MERGER AGREEMENT
BY AND AMONG
SPECIALTY CARE NETWORK, INC.,
ORTHOPEDIC SURGEONS ASSOCIATED OF LIMA, INC.,
XXXXX X. XXXXX, M.D.,
XXXXX X. XXXXX, M.D.,
XXXXX X. XXXXXXX, M.D.,
XXXX X. XXXXXX, M.D.,
XXXXX X. X'XXXXX, M.D.,
and
XXXX X. XXXXXXXX, M.D.
September 10, 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 OSAL and OSAL Stockholders...........- 5 -
(a) Organization, Qualification, and Corporate Power.............- 5 -
(b) OSAL 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 -
(c) Authorization of Transaction................................- 13 -
(d) Noncontravention............................................- 13 -
(e) Brokers' Fees...............................................- 13 -
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Page
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5. Covenants.............................................................- 13 -
(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.......................................- 15 -
(m) Distribution of Excluded Assets.............................- 15 -
(n) Satisfaction of Indebtedness................................- 16 -
(o) Conversion into Business Corporation........................- 16 -
(p) Employee Benefit Plans......................................- 16 -
(q) Securities Laws Compliance..................................- 16 -
(r) Filing Final Tax Returns/Payment of Applicable Taxes........- 16 -
6. Conditions to Obligation to Close.....................................- 16 -
(a) Conditions to Obligation of SCN.............................- 16 -
(b) Conditions to Obligation of OSAL............................- 17 -
7. Items to be Delivered at or Prior to Closing..........................- 17 -
(a) By the OSAL Stockholders or OSAL............................- 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 OSAL Stockholders....................- 19 -
(b) Notice to the OSAL Stockholders; Opportunity to Defend......- 19 -
(c) General Indemnification by SCN..............................- 19 -
(d) Notice to SCN; Opportunity to Defend........................- 19 -
(e) Right of Setoff.............................................- 00 -
00. Xxxxxxxxxxxxx........................................................- 00 -
(x) Xxxxxxxx....................................................- 00 -
(x) No Third-Party Beneficiaries................................- 20 -
(c) Entire Agreement............................................- 20 -
(d) Succession and Assignment...................................- 20 -
(e) Counterparts................................................- 20 -
(f) Headings....................................................- 20 -
(g) Notices.....................................................- 20 -
ii
Page
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(h) Governing Law...............................................- 21 -
(i) Amendments and Waivers......................................- 21 -
(j) Severability................................................- 21 -
(k) Expenses....................................................- 21 -
(l) Construction................................................- 21 -
(n) Incorporation of Exhibits and Schedules.....................- 22 -
iii
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is entered into this the 10th day
of September, 1997, by and among SPECIALTY CARE NETWORK, INC., a Delaware
corporation ("SCN"), ORTHOPEDIC SURGEONS ASSOCIATED OF LIMA, INC., an Ohio
professional corporation ("OSAL") and XXXXX X. XXXXX, M.D., XXXXX X. XXXXX,
M.D., XXXXX X. XXXXXXX, M.D., XXXX X. XXXXXX, M.D., XXXXX X. X'XXXXX, M.D., and
XXXX X. XXXXXXXX, M.D. (collectively, the "OSAL Stockholders"). SCN, OSAL and
the OSAL Stockholders are referred to collectively herein as the "Parties".
W I T N E S S E T H:
WHEREAS, SCN and OSAL have determined that it is desirable and in the best
interests of their respective corporations and stockholders that OSAL 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 OSAL 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 Ohio 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).
"Closing Date" has the meaning set forth in Section 2(b) below.
"Closing" has the meaning set forth in Section 2(b) below.
"Code" has the meaning set forth in the recitals above.
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"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.
"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 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. ss.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. ss.2501, et seq., the Marine Protection, Research and Sanctuaries
Act of 1972, 33 U.S.C.A. ss.1401, et seq., the Occupational Safety and
Health Act, 29 U.S.C.A. ss.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.
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"Ohio Certificate of Merger" has the meaning set forth in Section 2(a)
below.
"Ohio General Corporation Law" means the Ohio General Corporation Law of
the State of Ohio, as amended.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"OSAL" has the meaning set forth in the preface above.
