MERGER AGREEMENT
BY AND AMONG
SPECIALTY CARE NETWORK, INC.,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., P.C.
AND
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
November _____, 1996
TABLE OF CONTENTS
Page
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1. Definitions........................................................1
2. Basic Transaction..................................................3
(a) The Merger..................................................3
(b) The Closing.................................................3
(c) Actions at the Closing......................................3
(d) Effect of Merger............................................3
3. Representations and Warranties of FJMDPC and JAGGEARS..............4
(a) Organization, Qualification, and Corporate Power............4
(b) Capitalization..............................................4
(c) Authorization of Transaction................................4
(d) Noncontravention............................................4
(e) Subsidiaries and Investments................................5
(f) Financial Statement.........................................5
(g) Undisclosed Liabilities.....................................5
(h) Brokers' Fees...............................................5
(i) Material Contracts..........................................5
(j) Insurance; Malpractice......................................6
(k) No Changes Prior to Closing Date............................6
(l) Title; Condition............................................7
(m) Litigation..................................................7
(n) Permits and Licenses........................................7
(o) Tax Matters.................................................7
(p) Employee Benefit Plans......................................7
(q) Third-Party Relations.......................................8
(r) Compliance with Applicable Laws.............................8
(s) Employee Compensation.......................................9
(t) Environmental Matters.......................................9
(u) Healthcare Compliance.......................................9
(v) Fraud and Abuse............................................10
(w) Practice Compliance........................................10
(x) Rates and Reimbursement Policies...........................10
(y) Accounts Receivable........................................10
(z) Guaranties.................................................11
(aa) Powers of Attorney.........................................11
(bb) Tangible Assets............................................11
(cc) SCN Share Ownership; Investment Intent.....................11
(dd) Full Disclosure............................................12
4. Representations and Warranties of SCN.............................12
(a) Organization...............................................12
(b) Capitalization.............................................12
(c) Authorization of Transaction...............................12
(d) Noncontravention...........................................12
(e) Brokers' Fees..............................................12
(f) Private Placement Memorandum...............................12
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5. Covenants.........................................................13
(a) General....................................................13
(b) Notices and Consents.......................................13
(c) Regulatory Matters and Approvals...........................13
(d) Operation of Business......................................13
(e) Full Access................................................14
(f) Notice of Developments.....................................14
(g) Exclusivity................................................14
(h) Collection of Accounts Receivable..........................14
(i) Payment of Expenses........................................14
(j) Completion of Schedules....................................14
(k) Corporate Authorization....................................14
(l) Malpractice Insurance......................................15
(m) Distribution of Excluded Assets............................15
(n) Establishment of Accruals..................................15
(o) Satisfaction of Indebtedness...............................15
(p) Accrued Vacation and Sick Time.............................15
6. Conditions to Obligation to Close.................................15
(a) Conditions to Obligation of SCN............................15
(b) Conditions to Obligation of FJMDPC.........................16
7. Items to be Delivered at or Prior to Closing......................16
(a) By JAGGEARS or FJMDPC......................................16
(b) By SCN.....................................................17
8. Termination.......................................................18
(a) Termination of Agreement...................................18
(b) Effect of Termination......................................18
9. Indemnification...................................................18
(a) Indemnification by JAGGEARS................................18
(b) Notice to JAGGEARS; Opportunity to Defend..................18
(c) General Indemnification by SCN.............................19
(d) Notice to SCN; Opportunity to Defend.......................19
(e) Survival...................................................19
10. Miscellaneous....................................................19
(a) No Third-Party Beneficiaries...............................19
(b) Entire Agreement...........................................19
(c) Succession and Assignment..................................19
(d) Counterparts...............................................19
(e) Headings...................................................19
(f) Notices....................................................19
(g) Governing Law..............................................20
(h) Amendments and Waivers.....................................20
(i) Severability...............................................20
(j) Expenses...................................................20
(k) Construction...............................................20
(l) Incorporation of Exhibits and Schedules....................21
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EXHIBIT 5(m) - Excluded Assets..................................5(m) - 1
EXHIBIT 7(a)(vi) - FJMDPC Opinion Letter....................7(a)(vi) - 1
EXHIBIT 7(b)(iii) - SCN Opinion Letter.....................7(b)(iii) - 1
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MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is entered into this the _______ day
of November, 1996, by and among SPECIALTY CARE NETWORK, INC., a Delaware
corporation ("SCN") and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., P.C., a Georgia corporation
("FJMDPC") and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D. ("JAGGEARS"). SCN, FJMDPC and JAGGEARS are
referred to collectively herein as the "Parties."
