Registration No.333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-8
Registration Statement
under
The Securities Act of 1933
SPECIALTY CARE NETWORK, INC.
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(Exact name of registrant as specified in its charter)
Delaware 62-1623449
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
44 Union Boulevard, Suite 600, Lakewood, Colorado 80228
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(Address of Principal Executive Offices) (Zip Code)
Specialty Care Network, Inc. 1996 Equity Compensation Plan
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(Full title of the plan)
Kerry R. Hicks
President and Chief Executive Officer
Specialty Care Network, Inc.
44 Union Boulevard, Suite 600
Lakewood, Colorado 80228
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(Name and address of agent for service)
(303) 716-0041
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(Telephone number, including area code, of agent for service)
Copies to:
Alan Singer, Esquire
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
(215) 963-5000
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of securities to be price per offering registration
to be registered registered share price fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 4,000,000(2) $ (1) $46,524,974 $14,099
par value
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(1) Calculated pursuant to Rule 457(h) under the Securities Act of 1933, based
upon the price at which certain outstanding options may be exercised
(46,000 shares at $6.00, 657,500 shares at $8.00, 20,000 shares at $9.375,
108,500 shares at $9.75 and 480,428 shares at $11.75) or, with respect to
other shares issuable under the Plan, the average of the high and low
prices of the Company's Common Stock, as reported on the Nasdaq National
Market, of $12.6875 per share on September 30, 1997.
(2) Pursuant to Rule 416 under the Securities Act of 1933, this Registration
Statement also covers such additional shares as may hereinafter be offered
or issued to prevent dilution resulting from stock splits, stock dividends,
recapitalizations or certain other capital adjustments.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by Specialty Care Network, Inc. (the
"Registrant") with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 are incorporated in this registration statement
by reference:
1. The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by Form 10-K/A-1 filed on May 8, 1997 and Form
10-K/A-2 filed on July 7, 1997.
2. The Registrant's Quarterly Report on Form 10-Q for the period ended
March 31, 1997, as amended by Form 10-Q/A-1 filed on July 7, 1997.
3. The Registrant's Current Report on Form 8-K filed on April 21, 1997, as
amended by Form 8-K/A-1 filed on June 20, 1997.
4. The Registrant's Current Report on Form 8-K filed on June 2, 1997, as
amended by Form 8-K/A-1 filed on August 4, 1997.
5. The Registrant's Current Report on Form 8-K filed on July 17, 1997, as
amended by Forms 8-K/A-1 filed on August 4, 1997 and September 15, 1997.
6. The Registrant's Current Report on Form 8-K filed on July 31, 1997, as
amended by Form 8-K/A-1 filed on September 29, 1997.
7. The Registrant's Quarterly Report on Form 10-Q for the period ended June
30, 1997.
8. The Registrant's Current Report on Form 8-K filed on September 16, 1997.
9. The Registrant's Current Report on Form 8-K filed on September 25, 1997.
10. The description of the Registrant's shares of Common Stock, $.001 par
value, contained in the Registration Statement on Form 8-A filed by the
Registrant with the Securities and Exchange Commission on January 21, 1997 to
register such securities under the Securities Exchange Act of 1934.
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<PAGE>
All documents filed by the Registrant pursuant to Section 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 after the date of this
registration statement and prior to the filing of a post-effective amendment to
this registration statement which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this registration statement and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
Experts
The consolidated financial statements of the Registrant as of December 31,
1996 and 1995 and for the year ended December 31, 1996 and the period from
December 22, 1995 (date of incorporation) through December 31, 1995, and the
financial statements of Reconstructive Orthopaedic Associates II, P.C.