"OSAL Share" means any share of the issued and outstanding common stock of
OSAL at the date of this Agreement.
"OSAL Stockholders" has the meaning set forth in the preface above.
"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" 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.
"Service Agreement" shall mean that certain Service Agreement dated as of
the Closing Date by and among SCN, Orthopaedic Institute of Ohio, Inc., the OSAL
Stockholders, and certain other individuals 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.
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2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, OSAL 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. OSAL shall enter into the Agreement and Plan of Merger
upon adoption of the Agreement and Plan of Merger by the Board of Directors of
OSAL and the OSAL Stockholders and the satisfaction or waiver of the conditions
precedent to OSAL'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 Certificate of
Merger in substantially the form attached hereto as Exhibit 2(a)(2) (the "Ohio
Certificate of Merger")shall be executed and filed with the Secretary of State
of the State of Ohio , 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
Ohio to effect the Merger. Thereafter, the separate corporate existence of OSAL
shall cease and OSAL 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 Xxxxx Xxxxxxxx, 000
Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxx, Xxxx, 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"). Time
is of the essence for this Agreement.
(c) Actions at the Closing. At the Closing, (i) OSAL will deliver to SCN
the various certificates, instruments, and documents referred to in Section 7(a)
below, (ii) SCN will deliver to OSAL the various certificates, instruments, and
documents referred to in Section 7(b) below, (iii) SCN and OSAL will file with
the Secretary of State of the State of Delaware the Delaware Certificate of
Merger, and (iv) SCN and OSAL will file with the Secretary of State of the State
of Ohio the Ohio Certificate of Merger.
(d) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") SCN and OSAL file the Delaware Certificate of Merger with
the Secretary of State of the State of Delaware and file the Ohio
Certificate of Merger with the Secretary of State of the State of Ohio .
The Merger shall have the effect set forth in the Delaware General
Corporation Law and the Ohio Ohio 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 OSAL 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.
(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).
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(v) Conversion of OSAL Shares. At and as of the Effective Time, each
of the issued and outstanding OSAL Shares shall be converted into (A) the
right to receive Twenty-Thousand Seven Hundred Sixty and Seventeen
Hundredths (20,760.17) SCN Shares (the ratio of Four Hundred Ninety-Eight
Thousand Two Hundred Forty-Four SCN Shares divided by the total number of
OSAL Shares outstanding is referred to herein as the "Conversion Ratio")
and (B) the right to receive a cash payment of Forty-Six Thousand Four
Hundred Fifty-Three and 58/100 Dollars ($46,453.58). 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 OSAL
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 $12.875.
3. Representations and Warranties of OSAL and OSAL Stockholders. OSAL and
the OSAL Stockholders, jointly and severally, 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.
(a) Organization, Qualification, and Corporate Power. OSAL is a
professional corporation duly organized, validly existing, and in good standing
under the laws of the State of Ohio . OSAL 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
OSAL makes such qualification necessary. OSAL 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) OSAL Stockholder Interests and Capitalization. The capital stock of
OSAL is owned in the manner set forth in Section 3(b) of the Disclosure
Schedule. All of the issued and outstanding OSAL 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 OSAL 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 OSAL. As of the date of this Agreement, the authorized capital stock
of OSAL consists of 500 shares of OSAL common stock, of which 24 shares were
issued and outstanding.
(c) Authorization of Transaction. OSAL 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 OSAL and the OSAL 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 OSAL
is subject or any provision of the charter or bylaws of OSAL 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 OSAL 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). OSAL is not required to give any
notice to, make any filing
- 5 -
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. OSAL 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. OSAL has furnished SCN with unaudited balance
sheets dated December 31, 1995 and 1996 and July 31, 1997 and unaudited income
statements for the twelve (12) month periods ending December 31, 1996, 1995 and
1994 and the seven (7) months ended July 31, 1997. Such financial statements,
including the notes thereto, except as indicated therein, were prepared on a
basis consistent with past accounting practices of OSAL and fairly present the
results of operations for the periods noted therein. The balance sheets of OSAL
delivered by OSAL to SCN fairly present the financial condition of OSAL at the
date thereof, and except as indicated therein, reflect all claims against and
all debts and liabilities of OSAL, fixed or contingent, as of the date thereof.