W I T N E S S E T H:
WHEREAS, FJMDPC is a Georgia corporation which owns the assets which are
used by and/or result from JAGGEARS's practice of medicine;
WHEREAS, JAGGEARS is a medical doctor practicing medicine in the State of
Georgia;
WHEREAS, this Agreement contemplates a tax-free merger of FJMDPC with and
into SCN in a reorganization pursuant to Code Section 368(a)(1)(A);
WHEREAS, JAGGEARS will receive capital stock in SCN in exchange for his
capital stock in FJMDPC;
WHEREAS, the Parties anticipate that the Merger contemplated by this
Agreement will further certain of their business objectives; 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 mutual covenants and agreements
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, it is agreed as
follows:
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Closing" has the meaning set forth in Section 2(b) below.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Conversion Ratio" has the meaning set forth in Section 2(d)(v) below.
"Delaware Articles of Merger" shall have the meaning set forth in Section
2(c) 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.
"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.
"Georgia Articles of Merger" shall have the meaning set forth in Section
2(c) below.
"Georgia Business Corporation Act" means the Business Corporation Act of
the State of Georgia, as amended.
"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.
"Merger" has the meaning set forth in Section 2(a) below.
"FJMDPC Share" means any share of the issued and outstanding stock Common
Stock, of FJMDPC at the date of this Agreement.
"FJMDPC Stockholder" means ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
"FJMDPC" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"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.
"Private Placement Memorandum" means the confidential private placement
memorandum of SCN dated November 27, 1996 relating to the offering of the SCN
Shares under the Securities Act.
"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.
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"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.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, FJMDPC will merge with and into SCN (the "Merger") at the Effective
Time. SCN shall be the corporation surviving the Merger (the "Surviving
Corporation").
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Baker, Donelson,
Bearman & ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
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 Article VI have been fulfilled
or waived, or such other date as the Parties may mutually determine (the
"Closing Date").
(c) Actions at the Closing. At the Closing, (i) FJMDPC will deliver to SCN
the various certificates, instruments, and documents referred to in Section 7(a)
below, (ii) SCN will deliver to FJMDPC the various certificates, instruments,
and documents referred to in Section 7(b) below, (iii) SCN and FJMDPC will file
with the Secretary of State of the State of Delaware both Articles of Merger and
a Plan of Merger in the form required by SCN's legal counsel (the "Delaware
Articles of Merger"), and (iv) SCN and FJMDPC will file with the Department of
State of the State of Georgia both Articles of Merger and a Plan of Merger in
the form required by SCN's legal counsel (the "Georgia Articles of Merger").
(d) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") SCN and FJMDPC file the Delaware Articles of Merger with
the Secretary of State of the State of Delaware and file the Georgia
Articles of Merger with the Department of State of the State of Georgia.
The Merger shall have the effect set forth in the Delaware General
Corporation Law and the Georgia Business Corporation Act. 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 FJMDPC 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 in 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 in the Merger.
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(iv) Directors and Officers. The directors and officers of SCN in
office at and as of the Effective Time will remain the directors and
officers of the Surviving Corporation (retaining their respective
positions and terms of office).
(v) Conversion of FJMDPC Shares. At and as of the Effective Time,
all of the issued and outstanding FJMDPC Shares shall be converted into
the right to receive a total of 68,056 SCN Shares (the ratio of 68,056 SCN
Shares divided by the total number of FJMDPC Shares outstanding is
referred to herein as the "Conversion Ratio"). 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 FJMDPC
Shares or SCN Shares outstanding. For all purposes, each SCN Share is
agreed to have a value of $9.00 per share.
(vi) SCN Shares. Each SCN Share issued and outstanding at and as of
the Effective Time will remain issued and outstanding.
3. Representations and Warranties of FJMDPC and JAGGEARS. FJMDPC and
JAGGEARS, 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 and will be completed pursuant to Section 5(j).
