic
Orthopaedic Specialists, P.C. and by Specialty Care Network, Inc. in accordance
with the provisions of Section 252 of the General Corporation Law of the State
of Delaware and Section 3-109 of the Maryland General Corporation Law.
3. The name of the surviving corporation is Specialty Care Network, Inc.
4. The certificate of incorporation of Specialty Care Network, Inc. shall
be the certificate of incorporation of the surviving corporation.
5. The surviving corporation is a corporation of the State of Delaware.
6. The executed Agreement and Plan of Merger is on file at the principal
place of business of Specialty Care Network, Inc. at 00 Xxxxx Xxxxxxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxxx 00000.
7. A copy of the Agreement and Plan of Merger will be furnished by
Specialty Care Network, Inc., on request and without cost, to any stockholder of
Mid-Atlantic Orthopaedic Specialists, P.C. or Specialty Care Network, Inc.
Exhibit 2(a)(1)-1
8. The authorized capital stock of Specialty Care Network, Inc. is
50,000,000 shares of common stock, $.001 par value and 2,000,000 shares of
preferred stock.
9. The authorized capital stock of Mid-Atlantic Orthopaedic Specialists,
P.C. is 5,000 shares of common stock, without par value.
10. The Agreement and Plan of Merger shall be effective on _______________,
1997 at 11:59 p.m.
IN WITNESS WHEREOF, the undersigned corporation has caused this Certificate
of Merger to be executed on the ______ day of July, 1997.
SPECIALTY CARE NETWORK, INC.
By:
-------------------------------
Title:
----------------------------
Exhibit 2(a)(1)-2
EXHIBIT 2(a)(2)
MARYLAND ARTICLES OF MERGER
See Attached.
Exhibit 2(a)(2)-1
EXHIBIT 5(m)
EXCLUDED ASSETS
"Excluded Assets" shall mean (i) employment or noncompete agreements between
MAOS and the MAOS Stockholders and those licensed medical individuals under
contract with MAOS to provide professional services to patients of MAOS and
claims arising thereunder; (ii) all patient medical records and patient lists;
(iii) all insurance policies of MAOS and claims arising thereunder and all
prepaid expenses on malpractice insurance premiums; (iv) the inventories, cash
and Accounts Receivable disposed of, canceled, expended or collected, as the
case may be, by MAOS after the date hereof and prior to the Closing in the
Ordinary Course of Business and consistent with past practice; (v) personal
property of individual physicians which is not included on the financial
statements of MAOS; (vi) MAOS's Employee Benefit Plans and all liabilities
related thereto; (vii) MAOS's cash (other than any cash reserved for the payment
of any accrued liabilities) on hand as of the Closing Date, (viii) MAOS's third
party provider agreements; (ix) all drugs owned by MAOS; (x) all automobiles
owned by MAOS; and (xi) the Lease Agreement for MAOS' main office; provided,
however, MAOS shall sublease such main office to SCN prior to the consummation
of the Merger.
Exhibit 2(a)(2)-2
EXHIBIT 7(a)(iv)
SERVICE AGREEMENT
See attached.
7(a)(iv)-1
EXHIBIT 7(a)(vi)
MAOS OPINION LETTER
_______________, 1997
Specialty Care Network, Inc.
00 Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Gentlemen:
We have acted as counsel to Mid-Atlantic Orthopaedic Specialists, P.C.
("MAOS"), Mid-Atlantic Orthopaedic Specialists/Drs. Xxxxxxxxxx, Xxxxxxx, Xxxxxxx
& Xxxxxxxxxx, P.C. ("MAOS II"), and the shareholders of MAOS and MAOS II (the
"Shareholders"), in connection with the series of transactions culminating in
the merger ("Merger") of MAOS with and into Specialty Care Network, Inc., a
Delaware corporation ("SCN").