(successor to Reconstructive Orthopaedic Associates, Inc.) as of December 31,
1996 and 1995 and for each of the years in the three-year period ended December
31, 1996, included in the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements are, and audited
financial statements to be included in subsequently filed documents will be,
incorporated herein in reliance upon the reports of Ernst & Young LLP pertaining
to such financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Ortho-Associates, P.A. d/b/a Park Place
Therapeutic Center as of December 31, 1996 and for the year then ended, included
in the amendment to Registrant's Form 8-K filed with the Securities and Exchange
Commission on September 15, 1997, have been audited by London Witte & Company,
P.A., independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein in reliance upon the report of London Witte & Company, P.A.
pertaining to such financial statements given upon the authority of such firm as
experts in accounting and auditing.
Item 4. Description of Securities.
Not applicable.
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Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of directors
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. Article 7 of the Registrant's
Certificate of Incorporation provides that the personal liability of directors
of the Registrant is eliminated to the fullest extent permitted by Section
102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorney's
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in accordance
with the applicable standard of conduct set forth in such statutory provision.
Article 6 of the Registrant's Bylaws provides that the Registrant will indemnify
any person who was or is a party or is threatened to be made be a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or agent of the Registrant,
or is or was serving at the request of the Registrant as a director, officer,
employee or agent of another entity, against certain liabilities, costs and
expenses. Article 6 further permits the Company to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Registrant, or is or was serving at the request of the Registrant
as a director, officer, employee or agent of another entity, against any
liability asserted against such person and incurred by such person in any such
capacity or arising out of his status as such, whether or not the Registrant
would have the power to indemnify such person against such liability under the
provisions of Article 6.
The Registrant has purchased a Directors and Officers indemnity insurance
policy.
Item 7. Exemption from Registration Claimed.
Not applicable.
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Item 8. Exhibits.
The following Exhibits are filed as part of this Registration Statement:
4 Specialty Care Network, Inc. 1996 Equity Compensation Plan,
as amended
5 Opinion of Morgan, Lewis & Bockius LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of London Witte & Company, P.A.
23.3 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5)
25 Power of Attorney (contained on signature page of this Registration
Statement)
Item 9. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(l)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
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2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Lakewood, Colorado on September 30, 1997.
Specialty Care Network, Inc.
By: /s/ KERRY R. HICKS
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Kerry R. Hicks
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kerry R. Hicks, Patrick M. Jaeckle and D. Paul
Davis and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
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Signature Title Date
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/s/ RICHARD H. ROTHMAN Chairman of the Board of Directors September 30, 1997
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Richard H. Rothman, M.D., Ph.D.
/s/ KERRY R. HICKS Principal Executive Officer and Director September 30, 1997
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Kerry R. Hicks
/s/ PATRICK M. JAECKLE Principal Financial Officer and Director September 30, 1997
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Patrick M. Jaeckle
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/s/ D. PAUL DAVIS Principal Accounting Officer September 30, 1997
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D. Paul Davis
/s/ ROBERT E. BOOTH, JR. Director September 30, 1997
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Robert E. Booth, Jr., M.D.
/s/ JAMES L. CAIN Director September 30, 1997
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James L. Cain, M.D.
/s/ PETER H. CHEESBROUGH Director September 30, 1997
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Peter H. Cheesbrough
/s/ RICHARD E. FLEMING, JR. Director September 30, 1997
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Richard E. Fleming, Jr., M.D.
/s/ THOMAS C. HANEY Director September 30, 1997
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Thomas C. Haney, M.D.
/s/ LESLIE S. MATTHEWS Director September 30, 1997
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Leslie S. Matthews, M.D.
/s/ MATS WAHLSTROM Director September 30, 1997
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Mats Wahlstrom
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SPECIALTY CARE NETWORK, INC.
REGISTRATION STATEMENT ON FORM S-8
EXHIBIT INDEX
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Exhibit No.
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4 Specialty Care Network, Inc. 1996 Equity Compensation Plan,
as amended
5 Opinion of Morgan, Lewis & Bockius LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of London Witte & Company, P.A.
23.3 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5)
25 Power of Attorney (contained on signature page of this Registration
Statement)
EXHIBIT 4
SPECIALTY CARE NETWORK, INC.