(a) Organization, Qualification, and Corporate Power. FJMDPC is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Georgia. FJMDPC 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 FJMDPC makes
such qualification necessary. FJMDPC has the 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) Capitalization. The entire authorized capital stock of FJMDPC is set
forth in Section 3(b) of the Disclosure Schedule. All of the issued and
outstanding FJMDPC Shares have been duly authorized and are validly issued,
fully paid, and nonassessable. JAGGEARS is the sole stockholder of FJMDPC. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that could require FJMDPC 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 FJMDPC.
(c) Authorization of Transaction. FJMDPC has the 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 FJMDPC, 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
FJMDPC is subject or any provision of the charter or bylaws of FJMDPC 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 FJMDPC 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). FJMDPC is not required to give
any notice to, make any filing with, or obtain any
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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. FJMDPC does not own, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any other corporation, partnership, association, limited liability
company, trust, joint venture, or other entity.
(f) Financial Statement. FJMDPC has furnished SCN with unaudited balance
sheets dated December 31, 1994 and 1995, and unaudited income statements for the
twelve (12) month periods ending December 31, 1995, 1994 and 1993. Such
financial statements, including the notes thereto, except as indicated therein,
were prepared on a basis consistent with past accounting practices of FJMDPC and
fairly present the results of operations for the periods noted therein. The
balance sheets of FJMDPC delivered by FJMDPC to SCN fairly present the financial
condition of FJMDPC at the date thereof, and except as indicated therein,
reflect all claims against and all debts and liabilities of FJMDPC, fixed or
contingent, as of the date thereof.
(g) Undisclosed Liabilities. FJMDPC 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, 1995 and (ii) liabilities
which have arisen after December 31, 1995 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. FJMDPC 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 FJMDPC 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 or joint venture;
(iv) any agreement (or group of related agreements) under which
FJMDPC 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 FJMDPC'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;
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(viii) any agreement pursuant to which FJMDPC 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 FJMDPC; or
(x) any other agreement (or group of related agreements) outside the
ordinary course of FJMDPC's business or operations the performance of
which involves consideration in excess of $15,000.
FJMDPC 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 to execute and deliver this
Agreement or to consummate the transaction 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) to
FJMDPC's Knowledge, no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (D)
no party has repudiated any provision of the agreement.
(j) Insurance; Malpractice. Section 3(j) of the Disclosure Schedule
contains a list and brief description of all policies or binders of fire,
liability, product liability, workers compensation, health and other forms of
insurance policies or binders currently in force insuring against risks which
will remain in full force and effect at least through the Closing Date. Section
3(j) of the Disclosure Schedule contains a description of all current
malpractice liability insurance policies of JAGGEARS, FJMDPC and FJMDPC's
professional employees and all predecessor policies in effect since February 1,
1990. Except as set forth on Section 3(j) of the Disclosure Schedule (a) neither
FJMDPC, JAGGEARS, nor its professional employees have, in the last seven (7)
years, filed a written application for any insurance coverage relating to
FJMDPC's business or property which has been denied by an insurance agency or
carrier and (b) FJMDPC, FJMDPC's professional employees and JAGGEARS 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 FJMDPC, FJMDPC's professional employees or JAGGEARS 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 FJMDPC, FJMDPC's professional employees
nor JAGGEARS 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. Except as set forth in the
Disclosure Schedule during the period from December 31, 1995 through the date
hereof, FJMDPC 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 FJMDPC, (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
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Ordinary Course of Business, (viii) agreed, whether or not in writing, to do any
of the foregoing, or (ix) disposed of its assets other than in the Ordinary
Course of Business.
(l) Title; Condition. Section 3(l) of the Disclosure Schedule contains a
complete, true and correct list of those assets which are material to the
business or operations of FJMDPC (the "Practice Assets"). FJMDPC has good and
marketable title to, or leasehold interests in, all of the Practice Assets.
Except as disclosed on Section 3(l) of the Disclosure Schedule, none of the
Practice Assets is subject to a contract or other agreement of sale or subject
to security interests, mortgages, encumbrances, liens (including income,
personal property and other tax liens) or charges of any kind or character. Upon
completion of the merger, SCN shall own or lease the Practice Assets free and
clear of all liens and encumbrances, except as disclosed in Section 3(l) of the
Disclosure Schedule or except as otherwise disclosed elsewhere in this
Agreement.
