Exhibit 10.46
________________________________________________________________________________
PLAN AND AGREEMENT OF MERGER
among
MEDTRUST MEDICAL GROUP, INC.,
a Virginia nonstock corporation,
DOCTORS HEALTH SYSTEM, INC.,
a Maryland corporation,
and
DOCTORS HEALTH OF VIRGINIA, INC.
a Virginia corporation
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Dated as of November 15, 1996
________________________________________________________________________________
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and
is not intended to define, limit or describe the scope or
intent of any provision of this Agreement.)
Page
ARTICLE 1
THE TRANSACTION
Section 1.1. Merger............................................... 1
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Section 1.2. The Closing.......................................... 2
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Section 1.3. Employment of Drs. Wiederhorn and Marcus............. 2
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Section 1.4. Compensation to Negotiating Team..................... 2
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ARTICLE 2
ARTICLES OF INCORPORATION, BY-LAWS,
SHAREHOLDER AGREEMENTS
Section 2.1. Articles of Incorporation............................ 2
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Section 2.2. By-Laws.............................................. 2
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Section 2.3. Directors and Officers............................... 2
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ARTICLE 3
CONVERSION OF MEMBERSHIP INTERESTS
Section 3.1. Conversion of Membership Interests................... 3
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MEDTRUST
Section 4.1. Organization; Authority.............................. 4
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Section 4.2. Membership of Medtrust............................... 4
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Section 4.3. Charter Documents.................................... 4
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Section 4.4. Binding Obligation; Consents; Litigation............. 4
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Section 4.5. Financial Statements................................. 5
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Section 4.6. Material Contracts and Agreements.................... 5
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Section 4.7. Tax Matters.......................................... 5
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TABLE OF CONTENTS
Section 4.8. Absence of Undisclosed Liabilities................... 6
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Section 4.9. Insurance............................................ 6
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Section 4.10. Finders or Brokers.................................. 6
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Section 4.11. Employee Benefits................................... 6
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Section 4.12. Employment Matters.................................. 7
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Section 4.13. Compliance With Laws................................ 7
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Section 4.14. Litigation.......................................... 7
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF DHS AND SUB
Section 5.1. Organization; Authority.............................. 8
Section 5.2. Capitalization of DHS and Sub........................ 8
Section 5.3. Charter Documents.................................... 9
Section 5.4. Binding Obligation; Consents; Litigation............. 9
Section 5.5. Financial Statements................................. 9
Section 5.6. Compliance With Law; Permits......................... 10
Section 5.7. Litigation........................................... 10
Section 5.8. Material Contracts and Agreement .................... 10
Section 5.9. Tax Matters.......................................... 10
Section 5.10. Absence of Undisclosed Liabilities.................. 11
Section 5.11. Insurance........................................... 11
Section 5.12. No Material Adverse Change.......................... 11
Section 5.13. Required Consents................................... 12
Section 5.14. Disclosure Registration Statement................... 12
Section 5.15. Disclosure; Representations and Warranties.......... 12
Section 5.16. Finders or Brokers.................................. 12
ARTICLE 6
TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF THE MERGER
Section 6.1. Special Meeting...................................... 13
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Section 6.2. Effectiveness of Securities Act Registration
Statement............................................ 13
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Section 6.3. Management of Medtrust............................... 13
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ARTICLE 7
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TABLE OF CONTENTS
CERTAIN COVENANTS AND AGREEMENTS
Section 7.1. Approvals; Consents.................................. 14
Section 7.2. Conduct of Business Prior To Effective Time.......... 14
Section 7.3. Access to Information and Documents.................. 15
Section 7.4. Periodic Information................................. 15
Section 7.5. Representations...................................... 15
Section 7.6. Information.......................................... 16
Section 7.7. Notice of Breach..................................... 16
Section 7.8. Director and Officer Insurance....................... 16
Section 7.9. Business Plan and Capitalization of Sub.............. 16
Section 7.10. Exclusivity......................................... 16
Section 7.11. Establishment of Woman Care, IPA, LLC. ............. 17
Section 7.12. Right of First Refusal to Specialists............... 17
Section 7.13. Primary Care Affiliation Agreements................. 17
Section 7.14. Registration of DHS Common Stock.................... 17
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 8.1. Member Approvals..................................... 17
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Section 8.2. Pending Litigation................................... 18
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Section 8.3. Third Party Consents................................. 18
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ARTICLE 9
CONDITIONS TO DHS' OBLIGATIONS
Section 9.1. Representations and Warranties....................... 18
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Section 9.2. Opinion of Medtrust's Counsel........................ 18
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Section 9.3. Legal Matters Satisfactory........................... 18
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Section 9.4. No Material Adverse Change........................... 18
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Section 9.5. Alliance with Primary Care Physicians................ 18
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Section 9.6 Dissenters To Merger................................. 19
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Section 9.7 Virginia Blue Sky Laws............................... 19
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ARTICLE 10
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TABLE OF CONTENTS
CONDITIONS TO MEDTRUST'S OBLIGATIONS
Section 10.1. Representations and Warranties...................... 19
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Section 10.2. Opinion of Counsel for DHS and Sub.................. 19
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Section 10.3. Legal Matters Satisfactory.......................... 19
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Section 10.4. No Material Adverse Change.......................... 19
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Section 10.5. Registration Statement.............................. 19
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Section 10.6. Issue Price of DHS Common Stock..................... 20
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ARTICLE 11
TERMINATION
Section 11.1. Termination......................................... 20
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Section 11.2. Effect of Termination. ............................ 20
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ARTICLE 12
MISCELLANEOUS
Section 12.1. Expenses............................................ 20
Section 12.2. Survival of Representations, Warranties and
Covenants........................................... 21
Section 12.3. Governing Law; Jurisdiction and Venue............... 21
Section 12.4. Notices............................................. 21
Section 12.5. Press Releases...................................... 23
Section 12.6. Assignment; Amendments, Waivers..................... 23
Section 12.7. Entire Agreement.................................... 23
Section 12.8. Severability........................................ 23
Section 12.9. Headings............................................ 23
Section 12.10. Counterparts....................................... 23
Section 12.11. Third Party Beneficiaries.......................... 23
Section 12.12. Enforcement Costs.................................. 24
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PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER (this "Agreement") is made as of
November 15, 1996 by and among MEDTRUST MEDICAL GROUP, INC., a Virginia nonstock
corporation ("Medtrust"), DOCTORS HEALTH SYSTEM, INC., a Maryland corporation
("DHS"), and DOCTORS HEALTH OF VIRGINIA, INC., a Virginia corporation
wholly-owned by DHS ("Sub").
RECITALS
A. Sub is a corporation duly organized and existing under
the laws of the Commonwealth of Virginia, having been incorporated on
November 15, 1996 for the purpose of effecting this transaction and having
engaged in no other business prior to the date hereof.
B. Medtrust is a nonstock corporation duly organized and
existing under the laws of the Commonwealth of Virginia, having been
incorporated on May 3, 1994.
C. DHS is a corporation duly organized and existing
under the laws of the State of Maryland, having been incorporated on June 10,
1994.
D. The respective Boards of Directors of DHS, Sub and
Medtrust have approved the business combination of Sub and Medtrust.