1996 EQUITY COMPENSATION PLAN
As Amended on June 5, 1997
As Amended on July 24, 1997
As Amended on September 12, 1997
The purpose of the Specialty Care Network, Inc. 1996 Equity Compensation
Plan (the "Plan") is to provide (i) designated employees (including employees
who are also officers or directors) of Specialty Care Network, Inc. (the
"Company") and its subsidiaries,(ii) certain consultants and advisors to the
Company or its subsidiaries and (iii) non-employee members of the Board of
Directors of the Company (the "Board") with the opportunity to receive grants of
incentive stock options and nonqualified stock options ("Options"). The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefitting the Company's shareholders,
and will align the economic interests of the participants with those of the
shareholders.
1. Administration
(a) The Plan may be administered by the Board or by a committee (the
"Committee") of two or more directors appointed by the Board. Notwithstanding
the foregoing, the Board of Directors shall exercise the powers of the Committee
with respect to the grant of options to members of the Board who are not
employees of the Company or its subsidiaries or who are members of the Committee
("Non-Employee Directors"). If no administrative committee is appointed, all
references in the Plan to the "Committee" shall be deemed to refer to the Board.
(b) The Committee shall have the sole authority to (i) determine the
individuals to whom Options shall be granted under the Plan, (ii) determine the
type, size and terms of the Options to be granted to each such individual, (iii)
determine the time when the Options will be granted and the duration of any
applicable exercise period, including the criteria for exercisability and the
acceleration of exercisability and (iv) deal with any other matters arising
under the Plan.
(c) The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and for
the conduct of its business as it deems necessary or advisable, in its sole
discretion. The Committee's interpretations of the Plan and all determinations
made by the Committee pursuant to the powers vested in it hereunder shall be
conclusive and
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binding on all persons having any interest in the Plan or in any awards
granted hereunder. All powers of the Committee shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
2. Options
Options granted under the Plan may be incentive stock options ("Incentive
Stock Options") or nonqualified stock options ("Nonqualified Stock Options") as
described in Section 5. All Options shall be subject to the terms and conditions
set forth herein and to such other terms and conditions consistent with the Plan
as the Committee deems appropriate and as are specified in writing by the
Committee to the individual in a grant instrument (the "Grant Instrument") or an
amendment to the Grant Instrument. The Committee shall approve the form and
provisions of each Grant Instrument.
3. Shares Subject to the Plan
(a) Subject to the adjustment specified below, the aggregate number of
shares of common stock of the Company ("Company Stock") that may be issued under
the Plan is 4,000,000 shares. If the Company Stock becomes publicly traded as a
result of a public offering under the Securities Act of 1933, as amended, the
maximum aggregate number of shares of Company Stock that shall be subject to
Options granted under the Plan to any individual during any calendar year shall
be 500,000 shares. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised, the shares subject to
such Options shall again be available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company Stock
outstanding (i) by reason of a stock dividend, spin off, recapitalization, stock
split, or combination or exchange of shares, (ii) by reason of a merger,
reorganization or consolidation in which the Company is the surviving
corporation, (iii) by reason of a reclassification or change in par value, or
(iv) by reason of any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Options, the maximum number of shares of Company Stock for
which any individual participating in the Plan may receive Options in any year,
the number of shares covered by outstanding Options, the kind of shares issued
under the Plan, and the price per share of such Options shall be appropriately
adjusted by the Committee to reflect any increase or decrease in the number of,
or change in the kind or value of, issued shares of Company Stock to preclude,
to the extent practicable, the enlargement or dilution of rights and benefits
under such Options; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive.
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4. Eligibility for Participation
(a) All employees of the Company and its subsidiaries ("Employees"),
including Employees who are officers or members of the Board, and Non-Employee
Directors shall be eligible to participate in the Plan. Consultants and advisors
who perform services to the Company or any of its subsidiaries ("Key Advisors")
shall be eligible to participate in the Plan if the Key Advisors render bona
fide services and such services are not in connection with the offer or sale of
securities in a capital-raising transaction. The term "Key Advisors" shall
include personnel of medical practices that have entered into and remain subject
to management agreements with the Company or any subsidiary, and the provision
of services to those practices shall be considered the performance of services
with respect to the Company for purposes of the Plan.