(m) Litigation. Except as set forth in Section 3(m) of the Disclosure
Schedule, 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, to the Knowledge of FJMDPC, threatened against,
or affecting FJMDPC or any of the Practice Assets, or any physician or other
health care professional engaged or employed by FJMDPC, and to the best of
FJMDPC and JAGGEARS's Knowledge 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. FJMDPC and all physicians and other health care
professionals engaged or employed by FJMDPC have all permits and licenses
required by all applicable laws; have made all regulatory filings necessary for
the conduct of FJMDPC's business; and are not in violation of any of said
permitting or licensing requirements.
(o) Tax Matters. Except as set forth in Section 3(o) of the Disclosure
Schedule, FJMDPC has filed or caused to be filed all federal, state and local
tax returns which are required to have been filed by FJMDPC, including all
income, excise, franchise, and payroll tax returns, and FJMDPC has paid or
established an adequate accrual reserve for all taxes accrued through the
Effective Time of the Merger and has otherwise complied with all federal, state,
local and other tax laws applicable to it.
(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 FJMDPC (including all
employers (whether or not incorporated) which by reason of common control
are treated together with FJMDPC and/or JAGGEARS as a single employer
within the meaning of Section 414 of the Code) since September 2, 1974.
(ii) Status of Plans. FJMDPC 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. FJMDPC has not
incurred any liability to the Pension Benefit Guaranty Corporation
("PBGC") in connection with any Employee Benefit Plan covering any
employees of FJMDPC or ceased operations at any facility or withdrawn
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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 FJMDPC to the PBGC
under Title IV of ERISA which could reasonably be anticipated to result in
any claims being made against the FJMDPC by the PBGC. FJMDPC 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 FJMDPC.
(iii) Contributions. Full payment has been made of all amounts which
FJMDPC is required, under applicable law or under any Employee Benefit
Plan or any agreement relating to any Employee Benefit Plan to which
FJMDPC 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. FJMDPC 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, to the Knowledge of FJMDPC,
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. FJMDPC 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. FJMDPC 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. FJMDPC 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 Internal Revenue Service
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. FJMDPC has not received any notice that any
material patient, supplier, employer or associated physician intends to cease
doing business with FJMDPC.
(r) Compliance with Applicable Laws. Except as set forth in Section 3(r)
of the Disclosure Schedule, to FJMDPC's Knowledge, FJMDPC has operated in
compliance with all federal, state, county and municipal laws, constitutions,
ordinances, statutes, rules, regulations and orders applicable thereto
("Applicable Laws"). No
- 8 -
item disclosed in Section 3(r) of the Disclosure Schedule has a material effect
on the operations of FJMDPC. To FJMDPC's Knowledge, neither FJMDPC nor any
physician associated with or employed by FJMDPC has received payment or any
remuneration whatsoever to induce or encourage the referral of patients or the
purchase of goods and/or services as prohibited under 42 U.S.C. 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. FJMDPC has paid or discharged or will pay or
discharge or assume all liabilities for compensation and benefits to which all
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 certain of FJMDPC's physician employees.
(t) Environmental Matters.
(i) Except as set forth in Section 3(t) of the Disclosure Schedule,
FJMDPC is in material compliance with all applicable Environmental Laws.
(ii) FJMDPC has not authorized or conducted nor does FJMDPC have
Knowledge of the disposal or release, or other handling of any hazardous
substance, 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 FJMDPC.
(iii) FJMDPC 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) Except as disclosed in Section 3(t) of the Disclosure Schedule,
FJMDPC 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 FJMDPC or, with respect
to the Practice Assets or any property owned or leased by FJMDPC (b)
alleges that FJMDPC 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 FJMDPC, or (d)
alleges that FJMDPC is liable for any contamination of the environment,
contamination of any property owned or leased by FJMDPC, 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.
(u) Healthcare Compliance. FJMDPC 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. FJMDPC is in
compliance in all material respects with the
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requirements of all such third-party payors applicable thereto. FJMDPC, its
stockholders, and its physician employees do not have any financial relationship
(whether investment interest, compensation interest, or otherwise) with any
entity to which any of the foregoing refer patients, except for such financial
relationships that qualify for exceptions to state and federal laws restricting
physician referrals to entities in which they have a financial interest.
(v) Fraud and Abuse. To FJMDPC's Knowledge, FJMDPC, JAGGEARS and persons
and entities providing professional services for FJMDPC 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; and (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 (i) 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 (ii) 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. FJMDPC is duly licensed as a medical practice and
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 FJMDPC 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, FJMDPC 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 FJMDPC is
located does not currently impose any restrictions or limitations on rates which
may be charged to private pay patients receiving services provided by FJMDPC.