(g) Undisclosed Liabilities. OSAL 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. OSAL 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 OSAL 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;
(iv) any agreement (or group of related agreements) under which OSAL
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 OSAL'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;
- 6 -
(viii) any agreement pursuant to which OSAL 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 OSAL;
or
(x) any other agreement (or group of related agreements) outside the
ordinary course of OSAL's business or operations the performance of which
involves consideration in excess of $15,000.
OSAL 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 OSAL 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, 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 OSAL Stockholders, OSAL and OSAL's professional employees
and all predecessor policies in effect since February 1, 1990. Neither OSAL, the
OSAL Stockholders, nor OSAL's professional employees have, in the last seven (7)
years, filed a written application for any insurance coverage relating to OSAL's
business or property which has been denied by an insurance agency or carrier.
OSAL, OSAL's professional employees and the OSAL 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 OSAL, OSAL's professional employees or the OSAL 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 OSAL, OSAL's professional
employees or the OSAL 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.
(k) No Changes Prior to Closing Date. During the period from December 31,
1996 through the date hereof, OSAL 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 OSAL, (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.
- 7 -
(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 OSAL (the "Practice Assets"). OSAL 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. OSAL 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 OSAL or any
of the Practice Assets, or any physician or other health care professional
engaged or employed by OSAL, and to the best Knowledge of the OSAL 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. OSAL and all physicians and other health care
professionals engaged or employed by OSAL have all permits and licenses required
by all applicable laws; have made all regulatory filings necessary for the
conduct of OSAL'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 OSAL required
by law to be filed have been timely filed, and OSAL 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 OSAL has set aside on its
books adequate reserves. There are no tax liens on any of OSAL's assets except
those with respect to taxes not yet due and payable. There are no pending tax
examinations of OSAL's tax returns nor has OSAL 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 up to and through the Effective Time, any
claims pending or asserted against OSAL for unpaid taxes by any federal, state
or other governmental body. OSAL has withheld from each payment made to
employees of OSAL 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.
(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 OSAL (including all employers
(whether or not incorporated) which by reason of common control are treated
together with OSAL and/or the OSAL Stockholders as a single employer within
the meaning of Section 414 of the Code) since September 2, 1974.
(ii) Status of Plans. OSAL 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. OSAL has not incurred any
liability to the Pension Benefit Guaranty Corporation
- 8 -
("PBGC") in connection with any Employee Benefit Plan covering any
employees of OSAL 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 OSAL to the PBGC under Title IV
of ERISA which could reasonably be anticipated to result in any claims
being made against OSAL by the PBGC. OSAL 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 OSAL.
(iii) Contributions. Full payment has been made of all amounts which
OSAL is required, under applicable law or under any Employee Benefit Plan
or any agreement relating to any Employee Benefit Plan to which OSAL 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. OSAL 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. OSAL 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.
(vi) Other Plans. OSAL 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. OSAL 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. OSAL has not received any notice that any
material patient, supplier, employee or associated physician intends to cease
doing business with OSAL.
(r) Compliance with Applicable Laws. OSAL has operated in compliance with
all federal, state, county and municipal laws, constitutions, ordinances,
statutes, rules, regulations and orders applicable thereto ("Applicable Laws").
No item disclosed in Section 3(r) of the Disclosure Schedule could have a
material effect on SCN. Neither OSAL nor any physician associated with or
employed by OSAL has received payment or any remuneration whatsoever to induce
- 9 -
or encourage the referral of patients or the purchase of goods and/or services
as prohibited under 42 U.S.C. ss.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. OSAL 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 OSAL's employees.
(t) Environmental Matters.
(i) OSAL is in full compliance with all applicable Environmental Laws.
(ii) OSAL 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 OSAL.
(iii) OSAL has, 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) OSAL 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 OSAL or, with
respect to the Practice Assets or any property owned or leased by OSAL (b)
alleges that OSAL is a liable party or potentially responsible party under
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss.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 OSAL, or (d) alleges that
OSAL is liable for any contamination of the environment, contamination of
any property owned or leased by OSAL, 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, OSAL has complied with all
Medical Waste Laws.