(b) The Committee shall select the Employees, Non-Employee Directors and
Key Advisors to receive Options and shall determine the number of shares of
Company Stock subject to a particular grant in such manner as the Committee
determines. Employees, Key Advisors and Non-Employee Directors who receive
Options under this Plan shall hereinafter be referred to as "Grantees".
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of shares of
Company Stock that will be subject to each grant of Options to Employees,
Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are intended
to qualify as "incentive stock options" within the meaning of section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or Nonqualified Stock
Options that are not intended so to qualify, or any combination of Incentive
Stock Options and Nonqualified Stock Options, all in accordance with the terms
and conditions set forth herein. Incentive Stock Options may be granted only to
Employees. Nonqualified Stock Options may be granted to Employees, Non-Employee
Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock subject
to an Option shall be determined by the Committee and may be equal to, greater
than, or less than the Fair Market Value (as defined below) of a share of such
Stock on the date the Option is granted; provided, however, that (x) the
Exercise Price of an Incentive Stock Option shall be equal to, or greater than,
the Fair Market Value of a share of Company Stock on the date the Incentive
Stock Option is granted and (y) an Incentive Stock Option may not be granted to
an Employee who, at the time of grant, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary of the Company, unless the Exercise
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Price per share is not less than 110% of the Fair Market Value of Company
Stock on the date of grant.
(iii) If Company Stock is publicly traded, then the Fair Market Value
per share shall be determined as follows: (x) if the principal trading market
for the Company Stock is a national securities exchange or the Nasdaq National
Market, the last reported sale price thereof on the relevant date or, if there
were no trades on that date, the latest preceding date upon which a sale was
reported, or (y) if the Company Stock is not principally traded on such exchange
or market, the mean between the last reported "bid" and "asked" prices of
Company Stock on the relevant date, as reported on Nasdaq or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not publicly traded or, if
publicly traded, not subject to reported transactions or "bid" or "asked"
quotations as set forth above, the Fair Market Value per share shall be as
determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option. The
term of any Option shall not exceed ten years from the date of grant. However,
an Incentive Stock Option that is granted to an Employee who, at the time of
grant, owns stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company, or any parent or subsidiary of the
Company, may not have a term that exceeds five years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised while the
Grantee is employed by, or providing service to, the Company as an Employee, Key
Advisor or member of the Board. In the event that a Grantee ceases to be
employed by, or provide service to, the Company for any reason other than
"disability", death, or "termination for cause", any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days of
the date on which the Grantee ceases to be employed by, or provide service to,
the Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term. Unless otherwise specified by the Committee, any portion of the Grantee's
Option that is not otherwise exercisable as of the date on which the Grantee
ceases to be employed by or provide service to the Company shall terminate as of
such date.
(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a "termination for cause" by the Company,
any Option held by the Grantee shall terminate as of the date the Grantee ceases
to be employed by, or provide service to, the Company.
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(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Company because the Grantee is "disabled", any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date on which the Grantee ceases to be employed by, or provide
service to, the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Grantee's Options which are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by, or provide service
to, the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by, or providing service to,
the Company or within 90 days after the date on which the Grantee ceases to be
employed, or provide service, on account of a termination of employment or
service specified in Section 5(e)(i) above (or within such other period of time
as may be specified by the Committee), any Option that is otherwise exercisable
by the Grantee shall terminate unless exercised within one year after the date
on which the Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term. Any of the Grantee's Options that are not otherwise exercisable as of the
date on which the Grantee ceases to be employed by, or provide service to, the
Company shall terminate as of such date.
(v) For purposes of this Section 5(e):
(A) The term "Company" shall mean the Company and its parent and
subsidiary corporations. With request to personnel employed by medical
practices that have entered into, and remain subject to, management
agreements with the Company or any subsidiary, the term "Company" shall
include any such medical practice, but only so long as the practice remains
subject to such management agreement.