FJMDPC does not have any rate appeal currently pending before any governmental
authority or any administrator of any third-party payor program. FJMDPC has no
Knowledge of any Applicable Law which affects rates or reimbursement procedures
which has been enacted, promulgated or issued within the eighteen (18) months
preceding the date of this Agreement or any such legal requirement proposed or
currently pending in the jurisdiction in which FJMDPC is located, which could
have a material adverse effect on FJMDPC or may result in the imposition of
additional Medicaid, Medicare, charity, free care, welfare, or other discounted
or government assisted patients at FJMDPC or require FJMDPC to obtain any
necessary authorization which FJMDPC 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
FJMDPC, as being due to FJMDPC, as at the Closing Date have arisen in the
Ordinary Course of Business; and 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 December 31, 1995 in the amount of accounts receivable or
other debts due FJMDPC, the allowances with respect thereto, or accounts payable
of FJMDPC from that reflected in the Balance Sheet previously delivered by
FJMDPC to SCN.
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(z) Guaranties. FJMDPC is not a guarantor and otherwise is not liable for
any liability or obligation (including indebtedness) of any other Person.
(aa) Powers of Attorney. There are no outstanding powers of attorney
executed by FJMDPC, except as may be contained in financing documents or
security agreements listed in Section 3(i) of the Disclosure Schedule.
(bb) Tangible Assets. FJMDPC owns or leases all land, buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
business as presently conducted. To FJMDPC's Knowledge, each tangible asset has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear).
(cc) SCN Share Ownership; Investment Intent.
(i) Neither FJMDPC nor JAGGEARS owns, beneficially or otherwise, any
SCN Shares.
(ii) SCN Shares issuable in the Merger are being acquired by
JAGGEARS for investment and not with a view to the distribution thereof, and
JAGGEARS acknowledges and understands 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.
THE COMPANY WILL FURNISH THE HOLDER HEREOF INFORMATION REGARDING THE
DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, AND LIMITATION
APPLICABLE TO EACH CLASS AND THE VARIATIONS AND RIGHTS, PREFERENCES,
AND LIMITATIONS DETERMINED FOR EACH SERIES OF STOCK ISSUED BY THE
COMPANY (AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE
VARIATIONS FOR FUTURE SERIES) UPON REQUEST IN WRITING AND WITHOUT
CHARGE.
(iii) JAGGEARS represents and warrants as follows:
(A) JAGGEARS is an "accredited investor" as defined under Rule
501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
(B) JAGGEARS has received and reviewed a copy of SCN's Private
Placement Memorandum which contains certain information regarding
SCN and its business. JAGGEARS confirms that SCN has made available
to him or to his 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
JAGGEARS has requested, which additional information has been
received.
(C) In deciding to acquire SCN Shares pursuant to this
Agreement, JAGGEARS has consulted with his legal, financial, and tax
advisers with respect to the Merger and the nature of the investment
together with additional information concerning SCN set forth in the
SCN
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Private Placement Memorandum and any additional information provided
under subsection (B) above.
(D) JAGGEARS has adequate means of providing for his current
needs and personal contingencies and has no need for liquidity in
his investment in SCN. JAGGEARS, either alone or with his
representatives, has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and
risks of an investment in SCN.
(dd) Full Disclosure. No representation or warranty made by FJMDPC 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
FJMDPC 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 jurisdiction of its incorporation.
(b) Capitalization. As of the date of this Agreement, the entire
authorized capital stock of the SCN consists of 50,000,000 SCN Shares, of which
11,045,015 SCN Shares are issued and outstanding and zero SCN Shares are held in
treasury and 2,000,000 shares of preferred stock, no par value, of which none
are issued and outstanding. All of the SCN Shares to be issued in the Merger
have been duly authorized and, upon consummation of the Merger, will be validly
issued, fully paid, and nonassessable.
(c) Authorization of Transaction. SCN has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement, to issue the SCN Shares and otherwise to perform its obligations
hereunder. 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.
(f) Private Placement Memorandum. The Private Placement Memorandum does
not contain any untrue statement of material fact or omit to state a material
fact necessary to make the statements therein not misleading.
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5. Covenants. The Parties agree as follows with respect to the period from
and after the execution of this Agreement.