E. The respective Boards of Directors of DHS, Sub, and
Medtrust, have approved this Agreement and deem it advisable and in the best
interests of their respective corporations, and shareholders and Members (as
hereinafter defined) that Medtrust merge with and into Sub (the "Merger"),
subject to the approval and adoption of this Agreement by the Members of
Medtrust, pursuant to the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
II. THE TRANSACTION
A. .Merger. Upon the approval and adoption of this Agreement by the
Members of Medtrust (the "Members") in accordance with the laws of the
Commonwealth of Virginia, and the satisfaction or waiver of the conditions set
forth herein to the obligations of the parties hereto, articles of merger
substantially in the forms of Exhibit A hereto, shall be filed with the State
Corporation Commission of the Commonwealth of Virginia in accordance with the
laws of the Commonwealth of Virginia. Effective on the date and at the time on
which a certificate of merger containing the provisions required by, and
executed in accordance with, Article 12 of the Virginia Stock Corporation Act
and Article 11 of the Virginia Nonstock Corporation Act (the "Certificate of
Merger") shall have been issued by the
Virginia State Corporation Commission (or such later date and time as may be
specified in such Certificate of Merger) (the "Effective Time"), Medtrust shall
merge with and into Sub which, as the surviving corporation, shall continue its
corporate existence under the laws of the Commonwealth of Virginia under the
name of Doctors Health of Virginia, Inc.
B. .The Closing. The Merger and the other transactions contemplated
by this Agreement shall be effected at a closing (the "Closing") at the
offices of Xxxxxxx & Xxxxxxx, Xxx Xxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, or
such other place as the parties shall mutually agree, at 11:00 a.m. local
time on a mutually agreeable date (the "Closing Date") which is no later
than five (5) days following the satisfaction of the conditions set forth in
Articles 8, 9 and 10 hereof. The Effective Time shall occur on the Closing Date.
In no event shall the Closing Date occur later than January 31, 1997 (the
"Termination Date") without the mutual consent of the parties.
C. .Employment of Drs. Wiederhorn and Marcus. At Closing, DHS shall
execute and deliver those certain employment agreements attached hereto as
Exhibits B and C, respectively, under which DHS will employ Xx. Xxxxxx
Xxxxxx and Xx. Xxxxx Xxxxxxxxxx on a part-time basis to assist DHS with
further network development.
D. .Compensation to Negotiating Team. At Closing, DHS shall pay and/or
deliver to the individuals listed on Exhibit D (the "Negotiating Team") an
aggregate consideration of 6,000 shares of DHS Common Stock and $30,000 in
cash to be distributed ratably to the Negotiating Team Members in
consideration of their service in conducting the extended negotiations leading
to the consummation and implementation of this Agreement.
III. ARTICLES OF INCORPORATION, BY-LAWS,
SHAREHOLDER AGREEMENTS
A. .Articles of Incorporation. The articles of incorporation of Sub in
effect at the Effective Time shall be as set forth on Exhibit E attached hereto.
B. .By-Laws. The by-laws of Sub in effect at the Effective Time shall be
as set forth on Exhibit F which by-laws shall constitute a shareholder
agreement pursuant to Section 13.1-671.1 of the Code of Virginia (1950, as
amended).
C. .Directors and Officers. At and with effect from the Effective
Time, the directors of the Surviving Corporation shall be as set forth on
Schedule 2.3 hereto who shall hold office until their successors are elected and
qualify. At and with effect from the Effective Time, the officers of
the Surviving Corporation shall be as set forth on Schedule 2.3 hereto who
shall hold office until their successors are elected and qualify.
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IV. CONVERSION OF MEMBERSHIP INTERESTS
A. .Conversion of Membership Interests. The manner and basis of
converting the membership interests of Medtrust shall be as follows:
1. Subject to the provisions of paragraphs (c) and (d) below,
the Members of Medtrust shall receive in the aggregate 24,000 shares (the
"Share Consideration") of DHS Class B common stock, no par value per share
(the "DHS Common Stock") plus an aggregate amount of cash equal to
$120,000 plus the amount of cash or cash equivalents held by Medtrust as of the
date hereof (the "Cash Consideration").
2. Subject to the provisions of paragraphs (c) and (d) below,
each membership interest of the Members of Medtrust outstanding immediately
prior to the Effective Time will be converted into and represent the right to
receive the number of shares of DHS Common Stock and that amount of cash
determined by multiplying each of the Share Consideration and the Cash
Consideration by a fraction, the numerator of which is the aggregate Initial
Membership Fee paid by the respective Member for its Approved Physicians (as
defined in the Bylaws of Medtrust) and the denominator of which is the
aggregate Initial Membership Fees paid by all Members then holding
membership interests in Medtrust on behalf of their Approved
Physicians (the "Merger Consideration"). For purposes hereof, Initial
Membership Fee shall include only the initial membership fees paid by a Member
and shall expressly exclude any ongoing dues or assessments paid by a
Member in support of the operational expenses of Medtrust.
3. In the event that DHS changes the number of shares of DHS Common
Stock issued and outstanding after the date hereof and prior to the
Effective Time as a result of a stock split, stock dividend,
recapitalization or other similar transaction, the Share Consideration
shall be proportionately adjusted.
4. No certificates for fractions of shares of DHS Common Stock
and no scrip or other certificates evidencing fractional interests in such
shares shall be issuable and any such fractional share which would otherwise be
issued shall be rounded to the next highest whole share.
5. At the Closing, DHS shall deliver to counsel for Medtrust the
original of all certificates of DHS Common Stock to be issued as part of
the Share Consideration together with the Cash Consideration in
immediately available funds. Such certificates shall then be forwarded by
regular mail with appropriate checks for the Cash Consideration to the address
of record of each Member.
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6. At any time prior to the mailing of the notice of the Special
Meeting, the Board of Directors may revise the method of allocation of the
Share Consideration and Cash Consideration among the Members, make
appropriate revisions to the Plan of Merger and submit such revised plan to
the Members for their approval. The provisions of Section 3.1(b) regarding
allocation shall be amended to incorporate such revised allocations.
V. REPRESENTATIONS AND WARRANTIES OF MEDTRUST
Medtrust hereby represents and warrants to DHS and Sub that as of the
date of this Agreement:
A. .Organization; Authority. Medtrust is a nonstock corporation duly
organized and existing in good standing under the laws of the Commonwealth
of Virginia. Medtrust has all necessary corporate power and authority to own or
to lease, and to operate, its properties and assets and to carry on its
business as it is now being conducted.
B. .Membership of Medtrust. Medtrust has four classes of Members as provided
in the articles of incorporation. A true and complete copy of the Membership
roster as of the date hereof is attached hereto as Schedule 4.2. In
accordance with Section 13.1-837 of the Virginia Code, membership
interests are non-transferable.
C. .Charter Documents. A true and complete copy of the articles of
incorporation and by-laws of Medtrust are attached hereto as Exhibit G.