(B) "Employed by, or providing service to, the Company" shall
mean employment as an Employee or the provision of services to the Company
as a Key Advisor or member of the Board (so that, for purposes of
exercising Options, a Grantee shall not be considered to have terminated
employment or ceased to provide services until the Grantee ceases to be an
Employee, Key Advisor and member of the Board).
(C) "Disability" shall mean a Grantee's becoming disabled within
the meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean a finding by the
Committee that the Grantee has breached his or her employment or service
contract with the Company, or has been engaged in disloyalty to the
Company, including, without limitation, fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the course of his or her
employment or service, or has disclosed trade secrets or confidential
information of the Company to persons not entitled to receive such
information. In the event a Grantee's
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employment or service is terminated for cause, in addition to the immediate
termination of all Options, the Grantee shall automatically forfeit all
shares underlying any exercised portion of an Option for which the Company
has not yet delivered the share certificates, upon refund by the Company of
the Exercise Price paid by the Grantee for such shares.
(f) Exercise of Options. A Grantee may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price. The Grantee shall pay the Exercise
Price for an Option (i) in cash or by check or wire transfer in immediately
available funds, (ii) by delivering shares of Company Stock owned by the Grantee
(including Company Stock acquired in connection with the exercise of an Option,
subject to such restrictions as the Committee deems appropriate) and having a
Fair Market Value on the date of exercise equal to the Exercise Price or (iii)
by such other method as the Committee may approve, including payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board. Shares of Company Stock used to exercise an Option shall have
been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option. The Grantee
shall pay the Exercise Price and the amount of any withholding tax due (pursuant
to Section 6) at the time of exercise. Shares of Company Stock shall not be
issued upon exercise of an Option until the Exercise Price is fully paid and any
required withholding is made.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code). If and to the extent that an Option designated as
an Incentive Stock Option fails so to qualify under the Code, the Option shall
remain outstanding according to its terms as a Nonqualified Stock Option.
6. Withholding of Taxes
(a) Required Withholding. All Options under the Plan shall be granted
subject to any applicable federal (including FICA), state and local tax
withholding requirements. The Company shall have the right to deduct from wages
paid to the Grantee any federal, state or local taxes required by law to be
withheld with respect to Options, or the Company may require the Grantee or
other person receiving shares upon exercise of an Option to pay to the Company
the amount of any such taxes that the Company is required to withhold.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee may
elect to satisfy the Company's income tax withholding obligation with respect to
an Option by having shares withheld up to an amount that does not exceed the
Grantee's maximum marginal tax rate for federal
6
(including FICA), state and local tax liabilities. The election must be in
a form and manner prescribed by the Committee and shall be subject to the prior
approval of the Committee.
7. Transferability of Options
(a) Except as provided below, only the Grantee or his or her authorized
representative may exercise rights under an Option. A Grantee may not transfer
those rights except by will or by the laws of descent and distribution or, with
respect to Nonqualified Options, if permitted in any specific case by the
Committee in its sole discretion, pursuant to a qualified domestic relations
order (as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder). When a Grantee dies,
the representative or other person entitled to succeed to the rights of the
Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee must
furnish proof satisfactory to the Company of his or her right to receive the
Grant under the Grantee's will or under the applicable laws of descent and
distribution.
(b) Notwithstanding the foregoing, the Committee may provide, in a Grant
Instrument, that a Grantee may transfer Nonqualified Stock Options to family
members or other persons or entities according to such terms as the Committee
may determine.