(a) General. Each of the Parties will use its and 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
its parties to waive any condition precedent to his or its obligations to
perform hereunder.
(b) Notices and Consents. FJMDPC will give any notices to third parties,
and will use its best efforts to obtain any third party consents, 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 to this
Agreement will give any notices to, make any filings with, and use its
reasonable best efforts to obtain any 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) General Corporation Law. SCN will call a special meeting of its
Board of Directors as soon as practicable in order that the Board of
Directors may consider and vote upon the adoption of this Agreement and
the approval of the Merger in accordance with the Delaware General
Corporation Law.
(ii) 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 income tax purposes in accordance with the
foregoing.
(d) Operation of Business. From the date of this Agreement through the
Closing Date, FJMDPC 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) FJMDPC will not authorize or effect any change in its charter or
bylaws;
(ii) FJMDPC 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) FJMDPC 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) FJMDPC 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) FJMDPC will not impose any Security Interest upon any of its
assets outside the Ordinary Course of Business;
(vi) FJMDPC 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;
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(vii) FJMDPC will not make any change in employment terms for any of
its directors, officers, and employees outside the Ordinary Course of
Business; and
(viii) FJMDPC will not commit to any of the foregoing.
(e) Full Access. Upon three (3) days prior notice, FJMDPC 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 FJMDPC during normal business hours. SCN will treat and hold as
such any confidential information it receives from FJMDPC 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 FJMDPC all tangible
embodiments (and all copies) thereof which are in its possession.
(f) Notice of Developments. Each Party will give prompt written notice to
the other of any material adverse development causing a breach of any of its own
representations and warranties in Section 3 and Section 4 above. 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.
(g) Exclusivity. Until the earlier of (i) March 31, 1997, or (ii) the
Effective Time, FJMDPC 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 FJMDPC (including any
acquisition structured as a merger, consolidation, or share exchange). FJMDPC
shall notify SCN immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(h) Collection of Accounts Receivable. JAGGEARS agrees to cooperate with
SCN in the collection of accounts receivable owned by FJMDPC 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, JAGGEARS agrees to
execute the necessary documents and follow the necessary procedures as described
in the Service Agreement, which is attached hereto as Exhibit 7(a)(iv) to
accommodate the collection of the accounts receivable in such manner.
(i) Payment of Expenses. On or before the Effective Time, FJMDPC 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.
(j) Completion of Schedules. The parties hereto acknowledge that this
Agreement is being executed and delivered before the Disclosure Schedule has
been completed and attached hereto. SCN therefore agrees that FJMDPC and
JAGGEARS may complete the Disclosure Schedule and that said Disclosure Schedule
may be attached hereto after the execution and delivery of this Agreement;
provided, however, that the Disclosure Schedule shall be in form, substance and
content acceptable to SCN in its sole discretion and shall be completed and
delivered to SCN by FJMDPC and JAGGEARS on or prior to December 31, 1996. SCN
shall have the right to terminate this Agreement at any time on or prior to
March 31, 1996, in its sole discretion, based upon its review of the Disclosure
Schedule furnished by FJMDPC and JAGGEARS and the documents, events, facts or
other circumstances referred to therein. In the event that this Agreement is
terminated pursuant to this Section 5(j), neither party shall be obligated to
the other, except as set forth in Section 8(b).
(k) Corporate Authorization. By execution of this Agreement, JAGGEARS
agrees to vote his FJMDPC Shares in favor of the Merger and to complete all
other acts necessary to Close under this Agreement.
- 14 -
(l) Malpractice Insurance. On or before the Effective Time, all physicians
and employees of FJMDPC must be covered by medical malpractice insurance and, if
required by SCN, medical malpractice tail insurance to cover prior occurrences
shall be procured by FJMDPC.
(m) Distribution of Excluded Assets. Prior to the Effective Time, FJMDPC
shall have distributed to JAGGEARS all of the assets listed on Exhibit 5(m),
which constitute the entirety of the assets owned by FJMDPC not being acquired
by SCN (the "Excluded Assets"). Additionally, with respect to Employee Benefit
Plans, on or before the Effective Time, all Plans shall be transferred to a new
entity controlled by JAGGEARS, and the instrument of transfer shall provide that
the new entity assumes all of the liabilities of the Plan, including, but not
limited to, any current or future funding liabilities.