(u) Healthcare Compliance. OSAL 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. OSAL is in compliance in
all material respects with the requirements of all such third-party payors.
OSAL, the OSAL Stockholders, and OSAL's physician employees do not have any
financial relationship (whether investment interest, compensation
- 10 -
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. OSAL, the OSAL Stockholders and persons and entities
providing professional services for OSAL have not engaged in any activities
which are prohibited under 42 U.S.C. ss.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 or 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. OSAL 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 OSAL 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, OSAL 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 OSAL is
located does not currently impose any restrictions or limitations on rates which
may be charged to private pay patients receiving services provided by OSAL. OSAL
does not have any rate appeal currently pending before any governmental
authority or any administrator of any third-party payor program. To the best
Knowledge of the OSAL Stockholders 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 no such legal
requirement is proposed or currently pending in the jurisdiction in which OSAL
is located, which could have a material adverse effect on OSAL or may result in
the imposition of additional Medicaid, Medicare, charity, free care, welfare, or
other discounted or government assisted patients at OSAL or require OSAL to
obtain any necessary authorization which OSAL 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
OSAL, as being due to OSAL, (i) are valid, existing and to the best Knowledge of
the OSAL Stockholders are collectible (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 except to the
extent of any such provision or reserve. There has been no material adverse
change since July 31, 1997, in the amount of accounts receivable or other debts
due OSAL, the allowances with respect thereto, or accounts payable of OSAL from
that reflected in the most recent balance sheet previously delivered by OSAL to
SCN.
(z) Guaranties. OSAL is not a guarantor and otherwise is not liable for any
liability or obligation (including indebtedness) of any other Person.
- 11 -
(aa) Powers of Attorney. There are no outstanding powers of attorney
executed by OSAL, except as may be contained in financing documents or security
agreements listed in Section 3(i) of the Disclosure Schedule.
(bb) Tangible Assets. OSAL owns or leases all land, buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. 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 OSAL nor the OSAL Stockholders owns, beneficially or
otherwise, any SCN Shares.
(ii) SCN Shares issuable in the Merger are being acquired by the OSAL
Stockholders solely for their own account for investment and not with a
view to the distribution thereof, and the OSAL 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 OSAL Stockholders represent and warrant as follows:
(A) The OSAL 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 OSAL
Stockholders requested, which additional information has been
received.
(B) In deciding to acquire SCN Shares pursuant to this Agreement,
the OSAL 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 (A)
above.
(C) Each OSAL 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 OSAL 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.
(D) The OSAL 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 OSAL 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.
(E) The OSAL 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 OSAL Stockholders must 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
- 12 -
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 of Rule
144, such disposition can be made only in accordance with the terms
and conditions of such Rule (a summary of which is attached hereto as
Exhibit 3 (cc)); (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 OSAL 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
OSAL 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 and two
million (2,000,000) shares of preferred stock. 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
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.
- 13 -
(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. OSAL 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, OSAL 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) OSAL will not authorize or effect any change in its charter
documents or bylaws;
(ii) OSAL 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) OSAL 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) OSAL 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) OSAL will not impose any Security Interest upon any of its assets
outside the Ordinary Course of Business;
(vi) OSAL 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) OSAL will not make any change in employment terms for any of its
directors, officers or employees outside the Ordinary Course of Business;
and
(viii) OSAL will not commit to do any of the foregoing.
- 14 -
(e) Further Acts and Assurances. OSAL and the OSAL 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, OSAL 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 OSAL during normal business hours. SCN will treat and hold as
such any confidential information it receives from OSAL in the course of the
reviews contemplated by this Section 5(e), 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 OSAL all tangible
embodiments (and all copies) thereof which are in its possession.
(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(f), 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) October 31, 1997, or (ii) the
Effective Time, OSAL 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 OSAL (including any
acquisition structured as a merger, consolidation, or share exchange). OSAL
shall notify SCN immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(i) Collection of Accounts Receivable. The OSAL Stockholders agree to
cooperate with SCN in the collection of accounts receivable owned by OSAL 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 OSAL 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, OSAL 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 OSAL
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 OSAL in favor of the Merger and
voting as stockholders of OSAL in favor of the Merger at any meetings (or in any
action by written consent) required by the Ohio General Corporation Law.