D. .Binding Obligation; Consents; Litigation. The execution and delivery
of this Agreement by Medtrust does not, and the consummation of the
transactions contemplated hereby will not, violate (i) any provision of the
articles of incorporation or by-laws of Medtrust or (ii) any provision of, or
result in a breach of any of the terms or provisions of, or result in the
acceleration of any obligation under, or constitute a default under, any
mortgage, lien, lease, agreement, instrument, order, arbitration award,
judgment or decree to which Medtrust is a party, or to which Medtrust is, or
the assets, properties or business of Medtrust are, subject, which would have
a material adverse effect on Medtrust or any of its assets except as set forth
on Schedule 4.4. The Board of Directors of Medtrust has approved this Agreement,
has authorized the execution and delivery hereof and has directed that this
Agreement be submitted to the Members of Medtrust for adoption at a special
meeting of such Members following the satisfaction of the condition described
in Section 10.5 hereof (the "Special Meeting"). Medtrust has full power,
authority and legal right to enter into this Agreement and, upon appropriate
vote of its Members in accordance with law, to consummate the transactions
contemplated hereby. Except for the approval of its Members, Medtrust has
taken all action required by law, its articles of incorporation, its
by-laws or otherwise to authorize and to approve the execution and
delivery of this Agreement and the documents, agreements and certificates
executed and delivered by Medtrust in connection herewith and the consummation
by Medtrust of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Medtrust and constitutes a valid and legally
binding obligation of Medtrust, enforceable against Medtrust in
accordance with its terms. No
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consent, action, approval or authorization of, or registration, declaration or
filing with, any governmental authority is required to be obtained by Medtrust
in order to authorize the execution and delivery by Medtrust of this Agreement
or the consummation by Medtrust of the Merger other than the filings with the
State Corporation Commission contemplated by this Agreement.
E. .Financial Statements. Medtrust has furnished to DHS copies of the
financial statements compiled by its accountant for 1994 and 1995 (the "Medtrust
Financial Statements"). The Medtrust Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered thereby, reflect and
provide adequate reserves in respect of all known liabilities of Medtrust in
accordance with GAAP, including all known contingent liabilities required
to be included therein, and present fairly the financial condition of
Medtrust as of the indicated dates and the results of operations of Medtrust
for the indicated periods.
F. .Material Contracts and Agreements. All material contracts of Medtrust
now in effect to which Medtrust is a party or by which it or its properties or
assets may be bound or affected are listed on Schedule 4.6. A true and complete
copy of each such material contract has been heretofore delivered to DHS (the
"Material Contracts"). No default, alleged default or anticipatory breach
exists on the part of Medtrust or, to the best knowledge of Medtrust, on the
part of any other party, under any Material Contract, and there are no material
agreements of the parties relating to any Material Contract that have not been
disclosed to DHS. Subject to receipt of the consents set forth on Schedule 4.6,
the consummation of the Merger will not give rise to a default under any such
Material Contract.
G. .Tax Matters.
1. Medtrust has filed all tax returns required to be filed by it
under the laws of the United States of America, the jurisdiction of its
incorporation, and each state or other jurisdiction in which it conducts
business activities and is required to file. Medtrust has paid or set up an
adequate reserve in respect of all taxes for the periods covered by such
returns. Medtrust does not have any tax liability for which no tax reserve
has been made in respect of any jurisdiction in which Medtrust has business
activities and is required to file.
2. There are no tax liens, whether imposed by any federal, state
or local taxing authority, outstanding against any of the assets, properties or
business of Medtrust.
3. All taxes and assessments that Medtrust is required to withhold
or to collect have been duly withheld or collected and all withholdings and
collections have either been duly and timely paid over to the appropriate
governmental authority or are, together with the payments due or to
become due in connection therewith, duly reflected on the Medtrust Financial
Statements in accordance with GAAP.
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4. Except as set forth in Schedule 4.7, no Medtrust tax returns
for tax years that are open under any applicable statute of limitations have
been examined by the Internal Revenue Service or other tax authorities, and
no deficiencies (including any penalties or interest) have been asserted
or assessments made as a result of examinations. There are no waivers,
agreements or other arrangements providing for extension of time with respect
to the assessment or collection of any unpaid tax, interest, or penalties
relating to Medtrust. No issues have been raised by (or are currently
pending before) the Internal Revenue Service or any other taxing authority
in connection with any of Medtrust's tax returns which could reasonably be
expected to have a material adverse effect on the financial condition of
Medtrust if decided adversely to Medtrust, nor are there any such issues
which have not been so raised but if so raised by the Internal Revenue Service
or any other taxing authority in connection with any of the Medtrust tax
returns could, in the aggregate, reasonably be expected to have such material
adverse effect.
H. .Absence of Undisclosed Liabilities. Medtrust does not have any
material indebtedness, liability or obligation of any character whatsoever,
whether or not accrued and whether or not fixed or contingent, other than (i)
liabilities reflected in the Medtrust Financial Statements, (ii) liabilities
incurred in the ordinary course of business (or pursuant to the liquidation)
of Medtrust since the date of the Medtrust Financial Statements, (iii)
indebtedness, liabilities and obligations listed on Schedule 4.8 hereto, and
(iv) liabilities incurred in connection with the performance of this Agreement.
I. .Insurance. All significant policies of insurance, together with the
premiums currently paid thereon, providing for business interruption, personal,
employee, product or public liability coverage with respect to the business
of Medtrust are described on Schedule 4.9. The copies of such policies which
have previously been delivered to DHS are complete and correct. All such
policies will be outstanding and in full force and effect on the Closing Date
and thereafter in accordance with their terms. There are no claims, actions,
suits or proceedings arising out of or based upon any of such policies of
insurance, and, so far as is known to Medtrust or any of its officers, no
basis for any such claim, action, suit or proceeding exists. There are no
notices of any pending or threatened terminations with respect to any of such
policies and Medtrust is in compliance with all conditions contained therein.
J. .Finders or Brokers. Medtrust has not utilized the services of any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or commission
in connection with this Agreement or upon consummation of the transactions
contemplated hereby.
K. .Employee Benefits. Except for those plans set forth in Schedule 4.11,
Medtrust currently does not have, or has never had, an employee benefit plan,
including, without limitation, any plan, agreement or arrangement relating
to deferred compensation, pension, profit sharing, retirement income or
other benefits, stock purchase, stock ownership and stock option plan,
stock appreciation rights, bonus, severance arrangement, health and welfare
benefits, insurance benefits or any other employee benefits or fringe benefit
plan. Medtrust does not participate in, or contribute to, nor has
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Medtrust ever participated in or contributed to, any multi-employer plan
within the meaning of ERISA Section 4001(a)(3), nor does or will Medtrust
have, now or in the future, any multi-employer plan withdrawal liability
under Subtitle E of Part IV of ERISA.
L. .Employment Matters. Except as set out in Schedule 4.12, there are no
oral or written employment contracts or pension, bonus, profit sharing, stock
option, life, health, retirement, welfare, or other agreements or arrangements
providing for employee remuneration or benefits to which Medtrust is a party
or by which it is bound. To the knowledge of Medtrust, no person (including, but
not limited to, governmental agencies of any kind) has any claim, or basis for
any action or proceeding, against Medtrust arising out of any statute, ordinance
or regulation relating to discrimination in employment or employment practices
or occupational safety and health standards (including, but without limiting
the foregoing, The Fair Labor Standards Act, as amended; Title VII of the Civil
Rights Act of 1964, as amended; 42 U.S.C. 1981 or the Age Discrimination in
Employment Act of 1967, as amended), which, if upheld, would have an adverse
effect on Medtrust or its condition, financial or otherwise. To the knowledge
of Medtrust, there is no pending or threatened federal or state equal
employment opportunity enforcement action or labor dispute, strike or work
stoppage affecting Medtrust. Medtrust does not have any collective bargaining
or similar agreements, nor does it have any obligation to bargain with any
labor organization as the representative of Medtrust's employees, and there
is neither pending, nor to Medtrust's knowledge threatened, any labor dispute,
strike or work stoppage with affects or which may affect Medtrust or which may
interfere with the continued operation of Medtrust. No present or former
employee of Medtrust has any claim against Medtrust for (i) overtime pay,
other than overtime pay for the current payroll period, (ii) wages, salary
or other compensation or benefits for any period other than the current
payroll period, (iii) except as set forth in Medtrust's Financial
Statements, vacation, time off or pay in lieu of vacation or time off, other
than that earned in respect of the current fiscal year, or (iv) any violation of
any statute, ordinance or regulation relating to minimum wages or maximum hours
of work.