In connection with this opinion and with your permission, we have examined
(i) an executed copy of that certain Merger Agreement (the "Agreement") between
MAOS, the Shareholders and SCN dated as of June 30, 1997 as well as the exhibits
and schedules attached thereto or referenced therein, (ii) the Agreement and
Plan of Merger, (iii) the Service Agreement (the "Service Agreement") between
MAOS II, the Shareholders, and SCN dated as of ______________, 1997, as well as
the exhibits and schedules attached thereto or referenced therein, and (iv)
other documents appropriate for the preparation of this opinion. In addition, we
have considered such matters of law and fact as we considered appropriate for
the purposes of rendering the opinions set forth herein. The Agreement, the
Agreement and Plan of Merger, and the Service Agreement are hereinafter referred
to as the "Transaction Documents." Capitalized terms used herein, unless the
context otherwise indicates, shall have the meaning ascribed to such terms in
the Agreement.
In making such examinations, we have assumed that:
(A) All documents examined by us in connection with the preparation of this
opinion letter are authentic and accurate and, to the extent represented by
photostatic or certified copies, conform to their respective originals;
(B) All natural persons signing Transaction Documents had, or will have at
the time of such signing, full legal capacity to sign and deliver such
documents;
(C) SCN is duly organized, validly existing, and in good standing under the
laws of the State of Delaware and in all other places in which it is conducting
its business;
(D) The Transaction Documents have been duly authorized, executed, and
delivered by SCN (with genuine signatures) for value received, and nothing in
the charter, bylaws (or the equivalent thereof) of SCN prohibits it from
executing the Transaction Documents or performing the transactions contemplated
by the Transaction Documents to be executed, delivered, and performed by it, and
SCN has the full corporate power and authority to deliver and perform its
obligations under the Transaction Documents;
Exhibit 7(a)(vi)-1
(E) No court order, administrative ruling, contract, regulation or statute
governing SCN prohibits it from executing the Transaction Documents or
performing the transactions contemplated by the Transaction Documents;
(F) All Transaction Documents constitute the legal, valid and binding
obligation of the parties (other than MAOS, MAOS II, and the Shareholders),
enforceable against them in accordance with the terms of said Transaction
Documents;
(G) As to any Transaction Document that provides that it shall be
interpreted, governed by, and/or enforced (or words of similar import) in
accordance with the laws of any state other than the State of Maryland , the
document is valid and enforceable in accordance with its terms under the laws of
that state and the transaction bears a reasonable relationship to that state;
and
(H) All factual statements set forth in the Transaction Documents are true
and accurate in all material respects.
Although we have not conducted an independent investigation of the accuracy
of any of these assumptions, nothing has come to our attention leading us to
question the accuracy of said assumptions.
Subject to the foregoing assumptions and further qualifications and
limitations as stated herein, we are of the opinion that:
1. Each of MAOS and MAOS II is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland . Each of
MAOS and MAOS II has the full corporate power and authority to carry on the
business in which it is engaged and to own, lease, and use the properties owned
and used by it.
2. The entire authorized capital stock of MAOS consists of 5,000 shares, of
which 1,200 shares are issued and outstanding. All of the issued and outstanding
shares have been duly authorized and are validly issued, fully paid, and
nonassessable. To the best of our knowledge after due inquiry, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require MAOS to issue, sell, or otherwise cause to become outstanding
any of its capital stock. To the best of our knowledge after due inquiry, there
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to MAOS. The number of shares
owned by each Shareholder as reflected in the stock transfer ledger of MAOS is
as follows: Xxxxxx X. Xxxxxxxxxx, 300 shares; Xxxxxxx X. Xxxxxxx, 300 shares;
Xxxxxxx X. Xxxxxxx, 300 shares; and Xxxxxx X. Xxxxxxxxxx, 300 shares.
3. To our knowledge, except as described in the Disclosure Schedule to the
Agreement (the "Disclosure Schedule"), neither the execution and the delivery of
the Transaction Documents nor the consummation of the transactions contemplated
thereby will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, professional regulatory organization or court
to which MAOS or MAOS II is subject or any provision of the charter or bylaws of
MAOS or MAOS II or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement known to
us to which MAOS or MAOS II is a party or by which either is bound or to which
of MAOS or MAOSII assets is subject, except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, or
failure to give notice would not have a material adverse effect on the ability
of the parties to consummate the transactions contemplated by the Transaction
Documents.