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) After the effective date of the Plan, any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) becomes a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or more of the voting
power of the then outstanding securities of the Company, except where the
acquisition is approved by the Board;
(b) The shareholders of the Company approve (or, if shareholder approval is
not required, the Board approves) an agreement providing for (i) the merger or
consolidation of the Company with another corporation where the shareholders of
the Company, immediately prior to the merger or consolidation, will not
beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to a majority of all votes to which all shareholders
of the surviving corporation would be entitled in the election of directors, or
where the members of the Board, immediately prior to the merger or
consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the surviving corporation,
(ii) a sale or other disposition of all or substantially all of the assets of
the Company, or (iii) a liquidation or dissolution of the Company;
(c) Any person has commenced a tender offer or exchange offer for 35% or
more of the voting power of the then outstanding shares of the Company; or
7
<PAGE>
(d) After this Plan is approved by the shareholders of the Company,
directors are elected such that a majority of the members of the Board shall
have been members of the Board for less than two years, unless the election or
nomination for election of each new director who was not a director at the
beginning of such two-year period was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of
such period.
9. Consequences of a Change of Control
(a) Upon a Change of Control, unless the Committee determines otherwise,
(i) the Company shall provide each Grantee with outstanding Options written
notice of such Change of Control and (ii) all outstanding Options shall
automatically accelerate and become fully exercisable.
(b) In addition, upon a Change of Control described in Section 8(b)(i)
where the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation), unless the Committee determines otherwise,
all outstanding Options that are not exercised shall be assumed by, or replaced
with comparable options by, the surviving corporation. Any replacement options
shall entitle the Grantee to receive the same amount and type of securities as
the Grantee would have received as a result of the Change of Control had the
Grantee exercised the Options immediately prior to the Change of Control.
(c) Notwithstanding the foregoing, subject to subsection (d) below, in the
event of a Change of Control, the Committee may require that Grantees surrender
their outstanding Options in exchange for a payment by the Company, in cash or
Company Stock as determined by the Committee, in an amount equal to the amount
by which the then Fair Market Value of the shares of Company Stock subject to
the Grantee's outstanding Options exceeds the Exercise Price of the Options.
(d) Notwithstanding the foregoing, the Committee making the determinations
under this Section 9 following a Change of Control must be comprised of the same
members as those on the Committee immediately before the Change of Control. If
the Committee members do not meet this requirement, the automatic provisions of
Subsections (a) and (b) shall apply, and the Committee shall not have discretion
to vary them.
(e) Notwithstanding anything in the Plan to the contrary, in the event of a
Change of Control, the Committee shall not have the right to take any actions
described in the Plan (including without limitation actions described in
Subsection (c) above) that would make the Change of Control ineligible for
pooling of interest accounting treatment or that would make the Change of
Control ineligible for desired tax treatment if, in the absence of such right,
the Change of Control would qualify for such treatment and the Company intends
to use such treatment with respect to the Change of Control.
10. Amendment and Termination of the Plan
8
<PAGE>
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that if the Company Stock becomes publicly traded, the Board
shall not amend the Plan without shareholder approval if such approval is
required by Section 162(m) of the Code and if Section 162(m) is applicable to
the Plan.
(b) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date unless terminated earlier
by the Board or unless extended by the Board with the approval of the
shareholders.
(c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after an Option is granted shall not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 17(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Option. Whether or not the Plan has terminated, an outstanding Option may be
terminated or modified under Sections 9 and 17(b) or may be amended by agreement
of the Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
11. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any Options under this Plan. In no event shall interest be
paid or accrued on any Options.
12. Rights of Participants
Nothing in this Plan shall entitle any Employee, Key Advisor or other
person to any claim or right to be granted an Option under this Plan. Neither
this Plan nor any action taken hereunder shall be construed as giving any
individual any rights to be retained by or in the employ of the Company or any
other employment rights.
13. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Option. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
9
<PAGE>
14. Requirements for Issuance of Shares
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Committee shall deem necessary or advisable
as a result of any applicable law, regulation or official interpretation thereof
and certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued under the
Plan will be subject to such stop-transfer orders and other restrictions as may
be applicable under such laws, regulations and interpretations, including any
requirement that a legend or legends be placed thereon.
15. Headings
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
16. Effective Date of the Plan.
Subject to the approval of the Company's shareholders, this Plan shall be
effective on October 15, 1996. The Plan was subsequently amended on June 5,
1997.