(n) Establishment of Accruals. Prior to the Effective Time, FJMDPC shall
have established an adequate accrual reserve for payment of the taxes accrued
with respect to the taxable periods or portion thereof ended as of the Effective
Time of the Merger contemplated herein.
(o) Satisfaction of Indebtedness. Prior to the Effective Time, FJMDPC
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 JAGGEARS. FJMDPC
shall not be required to pay off accounts payable of FJMDPC, not more than
thirty (30) days old, and arising in the ordinary Course of Business, capital
leases or purchase money obligations secured by assets of FJMDPC.
(p) Accrued Vacation and Sick Time. Prior to the Effective Time, FJMDPC
will satisfy and discharge any and all liabilities to any employee of FJMDPC for
accrued vacation time in excess of one week and accrued sick time in excess of
one week.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of SCN. The obligation of SCN to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:
(i) FJMDPC 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) FJMDPC 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 the FJMDPC;
(v) SCN shall have received the resignations, effective as of the
Closing, of each director and officer of FJMDPC other than those whom SCN
shall have specified in writing at least five (5) business days prior to
the Closing;
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(vi) all actions to be taken by FJMDPC in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and
substance to SCN;
(vii) the issuance of the SCN Shares to FJMDPC or JAGGEARS will not
violate federal securities laws or the securities laws of any state of the
United States;
(viii) SCN and FJMDPC shall have all licenses and permits necessary
to operate their respective businesses;
(ix) FJMDPC and JAGGEARS shall have taken all steps necessary to
enable the Merger of FJMDPC with and into SCN, including, if necessary,
the conversion of FJMDPC from a Georgia Professional Corporation to a
Georgia Business Corporation;
(x) SCN shall have completed and be satisfied with its due diligence
review; and
(xi) 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 FJMDPC. The obligation of FJMDPC to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) This Agreement and the Merger shall have received approval of
the SCN Board of Directors;
(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 FJMDPC.
FJMDPC 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 JAGGEARS or FJMDPC. JAGGEARS or FJMDPC, as applicable, shall
execute and deliver to SCN, prior to or at the Closing:
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(i) Certified resolutions of FJMDPC authorizing the execution of all
documents and the consummation of all transactions contemplated hereby;
(ii) The Georgia Articles of Merger which shall be in substantially
the form attached hereto as Exhibit 2(c)(i);
(iii) Stock Certificates representing ownership of all shares of
FJMDPC, duly endorsed to SCN;
(iv) A Certificate duly executed by the President of FJMDPC and
JAGGEARS stating as of the Closing Date, all representations and
warranties are true, all covenants and agreements contained in the
Agreement to be performed by FJMDPC and JAGGEARS have been performed or
complied with and all conditions to closing have been complied with;
(v) An opinion from FJMDPC's counsel in substantially the form
attached hereto as Exhibit 7(a)(v);
(vi) A Specialty Care Network, Inc. Stockholder's Agreement;
(vii) A Service Agremeent in the form attached hereto as Exhibit
7(b)(vi); and
(viii) 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 FJMDPC at or prior to the Closing:
(i) Stock Certificates representing the SCN Shares being issued to
JAGGEARS pursuant to Section 2(d)(v);
(ii) The Delaware Articles of Merger in substantially the form
attached hereto Exhibit 2(c);
(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 Specialty Care Network, Inc. Stockholder's Agreement;
(vi) A Service Agreement in the form attached hereto as Exhibit
7(a)(iv);
(vii) A Service Agreement in the form attached hereto as Exhibit
7(b)(vi); and
(viii) Such other instruments as may be reasonably requested by
JAGGEARS 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
FJMDPC at any time prior to the Effective Time (A) in the event FJMDPC has
breached any representation, warranty, or covenant contained in this
Agreement in any material respect, SCN has notified FJMDPC 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 March 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
(iii) FJMDPC 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, FJMDPC 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 March 31, 1997 by reason of the failure of any condition precedent
under Section 6(b) hereof (unless the failure results primarily from
FJMDPC 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 transaction contemplated by this Agreement does not close and such
failure is not the fault of SCN, then FJMDPC agrees to reimburse SCN for
seventy-five percent of SCN's out of pocket expenses, including but not limited
to professional fees, related to the proposed transaction; provided, however,
FJMDPC's obligation to reimburse SCN shall not exceed fifty-six thousand two
hundred fifty dollars ($56,250).