4. To our knowledge, except as described in the Disclosure Schedule, and as
may be required by the provisions of the Maryland General Corporation Law, MAOS
and MAOS II do not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government, or governmental or
professional regulatory organization agency in order for the parties to
consummate the transactions contemplated by the Transaction Documents,
Exhibit 7(a)(vi)-2
except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
the ability of the parties to consummate the transactions contemplated by the
Transaction Documents.
5. Each of MAOS and MAOS II has the full corporate power and authority to
execute and deliver the Transaction Documents to which it is contemplated by the
document it will be a party and to perform its obligations thereunder. In those
instances where MAOS, MAOS II, or a Shareholder is a party to the Transaction
Documents, the Transaction Documents constitute the valid and legally binding
obligation of MAOS, MAOS II, or a Shareholder, as the case may be, enforceable
in accordance with their terms and conditions.
6. Except as described in the Disclosure Schedule, to our knowledge there
is no suit, action, proceeding at law or in equity, arbitration, administrative
proceeding or other proceeding or investigation by any governmental entity
pending or threatened against MAOS, MAOS II, any of the Practice Assets, or any
physician employed by MAOS or MAOS II.
7. Except as described in the Disclosure Schedule, to our knowledge,
neither MAOS, MAOS II, nor any physician employed by MAOS or MAOS II has
received any notice that either MAOS, MAOS II, or the physician employed by MAOS
or MAOS II is in violation of any healthcare laws or licensing laws of the State
of Maryland or the federal laws of the United States.
8. Except in connection with the filing of the Articles of Merger, there
are no intangible taxes, documentary stamp taxes or any other taxes, or fees
payable to the State of Maryland or any political subdivision or any agency
thereof in connection with the Merger pursuant to the Transaction Documents.
The opinions set forth above are qualified as stated therein and are
further qualified as follows:
(a) Enforceability of the rights and remedies in any of the Transaction
Documents as against any party or parties is subject to applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium, or other laws of
general application relating to or affecting the enforcement of creditors'
rights from time to time in effect;
(b) The availability of the remedy of specific performance, of any
injunctive relief, or of any other equitable remedy is subject to general
principles of equity and the discretion of the court before which any
proceedings may therefore be brought, whether in a court of law or a court of
equity;
(c) Except as described herein, we have not undertaken any independent
investigation to determine the existence or absence of such facts which would be
contrary to the opinions expressed herein, and no inference as to the knowledge
of the existence of such facts should be drawn from the fact of our
representation of the Shareholders, MAOS, or MAOS II as their respective counsel
in connection with this transaction. The phrases "our knowledge," "of which we
are aware," and similar phrases mean the knowledge of the attorney who signs
this opinion letter and any attorney in this law firm who has had active
involvement in the preparation of this opinion letter or the transactions to
which it relates or is primarily responsible for providing the response
concerning a particular issue or information regarding factual matters or
regularly provides legal services to the Shareholders, MAOS, or MAOS II.
(d) We express no opinions as to matters of federal or state laws relating
to antitrust, usury, or securities.
This letter is furnished by us solely for your benefit in connection with
the transaction referred to in the Transaction Documents and may not otherwise
be reproduced, quoted in whole or in part, filed publicly, or circulated to or
relied upon by any other person, or used in connection with any other
transaction, except to any successor in interest of the business of SCN or for
disclosure as required by law or by any regulatory agency having jurisdiction
Exhibit 7(a)(vi)-3
over SCN. This letter addresses the law as of the date hereof and we undertake
no obligation to inform you of any changes in the law occurring after the date
hereof.
We are admitted to practice in the State of Maryland and we express no
opinions as to matters under or involved in any jurisdiction other than the laws
of the United States and of the State of Maryland.
Sincerely yours,
-----------------------------------
By:
-------------------------------
Exhibit 7(a)(vi)-4
EXHIBIT 7(b)(iii)
SCN OPINION LETTER
_______________, 1997
The Board of Directors & Shareholders of
Mid-Atlantic Orthopaedic Specialists, P.C.