M. .Compliance With Laws. Medtrust is not in violation of any order, writ,
decree or judgment of any court, arbitrator, or governmental or regulatory
body which violation would (i) affect the legality, validity or
enforceability of this Agreement or the transactions contemplated hereby, (ii)
have a material adverse effect on Medtrust's assets, or (iii) impair Medtrust's
obligations to perform fully on a timely basis any material obligations of
Medtrust under this Agreement.
N. .Litigation.
1. Except as set forth on Schedule 4.14, there is no (i) action,
suit, claim, proceeding or investigation pending or, to the knowledge of
Medtrust or any officer of Medtrust, threatened against or affecting
Medtrust or its assets, employees or properties, at law or in equity, or
before or by any court or governmental authority, (ii) arbitration
proceeding relating to Medtrust or its assets, employees or properties or
(iii) governmental inquiry pending or, to the knowledge of Medtrust or any
officer of Medtrust, threatened relating to or involving Medtrust, its
assets or properties or the
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business of Medtrust or the transactions contemplated by this Agreement
(including inquiries as to the qualification of Medtrust to hold or receive
any permit) and Medtrust does not know of any basis for any of the
foregoing. There are no pending actions, suits, claims or proceedings brought
by Medtrust against others.
2. Medtrust has not received any written opinion, memorandum,
legal advice or notice from legal counsel to the effect that they are
exposed, from a legal standpoint, to any liability or disadvantage which
may be material to their respective businesses and which would continue
past the Effective Time. Medtrust is not in default with respect to any order,
writ, injunction or decree known to or served upon Medtrust of any court or of
any governmental authority.
3. Medtrust knows of no pending or threatened action, suit,
proceeding, investigation, order or injunction before or by any court or
governmental body that seeks to restrain or to prevent the consummation of
the Merger or the other transactions contemplated by this Agreement.
VI. REPRESENTATIONS AND WARRANTIES OF DHS AND SUB
DHS and Sub jointly and severally represent and warrant to Medtrust
that as of the date of this Agreement:
A. .Organization; Authority; Sub Status. Each of DHS and Sub is a
corporation duly organized and existing in good standing under the laws of
Maryland and Virginia, respectively, and DHS is duly authorized to conduct
business and is in good standing under the laws of the Commonwealth of
Virginia. Each of DHS and Sub has all necessary power and authority to own
or to lease, and to operate, its properties and assets and to carry on its
business as it is now being conducted. Sub is recently incorporated for the
purpose of effecting this transaction and has not engaged in any business other
than the transactions contemplated by this Agreement.
B. .Capitalization of DHS and Sub. The authorized capital stock of DHS and
Sub is as set forth on Schedule 5.2 hereto which also sets forth the number of
shares of each class of capital stock to be outstanding at the Effective Time.
At the Effective Time, all such outstanding shares of capital stock of DHS and
Sub will have been duly authorized and validly issued and will be fully
paid and nonassessable. No shares of the capital stock of DHS and Sub are
held in treasury. Except as set forth on Schedule 5.2, at the Effective Time,
there will be no options, warrants, rights, calls, commitments or
agreements of any character obligating DHS or Sub to issue any shares of
capital stock or any security representing the right to purchase or
otherwise receive any such shares. Except for restrictions on transfer arising
under applicable federal and state securities laws, there are no existing
restrictions imposed by DHS or Sub or by their respective affiliates on the
transfer of any outstanding shares of capital stock of DHS and Sub and there
are no registration covenants with respect thereto. At the
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Effective Time, none of the outstanding shares of DHS or Sub will have been
issued in violation of the preemptive rights of any present or former Member.
The DHS Common Stock to be issued in connection with the Merger
Consideration and under Section 1.4 will not be subject to any
restrictions on transfer other than those arising under applicable federal and
state securities laws and the restrictions on transfer set forth in the Amended
and Restated Stockholders Agreement dated September 4, 1996. Notwithstanding the
foregoing, each of the Members shall be permitted to transfer their DHS Common
Stock to their respective shareholders and partners without restriction but
subject to the Stockholders Agreement with respect to any subsequent transfer.
C. .Charter Documents. A true and complete copy of the articles and
certificates of incorporation, as the case may be, and by-laws of DHS and
Sub are attached hereto as Exhibit H.
D. .Binding Obligation; Consents; Litigation. The execution and delivery
of this Agreement by DHS and Sub do not, and the consummation of the
transactions contemplated hereby will not, violate (i) any provision of the
articles or certificate of incorporation, as the case may be, or by-laws of
DHS or Sub or (ii) any provision of, or result in a breach of any of the terms
or provisions of, or result in the acceleration of any obligation under, or
constitute a default under, any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which DHS or
Sub is a party, or to which DHS or Sub is, or the assets, properties or
business of DHS or Sub are, subject, which would have a material adverse
effect on DHS or any of their assets. The respective Boards of Directors of
DHS and Sub have approved this Agreement and authorized the execution and
delivery hereof. Each of DHS and Sub has full power, authority and legal
right to enter into this Agreement and to consummate the transactions
contemplated hereby. Each of DHS and Sub has taken all action required by law,
its articles of incorporation or certificate of incorporation, as the case
may be, its by-laws or otherwise to authorize and to approve the execution
and delivery of this Agreement and the documents, agreements and
certificates executed and delivered by it in connection herewith and the
consummation by it of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of DHS and Sub and
constitutes a valid and legally binding obligation of each of them, enforceable
against each of them in accordance with its terms. Except as set forth in
Section 10.5, no consent, action, approval or authorization of, or registration,
declaration or filing with, any governmental authority is required to be
obtained by DHS in order to authorize the execution and delivery by DHS of this
Agreement or the consummation of the Merger.
E. .Financial Statements. DHS has furnished to Medtrust complete copies
of the audited financial statements of DHS for each of the fiscal years ended
June 30, 1995 and June 30, 1996 (the "DHS Financial Statements"), including in
each case, a balance sheet, the related statements of income and of changes
in financial position for the periods then ended, the accompanying notes, and
the unaudited financial statements of DHS for the period ended September 30,
1996, including a balance sheet and the related statements of income and of
changes in financial position for the period then ended (the balance sheet
therein and the notes thereto as at September 30, 1996 being called the "DHS
Balance Sheet"). All such financial statements (i) have been prepared in
conformity with GAAP, (ii)
9
reflect and provide adequate reserves in respect of all known liabilities of DHS
in accordance with GAAP, including all known contingent liabilities as of their
respective dates, and (iii) present fairly the financial condition of DHS at
such dates.
F. .Compliance With Law; Permits. Except in all cases for non-compliance
which would not have a material adverse effect, each of DHS and Sub has
complied with all laws relating to its securities, property, employees or
business, including, without limitation, and all applicable statutes,
regulations, orders and restrictions relating to environmental standards or
controls.