17
9. Indemnification.
(a) Indemnification by JAGGEARS. JAGGEARS agrees to and shall defend,
indemnify and hold harmless SCN, its successors and assigns, officers and
directors against any and all losses, liabilities, expenses (including, but
without limitation, reasonable attorneys fees) and damages resulting from or
arising out of the breach, untruth or inaccuracy of any representation, warranty
or covenant of FJMDPC or JAGGEARS set forth in this Agreement. JAGGEARS shall
not be liable to SCN for any claims against JAGGEARS under this Section 9(a)
unless and until the aggregate of all claims against JAGGEARS 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. Notwithstanding the foregoing
provisions, the obligations of JAGGEARS to indemnify SCN shall not exceed the
fair market value (as determined under the Stockholders' Agreement) of the SCN
Shares delivered to JAGGEARS at the time of Closing.
(b) Notice to JAGGEARS; Opportunity to Defend. SCN agrees to give prompt
notice to JAGGEARS 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). JAGGEARS may participate in and at his election, or at the request
of SCN, assumes the defense of any such suit, action or proceeding at JAGGEARS's
expense. JAGGEARS shall not be liable under Section 9(a) for any settlement
effected without his 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 JAGGEARS, his 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 JAGGEARS 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 JAGGEARS shall be entitled to recover the full amount of
all claims, including the initial $25,000.00.
(d) Notice to SCN; Opportunity to Defend. JAGGEARS agrees 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 JAGGEARS,
assumes the defense of any such suit, action or proceeding at SCN's expense. SCN
shall not be liable under Section 9(c) for any settlement effected without its
consent of any claim, litigation or proceeding in respect of which indemnity may
be sought hereunder, which consent shall not be unreasonably withheld.
(e) Survival. The representations and warranties of JAGGEARS, FJMDPC and
SCN contained in this Agreement and the indemnifications contained herein shall
survive the Closing. No claim for indemnification with respect to any alleged
misrepresentation or breach of warranty may be made after two (2) years
following the Closing Date. Any matter to which indemnification pertains and
with respect to which a claim has been asserted or threatened following the
Closing Date shall continue to be subject to the indemnification under this
Agreement until finally terminated, settled, resolved or adjudicated; and all
terms, conditions and stipulations of this Agreement shall likewise continue to
apply.
10. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
18
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to FJMDPC: Copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D. _____________________________
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ _____________________________
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ _____________________________
Facsimile: ______________ _____________________________
Facsimile: __________________
If to SCN: Copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Specialty Care Network, Inc. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, Bearman & ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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.
(g) 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.
(h) 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 stockholder approval will be subject to the
restrictions contained in the Delaware General Corporation Law and the Georgia
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.
19
(i) 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.
(j) 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.
(k) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(l) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
* * * * *
- 20 -
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SPECIALTY CARE NETWORK, INC.
By:_________________________________
Title:______________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., P.C.
By:_________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., President
_________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., Stockholder
- 21 -
EXHIBIT 5(m)
Excluded Assets
"Excluded Assets" shall mean (i) employment or noncompete agreements between
FJMDPC and JAGGEARS and those licensed medical individuals under contract with
FJMDPC to provide professional services to patients of FJMDPC and claims arising
thereunder; (ii) all patient medical records and patient lists; (iii) all
insurance policies of FJMDPC and claims arising thereunder and all prepaid
expenses on malpractice insurance premiums; (iv) the inventories, cash and
Accounts Receivable disposed of, cancelled, expended or collected, as the case
may be, by FJMDPC after the date hereof and prior to the Closing in the Ordinary
Course of Business and consistent with past practice; (v) personal property of
individual physicians which is not included on the financial statements of
FJMDPC; (vi) FJMDPC's Employee Benefit Plans and all liabilities related
thereto; (vii) FJMDPC's cash (other than any cash reserved for the payment of
any accrued liabilities) on hand as of the Closing Date, (viii) FJMDPC's third
party provider agreements; (ix) all drugs owned by FJMDPC; and (x) all notes to
FJMDPC from JAGGEARS.
5(m)-1
EXHIBIT 7(a)(iv)
Service Agreement
7(a)(iv)-1
EXHIBIT 7(a)(vi)
FJMDPC Opinion Letter
See Attached.
7(a)(vi)-1
EXHIBIT 7(b)(iii)
SCN Opinion Letter
See Attached.
7(b)(iii)-1