0000X Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Gentlemen:
We have acted as counsel to Specialty Care Network, Inc., a Delaware
corporation ("SCN") in connection with the series of transactions culminating in
the Merger ("Merger") of Mid-Atlantic Orthopaedic Specialists, P.C., a Maryland
Professional corporation ("MAOS"), with and into SCN.
In connection with this opinion and with your permission, we have examined
(i) an executed copy of that certain Merger Agreement (the "Agreement") between
MAOS, Xxxxxx X. Xxxxxxxxxx, M.D., Xxxxxxx X. Xxxxxxx, M.D., Xxxxxxx X. Xxxxxxx,
M.D., and Xxxxxx X. Xxxxxxxxxx, M.D. (the "Shareholders") and SCN dated as of
June 30, 1997, as well as the exhibits and schedules attached thereto or
referenced therein, (ii) the Agreement and Plan of Merger, (iii) the Service
Agreement (the "Service Agreement") between Mid-Atlantic Orthopaedic
Specialists/Drs. Xxxxxxxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxxxx , P.C., a Maryland
professional corporation ("MAOS II"), the Shareholders and SCN dated as of
________________________, 1997 as well as the exhibits and schedules attached
thereto or referenced therein and (iv) other documents appropriate for the
rendering of this opinion. In addition, we have considered such matters of law
and fact as we considered appropriate for the purposes of rendering the opinions
set forth herein. The Agreement, the Plan of Merger, and the Service Agreement
are hereinafter referred to as the "Transaction Documents." Capitalized terms
used herein, unless the context otherwise indicates, shall have the meaning
ascribed to such terms in the Agreement.
In making such examinations, we have, with your permission, assumed that:
(A) All documents examined by us in connection with the preparation of this
opinion letter are authentic and accurate and, to the extent represented by
photostatic or certified copies, conform to their respective originals;
(B) All natural persons signing Transaction Documents had, or will have at
the time of such signing, full legal capacity to sign and deliver such
documents;
(C) MAOS is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and in all other places in which
it is conducting business;
(D) MAOS II is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and in all other places in
which it is conducting business;
Exhibit 7(b)(iii)-1
(E) The Transaction Documents have been duly authorized, executed and
delivered by MAOS, MAOS II and the Shareholders (with genuine signatures) for
value received, and nothing in the charter, bylaws (or the equivalent thereof)
of MAOS or MAOS II prohibits it from executing the Transaction Documents or
performing the transaction contemplated by the Transaction Documents to be
executed, delivered and performed by it, and the Shareholders has the full power
and authority to perform his obligations under the Transaction Documents;
(F) No court order, administrative ruling, contract, regulation or statute
governing MAOS II , MAOS or the Shareholders prohibits them from executing the
Transaction Documents or performing the transaction contemplated by the
Transaction Documents;
(G) All Transaction Documents constitute the legal, valid and binding
obligation of the parties (other than SCN) enforceable against them in
accordance with the terms of said Transaction Documents;
(H) As to any Transaction Document that provides that it shall be
interpreted, governed by and/or enforced (or words of similar import) in
accordance with the laws of any state other than the States of Mississippi or
Tennessee, the document is valid and enforceable in accordance with its terms
under the laws of that state and the transaction bears a reasonable relationship
to that state; and
(I) All factual statements set forth in the Transaction Documents are true
and accurate in all material respects.
Although we have not conducted an independent investigation of the accuracy
of any of these assumptions, nothing has come to our attention leading us to
question the accuracy of said assumptions.
Subject to the foregoing assumptions and further qualifications and
limitations as stated herein, we are of the opinion that:
1. SCN is a corporation duly organized, validly existing, and in good
standing under the laws of the state of Delaware. SCN is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction in
which the character or location of the properties owned or the business
conducted by SCN makes such qualification necessary. SCN has full corporate
power and authority to carry on the businesses in which it is engaged and to
own, lease and use the properties owned and used by it.