(l) Malpractice Insurance. On or before the Effective Time, all physicians
and employees of OSAL must be covered by medical malpractice insurance and, if
required by SCN, medical malpractice tail insurance to cover prior occurrences
shall be procured by OSAL.
(m) Distribution of Excluded Assets. Prior to the Effective Time, OSAL
shall have distributed to the OSAL Stockholders all of the assets listed on
Schedule 5(m), which constitute the entirety of the assets owned by OSAL not
being acquired by SCN (the "Excluded Assets").
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(n) Satisfaction of Indebtedness. Prior to the Effective Time, OSAL shall
have caused the payoff of all liabilities owed to third-parties and all
indebtedness owed to banks or other financial institutions or lenders or shall
have caused the assumption thereof by a new entity organized by the OSAL
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 OSAL, 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 OSAL, 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 OSAL; nor (iv) any liability
based upon or arising out of any tortious or wrongful actions of OSAL or any
Physician Owner, or any liability for the payment of any taxes imposed by law on
OSAL arising from or by reason of the transactions contemplated by this
Agreement. OSAL shall establish a reserve for income, excise or other taxes owed
by OSAL through the Effective Time, including but not limited to any such taxes
to be paid upon the collection of any cash basis accounts receivable existing on
the books of OSAL at the Effective Time.
(o) Conversion into Business Corporation. If required by the Ohio General
Corporation Law, prior to the Effective Time, the OSAL Stockholders shall have
caused the conversion of OSAL to a Ohio business corporation.
(p) Employee Benefit Plans. Prior to the Effective Time, all Employee
Benefit Plans shall be terminated in accordance with Applicable Law or
Orthopaedic Institute of Ohio, Inc. shall have taken whatever actions are
necessary to become the sponsor of any such plans.
(q) Securities Laws Compliance. No OSAL 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.
(r) Filing Final Tax Returns/Payment of Applicable Taxes. The OSAL
Stockholders shall cause to be filed all final tax returns for OSAL and shall
pay any and all taxes owed or accrued up to and through the Effective Time.
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) OSAL 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) OSAL 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 OSAL;
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(v) SCN shall have received the resignations, effective as of the
Closing, of each director and officer of OSAL 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 OSAL and/or the OSAL 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 OSAL 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 OSAL. The obligation of OSAL to consummate
the Merger is subject to satisfaction of the following conditions:
(i) This Agreement and the Merger shall have received the OSAL
director and OSAL Stockholders' approval required by the Ohio 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
(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 OSAL.
OSAL 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 OSAL Stockholders or OSAL. The OSAL Stockholders or OSAL, as
applicable, shall execute and deliver to SCN, prior to or at the Closing:
(i) Certified resolutions of the directors and stockholders of OSAL
authorizing the execution of all documents and the consummation of all
transactions contemplated hereby;
(ii) The Ohio Certificate of Merger which shall be in the form
required by SCN's legal counsel;
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(iii) Stock Certificates representing ownership of all shares of OSAL,
duly endorsed to SCN;
(iv) A Service Agreement in the form attached hereto as Exhibit
7(a)(iv);
(v) A certificate duly executed by the President of OSAL and the OSAL
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 OSAL and the OSAL Stockholders have been
performed or complied with and all conditions to closing have been complied
with;
(vi) An opinion from OSAL's counsel in substantially the form attached
hereto as Exhibit 7(a)(vi); and
(vii) Such other instruments as may be reasonably requested by SCN in
order to effect to or carry out the intent of this Agreement.