G. .Litigation.
1. Except as set forth on Schedule 5.7, there is no (i) action,
suit, claim, proceeding or investigation pending or, to the knowledge of
DHS or any officer of DHS, threatened against or affecting DHS or its
assets, employees or properties, at law or in equity, or before or by
any court or governmental authority, (ii) arbitration proceeding relating
to DHS or its assets, employees or properties or (iii) governmental inquiry
pending or, to the knowledge of DHS or any officer of DHS, threatened relating
to or involving DHS, its assets or properties or the business of DHS or the
transactions contemplated by this Agreement (including inquiries as to the
qualification of DHS to hold or receive any permit) and DHS does not know of
any basis for any of the foregoing. There are no pending actions, suits,
claims or proceedings brought by DHS against others.
2. DHS has not received any written opinion, memorandum, legal
advice or notice from legal counsel to the effect that they are exposed, from a
legal standpoint, to any liability or disadvantage which may be material to
their respective businesses and which would continue past the Effective
Time. DHS is not in default with respect to any order, writ, injunction or
decree known to or served upon DHS of any court or of any governmental
authority.
3. DHS knows of no pending or threatened action, suit,
proceeding, investigation, order or injunction before or by any court or
governmental body that seeks to restrain or to prevent the consummation of
the Merger or the other transactions contemplated by this Agreement.
H. .Material Contracts and Agreement . No default, alleged default or
anticipatory breach exists on the part of DHS or, to the best knowledge of DHS
or any of its officers, on the part of any other party, under any material
agreement, written or oral, relating to the business of DHS.
I. .Tax Matters.
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1. DHS has filed all tax returns required to be filed by it
under the laws of the United States of America, the jurisdiction of its
incorporation, and each state or other jurisdiction in which it conducts
business activities and is required to file. DHS has paid or set up an
adequate reserve in respect of all taxes for the periods covered by such
returns. DHS does not have any tax liability for which no tax reserve has
been made in respect of any jurisdiction in which DHS has business activities
and is required to file. DHS has set up as provisions for taxes on the DHS
Balance Sheet amounts sufficient for all accrued and unpaid federal,
state, county and local taxes of DHS, whether or not disputed, including
any interest and penalties in connection therewith, for all fiscal periods
ending on or before the date of the DHS Balance Sheet.
2. No examinations of DHS' federal income tax returns are in
progress. The results of any settlements and any necessary adjustments in
state income tax resulting therefrom are properly reflected in DHS'
financial statements referred to in Section 5.5. DHS is not aware of any
fact which would constitute grounds for any further tax liability with
respect to the years which have not been examined. No agreements or waivers
have been made by or on behalf of DHS for the extension of time for the
assessment of any tax or for any applicable statute of limitations.
3. Except for taxes for the payment of which an adequate
reserve has been established on the DHS Balance Sheet, there are no tax
liens, whether imposed by any federal, state or local taxing authority,
outstanding against any of the assets, properties or business of DHS.
4. All taxes and assessments that DHS is required to withhold or
to collect have been duly withheld or collected and all withholdings and
collections have either been duly and timely paid over to the appropriate
governmental authority or are, together with the payments due or to become due
in connection therewith, duly reflected on the DHS Balance Sheet in accordance
with GAAP.
J. .Absence of Undisclosed Liabilities. DHS does not have any
material indebtedness, liability or obligation of any character whatsoever,
whether or not accrued and whether or not fixed or contingent, other than (i)
liabilities reflected in the DHS Balance Sheet, (ii) liabilities incurred in
the ordinary course of business of DHS since the date of the DHS Balance
Sheet, (iii) indebtedness, liabilities and obligations listed on Schedule
5.10 hereto, and (iv) liabilities incurred in connection with the performance
of this Agreement.
K. .Insurance. All significant policies of insurance, together with the
premiums currently paid thereon, providing for personal, employee, product
or public liability coverage with respect to the business of DHS are and will
be in full force and effect at the Closing Date and thereafter in accordance
with their terms. There are no claims, actions, suits or proceedings
arising out of or based upon any of such policies of insurance, and, so far as
is known to DHS or any of its officers, no basis for any such
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claim, action, suit or proceeding exists. There are no notices of any pending
or threatened terminations with respect to any of such policies and DHS is in
compliance with all conditions contained therein.
L. .No Material Adverse Change. Since the date of the DHS Balance Sheet,
DHS has not experienced any material damage, destruction or loss (whether or not
covered by insurance) to its assets or material adverse change in the
business, financial condition, operations, or results of operations of DHS.
M. .Required Consents. There have been or will be timely filed, given,
obtained or taken all applications, notices, consents, approvals, orders,
registrations, qualifications, waivers or other actions of any kind required
by virtue of the execution and delivery of this Agreement by DHS or Sub or the
consummation by DHS or Sub of any of the transactions contemplated hereby.
N. .Disclosure Registration Statement. The Securities Act Registration
Statement, the Prospectus (as defined in Section 6.1(b) of the
Agreement), and any post-effective amendment thereto, on the date on which
the Securities Act Registration Statement (or the post-effective amendment
thereto) shall become effective, on the date on which the Proxy Statement is
mailed to the Members of Medtrust in connection with the Special Meeting and at
all times subsequent to such effectiveness and mailing, up to and including
the date of the Special Meeting with respect to all information set forth
therein furnished by DHS and relating to DHS (i) will comply as to form in all
material respects with the provisions of the Securities Act and the rules
and regulations of the SEC thereunder, as applicable, and (ii) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they will
be made, not misleading. DHS will advise Medtrust promptly after it
receives notice thereof, of the times when the Securities Act Registration
Statement has become effective or any supplement or amendment thereto has been
filed, of the issuance of any stop order, of the suspension of the
qualification of the shares of DHS Common Stock issuable in connection with
the Merger for offering or sale in any jurisdiction, of the initiation or
threat of any proceeding for any such purpose, or of any request by the SEC
for the amendment or supplement of the Securities Act Registration Statement
or for additional information. DHS has made all filings with the SEC that it
has been required to make under the Exchange Act (collectively the "Public
Reports"). Each of the Public Reports has complied with the Exchange Act in all
material respects. None of the Public Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. DHS has
delivered to Medtrust a correct and complete copy of each Public Report
(together with all exhibits and schedules thereto and as amended to date).
O. .Disclosure; Representations and Warranties. DHS has made true and
complete responses to all Medtrust's requests for information, documents,
contracts, agreements and records of DHS relating to the business of DHS.
Neither this Agreement nor any statement, certificate, writing or document
furnished to Medtrust by DHS in connection with this Agreement contains, as
of the dates of
12
such documents, any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading.
P. .Finders or Brokers. DHS has not utilized the services of any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who might be entitled to a fee or commission in
connection with this Agreement or upon consummation of the transactions
contemplated hereby.
VII. TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF THE MERGER
A. .Special Meeting.
1. The Board of Directors of Medtrust has approved the execution
and delivery of this Agreement and the consummation of the Merger under
the terms set forth herein. If the Securities Act Registration Statement
shall become effective, DHS shall promptly notify Medtrust and furnish to
Medtrust at least one copy of its final Prospectus (as hereinafter
defined) for each Member. Thereafter, the Board of Directors of Medtrust
shall submit this Agreement to its Members for their adoption and will solicit
proxies in favor of and recommend to its Members such adoption at a
meeting thereof to be duly called and held upon the giving of the requisite
notices.