2. The entire authorized capital stock of SCN consists of 50,000,000 shares
of SCN Common Stock and 2,000,000 shares of Preferred Stock, of which
______________ shares of SCN Common Stock are issued and outstanding and no
shares of SCN Preferred Stock are issued and outstanding. No shares are held in
treasury. All of the shares to be issued in the Merger have been duly authorized
and, upon consummation of the Merger, will be validly issued, fully paid, and
nonassessable.
3. SCN has full power and authority (including full corporate power and
authority) to execute and deliver the Transaction Documents and to perform its
obligations thereunder. In those instances where SCN is a party to the
Transaction Documents, the Transaction Documents constitute the valid and
legally binding obligation of SCN enforceable against SCN in accordance with
their terms and conditions.
4. To our knowledge, neither the execution and the delivery of the
Transaction Documents, nor the consummation of the transactions contemplated
thereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which SCN is subject or any
provision of the Certificate of Incorporation or bylaws of SCN or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which SCN is a party or by which it is bound
or to which any of its assets is subject, except where the
Exhibit 7(b)(iii)-2
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, or failure to give notice would not have a material adverse effect
on the ability of the parties to consummate the transactions contemplated by the
Transaction Documents.
5. To our knowledge, and other than in connection with the provisions of
the Delaware General Corporation Law, the Securities Exchange Act, the
Securities Act, and applicable state securities laws, SCN does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by the Transaction Documents, except
where the failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a material adverse effect on the ability of
the parties to consummate the transactions contemplated by the Transaction
Documents.
4. Except as described in the Disclosure Schedule, to our knowledge there
is no suit, action, proceeding at law or in equity, arbitration, administrative
proceeding or other proceeding or investigation by any governmental entity
pending or threatened against SCN.
The opinions set forth above are qualified as stated therein and are
further qualified as follows:
(a) Enforceability of the rights and remedies in any of the Transaction
Documents as against any party or parties is subject to applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium or other laws of
general application relating to or affecting the enforcement of creditors'
rights from time to time in effect;
(b) The enforceability of the Transaction Documents, the rights and
remedies set forth therein, and the availability of the remedy of specific
performance or of any injunctive relief or of any other equitable remedy is
subject to general principles of equity and the discretion of the court before
which any proceedings may therefore be brought, whether in a court of law or a
court of equity;
(c) Except as described herein, we have not undertaken any independent
investigation to determine the existence or absence of such facts which would be
contrary to the opinions expressed herein, and no inference as to the knowledge
of the existence of such facts should be drawn from the fact of our
representation of SCN as their counsel in connection with this transaction.
Reference to the phrase "our knowledge," "of which we are aware," or a phrase
having equivalent wording means the actual knowledge of the attorney who signs
the opinion letter and any attorney in this law firm who has had active
involvement in the preparation of this opinion letter or the transactions to
which it relates or is primarily responsible for providing the response
concerning a particular issue or information regarding factual matters or
regularly provides legal services to SCN.
We express no opinions as to matters of federal or state law relating to
anti-trust, health care, usury or securities.
This letter is furnished by us solely for your benefit in connection with
the transaction referred to in the Transaction Documents and may not otherwise
be reproduced, quoted in whole or in part, filed publicly or circulated to or
relied upon by any other person, nor used in connection with any other
transaction except to any successor in interest of the business of MAOS or the
Shareholders or for disclosure as required by law or any regulatory agencies
having jurisdiction over MAOS or the Shareholders or otherwise. This letter
addresses the law as of the date hereof and we undertake no obligation to inform
you of any changes in the law occurring after the date hereof.
Exhibit 7(b)(iii)-3
We are admitted to practice in the States of Mississippi and Tennessee and
we express no opinions as to matters under or involved in any jurisdiction other
than the federal law of the United States and the States of Delaware,
Mississippi and Tennessee.
Sincerely yours,
BAKER, DONELSON, BEARMAN & XXXXXXXX,
a professional corporation
By:
-------------------------------
Exhibit 7(b)(iii)-4