(b) By SCN. SCN shall deliver to OSAL at or prior to the Closing:
(i) Stock Certificates representing the SCN Shares being issued to the
OSAL 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 the President 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 Service Agreement in the form attached hereto as Exhibit
7(a)(iv); and
(vi) Such other instruments as may be reasonably requested by OSAL or
the OSAL 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 OSAL
at any time prior to the Effective Time (A) in the event OSAL has breached
any representation, warranty, or covenant contained in this Agreement in
any material respect, SCN has notified OSAL of the breach, and the breach
has continued without cure for a period of 30 days after the notice of
breach, (B) if the Closing shall not have occurred on or before October 31,
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 (C)
in accordance with Section 5(j); or
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(iii) OSAL 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, OSAL 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
October 31, 1997 by reason of the failure of any condition precedent under
Section 6(b) hereof (unless the failure results primarily from OSAL
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). Notwithstanding the foregoing, in the
event the Merger is not consummated (i) due to the fault of OSAL or the OSAL
Stockholders, or (ii) because SCN is dissatisfied with any disclosure made in
the Disclosure Schedule, then OSAL agrees to reimburse SCN for SCN's out of
pocket expenses, including but not limited to professional fees, related to the
proposed transaction.
9. Indemnification.
(a) Indemnification by the OSAL Stockholders. The OSAL Stockholders,
jointly and severally, agree 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 OSAL or the OSAL
Stockholders set forth in this Agreement, from any loss, liability or expense
resulting from or related to OSAL's operation of its business prior to the
Effective Time and from any loss, liability or expense resulting from or related
to any actions, suits, proceedings, hearings, and investigations set forth in
Section 3(m) of the Disclosure Schedule. The OSAL Stockholders shall not be
liable to SCN for any claims against the OSAL Stockholders under this Section
9(a) unless and until the aggregate of all claims against the OSAL 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 OSAL Stockholders; Opportunity to Defend. SCN agrees to
give prompt notice to the OSAL 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 OSAL Stockholders may
participate in and at their election, or at the request of SCN, assumes the
defense of any such suit, action or proceeding at the OSAL Stockholders'
expense. The OSAL 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.
(c) General Indemnification by SCN. SCN agrees to and shall defend,
indemnify and hold harmless the OSAL Stockholders, their heirs and assigns
against any and all losses, liabilities, expenses (including, but without
limitation, reasonable attorneys fees) and damages resulting from the breach,
untruth or inaccuracy of any representation, warranty or covenant of SCN set
forth in this Agreement. SCN shall not be liable to the OSAL 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 OSAL
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 OSAL 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 OSAL 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.
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(e) Right of Setoff. In the event of any breach of warranty,
representation, covenant or agreement by OSAL or the OSAL 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 OSAL Stockholders or Orthopedic Institute of Ohio, Inc. 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 OSAL
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 OSAL
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 OSAL 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 OSAL 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 OSAL Stockholders,
OSAL and SCN contained in this Agreement and the indemnifications contained
herein shall survive the Closing. Except as set forth in the following sentence
of this Agreement, no claim for indemnification with respect to any alleged
misrepresentation or breach of warranty or covenant may be made after two (2)
years following the Closing Date. SCN shall be entitled to indemnification for
claims for breaches of representations, warranties or covenants relating to
matters involving the payment of taxes (including penalties and/or interest
thereon) or reimbursement of any amounts to Medicare, Medicaid or third-party
payors (including penalties and/or interest thereon) for so long as the
applicable statute of limitations for collection of such amounts continues. 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.
(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:
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If to OSAL: Copy to:
Xxxxx X. Xxxxx, M.D. Xxxxx X. Xxxxxxxx, Esq.
0000 X. Xxx Xxxxxx, Xxxxx 000 Xxxx, Meredith, Witter, Xxxxx & Xxxxxx
Xxxx, Xxxx 00000 000 Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Facsimile: (000) 000-0000 Xxxx, Xxxx 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. 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.
(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 OSAL stockholder approval will be subject
to the restrictions contained in the Ohio 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
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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 OSAL 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.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
SPECIALTY CARE NETWORK, INC.
By:
---------------------------------------
Title:
-----------------------------------
ORTHOPEDIC SURGEONS ASSOCIATED OF LIMA, INC.
By:
---------------------------------------
Title:
-----------------------------------
------------------------------------------
Xxxxx X. Xxxxx, M.D.
------------------------------------------
Xxxxx X. Xxxxx, M.D.
------------------------------------------
Xxxxx X. Xxxxxxx, M.D.
------------------------------------------
Xxxx X. Xxxxxx, M.D.
------------------------------------------
Xxxxx X. X'Xxxxx, M.D.
------------------------------------------
Xxxx X. XxXxxxxx, M.D.
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