17. Miscellaneous
(a) Options in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to grant Options under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including options granted to
employees thereof who become Employees of the Company, or for other proper
corporate purpose, or (ii) limit the right of the Company to grant stock options
or make other awards outside of this Plan. Without limiting the foregoing, the
Committee may grant Options to an employee of another corporation who becomes an
Employee by reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Company or any of its
subsidiaries in substitution for a stock option or restricted stock grant made
by such corporation. The Committee shall prescribe the provisions of the
substitute Options.
(b) Compliance with Law. The Plan, the grant and exercise of Options, and
the obligations of the Company to issue or transfer shares of Company Stock
under Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. The Committee may revoke
any Grant if it is contrary to law or modify a Grant to bring it into compliance
with any valid and mandatory government regulation. The Committee may also
10
<PAGE>
adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no rights
as a shareholder with respect to any shares of Company Stock covered by an
Option until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company.
(d) Governing Law. The validity, construction, interpretation and effect of
the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Delaware.
11
<PAGE>
EXHIBIT 5
2000 One Logan Square Morgan, Lewis
Philadelphia, PA 19103-6993 & Bockius LLP
COUNSELORS AT LAW
215-963-5000
FAX: 215-963-5299
September 30, 1997
Specialty Care Network, Inc.
44 Union Boulevard, Suite 600
Lakewood, Colorado 80228
Re: Speciality Care Network, Inc.
Registration Statement on Form S-8 Relating to the
Specialty Care Network, Inc. 1996 Equity Compensation Plan
----------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Specialty Care Network, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of a registration statement
on Form S-8 (the "Registration Statement") to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
relating to 4,000,000 shares of the Company's common stock, par value $.001 per
share (the "Common Stock"), issuable under the Specialty Care Network, Inc. 1996
Equity Compensation Plan (the "Plan"). We have examined such certificates,
records, statutes and other documents as we have deemed relevant in rendering
this opinion.
As to matters of fact, we have relied on representations of officers of the
Company. In our examination, we have assumed the genuineness of documents
submitted to us as originals and the conformity with the originals of all
documents submitted to us as copies thereof.
Based on the foregoing, it is our opinion that the shares of Common Stock
issuable under the Plan will be, when issued in accordance with the terms of the
Plan, validly issued, fully paid and nonassessable shares of Common Stock.
The opinion set forth above is limited to the General Corporation Law of the
State of Delaware.
<PAGE>
We hereby consent to the use of this opinion as Exhibit 5 to the Registration
Statement. In giving such opinion, we do not thereby admit that we are acting
within the category of persons whose consent is required under Section 7 of the
Act or the rules or regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ MORGAN, LEWIS & BOCKIUS LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-8 pertaining to the Specialty Care Network,
Inc. 1996 Equity Compensation Plan and to the incorporation by reference therein
of our reports dated March 21, 1997 and March 13, 1997, with respect to the
consolidated financial statements and schedule of Specialty Care Network, Inc.
and subsidiary and the financial statements of Reconstructive Orthopaedic
Associates II, P.C. (successor to Reconstructive Orthopaedic Associates, Inc.),
respectively, included in the Annual Report on Form 10-K of Specialty Care
Network, Inc. for the year ended December 31, 1996, filed with the Securities
and Exchange Commission.
/s/ ERNST & YOUNG LLP
-----------------------------
Ernst & Young LLP
Denver, Colorado
September 29, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-8 pertaining to the Specialty Care Network,
Inc. 1996 Equity Compensation Plan and to the incorporation by reference therein
of our report dated May 31, 1997, with respect to the financial statements of
Ortho-Associates, P.A. d/b/a Park Place Therapeutic Center included in Specialty
Care Network, Inc.'s amendment to its Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 15, 1997.
/s/ LONDON WITTE & COMPANY, P.A.
---------------------------------
London Witte & Company, P.A.
Fort Lauderdale, Florida
September 26, 1997