2. The parties hereto shall cooperate with each other in every
way in carrying out the transactions contemplated herein, including, but not
limited to, (i) in obtaining all required approvals and authorizations,
(ii) in furnishing information required for use in a proxy statement (the
"Proxy Statement") for use in connection with the Special Meeting to be held for
the purpose of considering the transactions contemplated by this Agreement,
(iii) in preparing and filing with the SEC a Registration Statement on Form S-1
under the Securities Act (or such other Form as may be appropriate) covering
the offer and sale of the shares of DHS Common Stock to be issued in
connection with the Merger (the "Securities Act Registration Statement"), the
prospectus and any prospectus supplement which shall constitute a part thereof
(the "Prospectus"), (iv) in preparing and filing such reports and applications
with state regulatory authorities in connection with the Merger, including the
issuance of the DHS Common Stock as may be required and (v) in executing and
delivering all documents, instruments or copies thereof deemed necessary or
useful by either party. Should the appearance of any of the officers, directors,
employees or counsel of any of the parties hereto be requested by any of the
parties or by any governmental agency at any hearing in connection with any such
application or in connection with any such agency's review of the transactions
contemplated hereby, the Securities Act Registration Statement, or the
Prospectus such party promptly shall use its best efforts to arrange for such
appearance. Medtrust and DHS, each promptly shall provide the other with copies
of all such applications and all amendments and supplements thereto filed
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or made in connection with the transactions contemplated hereby and promptly
shall advise the other of the substance of all oral or written comments
received thereon from applicable regulatory authorities.
B. .Effectiveness of Securities Act Registration Statement. DHS shall use
its best efforts to cause the Securities Act Registration Statement to become
effective as soon as practicable following the date hereof.
C. .Management of Medtrust. Contemporaneously herewith, DHS and Medtrust
have executed and delivered a Network Contracting and Management Services
Agreement in the form of Exhibit I (the "Management Services Agreement")
pursuant to which DHS will manage Medtrust until the earlier to occur of Closing
or termination of this Agreement.
VIII. CERTAIN COVENANTS AND AGREEMENTS
A. .Approvals; Consents. Medtrust will obtain or cause to be obtained all
consents, approvals and authorizations required by any applicable requirement of
law or by any contract or agreement to be obtained by Medtrust in connection
with the consummation of the Merger. DHS and Sub will obtain or cause to be
obtained all consents, approvals and authorizations required by any applicable
requirement of law or by any contract or agreement to be obtained by DHS and Sub
in connection with the consummation of the Merger.
B. .Conduct of Business Prior To Effective Time. Except as otherwise
provided in this Agreement, the Management Services Agreement and
the Exclusive Participation Agreements, Medtrust shall: (i) conduct its
business only in the ordinary course and consistent with past practices; (ii)
keep in full force and effect its corporate existence; (iii) comply with the
Material Contracts and other agreements by which it is bound; (iv) use
reasonable efforts to retain its employees and maintain its business
relationships with customers and suppliers; (v) use, operate and maintain in
all material respects its properties, as presently used, operated and
maintained, except for ordinary wear and tear; and (vi) except for increases in
the ordinary course of business and consistent with past practices, not grant
any increase in the compensation or rate of compensation payable or to
become payable to any of its employees. Except as otherwise provided in this
Agreement, DHS and Sub shall conduct its business in the ordinary course and
consistent with past practice. Without the prior written consent of the other
parties neither Medtrust on the one hand, nor Sub on the other hand, will:
(i) amend its charter or by-laws, (ii) except as expressly permitted by this
Agreement, declare, set aside or pay any dividend or distribution with
respect to its capital stock, or repurchase, redeem or otherwise acquire
or exchange, directly or indirectly, any shares of its capital stock or any
securities convertible into any shares of its capital stock, (iii) except as
expressly permitted by this Agreement, issue, sell or otherwise permit to become
outstanding any additional shares of its capital stock, or any option, warrant,
conversion, or other right to acquire any such stock or any security
convertible into any such stock, or
14
enter into an agreement or commitment with respect to the foregoing, (iv) enter
into any other agreement or commitment not in the ordinary course of business,
including without limitation an agreement or commitment to acquire direct or
indirect control over any third party or to sell or otherwise dispose of any
substantial part of its assets or any asset other than in the ordinary
course of business for reasonable and adequate consideration; (v) incur
any indebtedness, other than indebtedness incurred in the ordinary course of
business; or (vi) make any new commitments for capital expenditures exceeding
Five Thousand Dollars ($5,000) per item or Ten Thousand Dollars ($10,000) in
the aggregate.
C. .Access to Information and Documents.
1. From the date hereof to the Closing Date, Medtrust shall give
to, or cause to be made available for, DHS and Sub shall give to, or cause
to be made available for, Medtrust and their respective counsels,
accountants and other representatives full access during normal business
hours to all properties, documents, contracts, employees and records of
Medtrust or DHS and Sub and furnish the other party with copies of such
documents and with such information as such party from time to time
reasonably may request. Each party will make available to the other for
examination correct and complete copies of all Federal, state, local and
foreign tax returns filed together with all available revenue agents'
reports, all other reports, notices and correspondence concerning tax audits
or examinations and analyses of all provisions for reserves or accruals of
taxes, including deferred taxes.
2. Until the Closing Date (and, if this Merger Agreement is
terminated prior to the Closing Date, at all times after such termination),
the parties will not disclose or use any confidential information obtained
in the course of their respective investigations, except to the extent
that any such confidential information subsequently becomes public knowledge.
3. If the Merger is not consummated and this Agreement is
terminated, then DHS and Sub promptly shall return all documents, contracts,
records or properties of Medtrust furnished by Medtrust to DHS and Sub and all
copies thereof, and Medtrust promptly shall return all documents, contracts,
records or properties of DHS and Sub furnished by DHS and Sub to Medtrust, and
all copies thereof.
D. .Periodic Information.
1. From the date hereof to the Closing Date, Medtrust shall
furnish DHS withsuch additional financial and operating data and other
information regarding its business, reasonably available to Medtrust, as DHS
shall from time to time reasonably request.
2. From the date hereof to the Closing Date, DHS and Sub shall
furnish Medtrust with such additional financial and operating data and
other information regarding its business, reasonably available to DHS and
Sub as Medtrust shall from time to time reasonably request.
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E. .Representations. Each of the parties to this Agreement (a) will take all
action necessary to render accurate as of the Closing Date their
respective representations and warranties contained herein, (b) will refrain
from taking any action which would render any such representation or warranty
inaccurate in any material respect as of such time, and (c) will perform
or cause to be satisfied each covenant or condition to be performed or
satisfied by them under this Agreement.
F. .Information.
1. Medtrust will furnish DHS with all information concerning
Medtrust reasonably required for inclusion in the Securities Act Registration
Statement, the Prospectus, and any other registration statement, application
or filing made by DHS to the SEC or any other governmental or regulatory
body in connection with the transactions contemplated by this Agreement.
2. DHS will furnish Medtrust with all information concerning
DHS and Sub reasonably required for inclusion in the Proxy Statement or
any other governmental or regulatory body in connection with the
transactions contemplated by this Agreement.
G. .Notice of Breach.
1. DHS will immediately give notice to Medtrust of the
occurrence of any event or the failure of any event to occur that results in a
breach of any representation or warranty by DHS or Sub or a failure by DHS or
Sub to comply with any covenant, condition or agreement contained herein.
2. Medtrust will immediately give notice to DHS of the
occurrence of any event or the failure of any event to occur that results in a
breach of any representation or warranty by Medtrust or a failure by Medtrust
to comply with any covenant, condition or agreement contained herein.
H. .Director and Officer Insurance.
(a) DHS and Sub will use its commercially reasonable efforts to provide
each individual who serves as a director or officer of Sub following the
Effective Time with liability insurance for a period of 3 years after the
Effective Time on such specific terms and conditions as are customary and
mutually agreed upon by the parties; provided, however, that such insurance
shall apply to acts of such directors and officers after the Effective Time.
(b) DHS and Sub will not take any action to alter or impair any
exculpatory or indemnification provisions now existing in the articles of
incorporation or by-laws of Sub for the benefit of any individual who serves as
a director or officer of Sub.
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I. .Business Plan and Capitalization of Sub. As soon as practicable
after the Effective Time, DHS and the Board of Directors of Sub shall develop
a Business Plan for the development of a physician network in the Northern
Virginia area and shall determine the amount of capital DHS should invest in
the Sub for the purpose of funding its operations and providing adequate
reserves for the implementation of its Business Plan.
J. .Exclusivity. For a period of at least five years following Closing, DHS
shall utilize Sub as its exclusive independent practice association in the
Northern Virginia marketplace defined as the geographic area set forth on
Exhibit J.
K. .Establishment of Woman Care, IPA, LLC. DHS shall use commercially
reasonable efforts to organize, at its expense, a network of Medtrust's ob/gyn
physicians which shall include as its members qualified ob/gyn physician who
are presently affiliated with Medtrust. Such network shall be granted a right of
first refusal with respect to ob/gyn services for all third-party payor
contracts executed by Sub during the five-year period following Closing.
L. .Right of First Refusal to Specialists. For a period of four years
following the Effective Time, each specialist who is a member of Medtrust shall
have the right to participate, at his option, in all third-party payor
contracts available within a reasonable geographic area of such specialist's
office and executed by DHS, Medtrust, or its assigns, unless excluded by the
third party payor. Each such specialist will be required to be approved
pursuant to DHS normal credentialling process and will be required to meet
the utilization, quality assurance and performance guidelines established from
time to time by the plans. The fee arrangements under any such provider
agreements will be subject to modification from time to time by DHS.
M. .Primary Care Affiliation Agreements. Prior to Closing, DHS and/or Sub
shall solicit Medtrust primary care physicians to sign Exclusive
Participation Agreements pursuant to which such primary care physicians
will be paid Ten Thousand Dollars ($10,000) in cash upon the completion of their
credentialling. Credentialling shall be completed within ninety (90) days after
execution of the Exclusive Participation Agreement. Following Closing,
each primary care physician shall have the right to extend his agreement by
an additional term of two (2) years in which event he shall receive an
additional Five Thousand Dollars ($5,000) in cash and options to acquire 1,000
shares of DHS Common Stock at an exercise price of Twenty Dollars ($20) per
share. For a period of at least two (2) years following Closing, any primary
care physician employed by a Medtrust Member shall be permitted to elect to
sign Exclusive Participation Agreements with DHS and/or Sub on the same terms
and conditions as described above, subject only to completion of DHS normal
credentialling process.
N. .Registration of DHS Common Stock. The DHS Common Stock shall be
included as registered shares under the .ecurities Act Registration Statement.
IX. CONDITIONS TO OBLIGATIONS OF THE PARTIES
17
The obligations of the parties under this Agreement are subject to the
fulfillment and satisfaction of each of the following conditions:
A. .Member Approvals. At or before the Effective Time, the Members of
Medtrust holding more than two-thirds of the Membership interests shall have
approved the Merger and the terms of this Agreement ("Requisite Member
Approval").
B. .Pending Litigation. No legal, administrative, arbitrational,
investigatory or other proceeding shall be pending before any court, tribunal
or governmental authority at the Closing Date which seeks to challenge or
prevent the Merger or any transaction contemplated by this Agreement or which
seeks to obtain a remedy at law in connection therewith.
C. .Third Party Consents. At or before the Effective Time, all consents from
third parties necessary to consummate the transactions contemplated by this
Agreement shall have been obtained.
X. CONDITIONS TO DHS' OBLIGATIONS
The obligations of DHS and Sub hereunder are subject to the
satisfaction, at or before the Closing Date, of the following conditions (any of
which may be waived, in whole or in part, by DHS):
A. .Representations and Warranties. The representations and warranties of
Medtrust contained in this Agreement (including the Schedules and Exhibits
hereto), or in any certificate or document delivered to DHS in connection
herewith, shall be true in all material respects on the Closing Date as if
made again on and as of the Closing Date. Medtrust shall have duly
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by
Medtrust at or before the Closing Date. DHS shall have been furnished with
certificates of appropriate officers of Medtrust, dated the Closing Date,
certifying in such detail as Medtrust may reasonably request to the
fulfillment of the foregoing conditions.
B. .Opinion of Medtrust's Counsel. Xxxxxxx & Xxxxxxx, counsel to Medtrust,
shall have delivered to DHS and Sub an opinion, dated the Closing Date and
addressed to DHS and Sub in a form reasonably acceptable to DHS and Medtrust.
C. .Legal Matters Satisfactory. All legal matters, and the form and
substance of all documents to be delivered by Medtrust to DHS at the Closing,
shall have been approved by, and shall be satisfactory to, counsel to DHS.
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D. .No Material Adverse Change. There shall not have been any material
adverse change in the business or financial condition of Medtrust from that
disclosed in the Financial Statements.
E. .Alliance with Primary Care Physicians. At least thirty (30)
primary care physicians affiliated with Medtrust shall have executed and
delivered Exclusive Participation Agreements in the form of Exhibit K;
provided that each such primary care physician is capable of being
credentialled and included in DHS's managed care payor contracts. The
Exclusive Participation Agreements shall only become effective upon consummation
of the Closing.
F. .Dissenters To Merger. Members holding no more than twenty percent (20%)
of the membership interests of Medtrust shall have dissented to the
consummation of the Merger at the Special Meeting.
G. .Virginia Blue Sky Laws. The issuance of DHS Common Stock to Medtrust
Members shall have been approved by the Virginia Stock Corporation Commission.
XI. CONDITIONS TO MEDTRUST'S OBLIGATIONS
The obligations of Medtrust hereunder are subject to the satisfaction,
at or before the Closing Date, of the following conditions (any of which may be
waived, in whole or in part, by Medtrust):
A. .Representations and Warranties. The representations and warranties
of DHS contained in this Agreement, or in any certificate or document
delivered to Medtrust in connection herewith, shall be true in all material
respects at the Closing Date as if made again on and as of the Closing Date. DHS
shall have duly performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or
complied with by DHS at or before the Closing Date. Medtrust shall have been
furnished with certificates of appropriate officers of DHS, dated the Closing
Date, certifying in such detail as Medtrust may reasonably request to the
fulfillment of the foregoing conditions.
B. .Opinion of Counsel for DHS and Sub. Corporate counsel for DHS and Sub,
shall have delivered to Medtrust an opinion, dated the Closing Date and
addressed to Medtrust in a form reasonably acceptable to DHS and Medtrust.
C. .Legal Matters Satisfactory. All legal matter, and the form and substance
of all documents to be delivered by DHS to Medtrust at the Closing, shall
have been approved by, and shall be reasonably satisfactory to, counsel to
Medtrust.
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D. .No Material Adverse Change. There shall not have been any material
adverse change in the business or financial condition of DHS from that
disclosed in the DHS Balance Sheet for the period from the date of the DHS
Balance Sheet to the Closing Date.
E. .Registration Statement. At or before the Effective Time, the
Securities Act Registration Statement shall have been declared effective by
the SEC and be effective on the Closing Date, and all applicable approvals
of governmental regulatory authorities of the United States of America
or of any state or political subdivision thereof required to consummate the
Merger shall have been obtained.
F. .Issue Price of DHS Common Stock. Between the date hereof and the
Effective Time, the consideration for the issuance of DHS Common Stock to
physicians in physician acquisition transactions shall be based upon a price of
not less than $15 per share.
XII. TERMINATION
A. .Termination. This Agreement may be terminated and the Merger abandoned
at any time before the Closing Date:
1. by the written consent of Medtrust and DHS;
2. by DHS, in writing, if there has been a material
misrepresentation in this Agreement by Medtrust, or a material breach by
Medtrust of any of its warranties or covenants set forth herein, or a failure
of any condition to which the obligations of DHS hereunder are subject;
3. by Medtrust, in writing, if there has been a material
misrepresentation in this Agreement by DHS, or a material breach by DHS or
Sub of any of the warranties or covenants of DHS or Sub set forth herein, or a
failure of any condition to which the obligations of Medtrust hereunder are
subject;
4. by either Medtrust or DHS, in writing, if the Effective Time
shall not have occurred before January 31, 1997, for any reason other than
the failure of the party seeking to terminate this Agreement to perform its
obligations hereunder or a misrepresentation or breach of warranty by such party
herein;
B. .Effect of Termination. In the event of termination of this Agreement
pursuant to Section 11.1, the provisions of Section 7.3 and 12.12 shall survive
any such termination and no such termination will relieve any party from any
liability for any breach of this Agreement or any misrepresentation giving
rise to such termination.
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XIII. MISCELLANEOUS
A. .Expenses. Each party hereto shall pay its own costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance of and compliance with all agreements and conditions contained
herein to be performed or complied with by it, except that DHS will pay up to
$30,000 of the fees and expenses of Xxxxxxx & Xxxxxxx as counsel to Medtrust
with respect to periods after August 14, 1996, irrespective of whether
this transaction shall be consummated.
B. .Survival of Representations, Warranties and Covenants.nties and Covenants
1. The representations, warranties and covenants of each party
hereto shall terminate upon (i) the Closing, or (ii) upon the date of
termination of this Agreement and abandonment of the Merger pursuant to the
provisions of Section 11.1 and the parties hereto shall have no continuing
obligations or liabilities with respect thereto except as may be provided in
Section 12.2(b) below and except for the covenants set forth in Sections 7.3,
7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14 and 12.12 which shall survive the
Closing.
2. If either DHS or Medtrust shall have the right to terminate
this Agreement and abandon the Merger pursuant to the provisions of
Section 11.1(b) or Section 11.1(c), then the party which does not have the
right so to terminate this Agreement will use its reasonable efforts to cure the
condition giving rise to such right. If such party is unable to cure the
condition giving rise to such right, the other may exercise its right under
Section 11.1(b) or Section 11.1(c) to terminate this Agreement and abandon the
Merger, or may waive such right and proceed to consummate the Merger. In any
such event, the representations, warranties, covenants and agreements of the
parties shall terminate, and the parties hereto shall have no continuing
obligations or liabilities with respect thereto, except that no termination
shall relieve any party from liability for a breach of any representation,
warranty or covenant giving rise to such termination and except that the
provisions of Sections 7.3, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14 and 12.12
shall survive the Closing or termination of this Agreement.
C. .Governing Law; Jurisdiction and Venue. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF VIRGINIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
WITHIN SUCH STATE. EACH PARTY AGREES THAT THE FEDERAL COURTS OF THE UNITED
STATES OR STATE COURTS OF VIRGINIA SHALL HAVE THE EXCLUSIVE JURISDICTION FOR
ANY DISPUTE UNDER THIS AGREEMENT. MEDTRUST, DHS AND SUB HEREBY CONSENT TO
PERSONAL JURISDICTION IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT SITTING IN
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ALEXANDRIA, VIRGINIA OR ANY STATE COURT LOCATED WITHIN THE EASTERN DISTRICT
WITH RESPECT TO CLAIMS ARISING UNDER THIS AGREEMENT.
D. .Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be deemed validly given, made or
served if in writing and delivered personally (as of such delivery) or
sent by certified mail (as of two days after deposit in a United States post
office), or sent by overnight courier service (as of two days after
delivery to an internationally recognized courier service), or by facsimile
(upon receipt), in any case, postage and charges prepaid,
1. if to DHS or Sub, addressed to:
00000 Xxxx Xxx Xxxxxx
Tenth Floor
Owings Mills, MD 21117
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
Xxxxxxx, Carton & Xxxxxxx
0000 X Xxxxxx, X.X.
Xxxxx 000, Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: E. Xxxxxxx Xxxxxxxx, Esq.
Xxxxxx X. Xxxx, Esq.
Corporate Counsel
00000 Xxxx Xxx Xxxxxx
Xxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
2. if to Medtrust, addressed to:
Medtrust Medical Group, Inc.
0000 Xxx Xxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxxxx & Xxxxxxx
Xxx Xxxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxx Xxxxx, III, Esq.
or such other address as shall be furnished in writing by either party to the
other.
E. .Press Releases. Medtrust and DHS will consult and cooperate in the
issuance, form, content and timing of any press releases issued in connection
with the transactions contemplated by this Agreement.
F. .Assignment; Amendments, Waivers
1. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the
others.
2. This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and permitted
assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement.
3. No provision of this Agreement may be amended, modified or
waived except by written agreement duly executed by each of the parties. No
waiver by either party of any breach of any provision hereof shall be deemed to
be a continuing waiver thereof in the future or a waiver of any other provision
hereof; nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter.
G. .Entire Agreement. This Agreement represents the entire agreement
between the parties and supersedes and cancels any prior oral or written
agreement, letter of intent or understanding related to the subject matter
hereof.
H. .Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect, unless such action would substantially impair the benefits to
either party of the remaining provisions of this Agreement.
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I. .Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
J. .Counterparts. This Agreement may be executed in one or more counterparts
which, taken together, shall constitute one and the same instrument, and this
Agreement shall become effective when one or more counterparts have been signed
by each of the parties.
K. .Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties to this Agreement
and their respective successors and permitted assigns. Notwithstanding the
foregoing, from and after Closing, any Member of Medtrust as of Closing
shall be entitled to enforce the provisions of Sections 7.8, 7.9, 7.10, 7.11,
7.12, 7.13 and 7.14 hereof as if such Member were an original party hereto
to the extent that the provisions of any such section are intended for the
benefit of such Member.
L. .Enforcement Costs. The prevailing party shall be entitled to recover its
costs of enforcement, including, without limitation, reasonable attorneys'
fees, in any action brought to enforce its rights hereunder or to seek
redress for a breach of any of the representations, warranties or covenants set
forth herein.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto on the day and year first above written.
MEDTRUST MEDICAL GROUP, INC. DOCTORS HEALTH SYSTEM, INC.
By:_____________________________ By:______________________________
Stewart B. Gold, President
Name:___________________________
Title:__________________________
DOCTORS HEALTH OF VIRGINIA, INC.
By:_____________________________
Stewart B. Gold, President
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