U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
Commission File No. 333-3530
VISION HEALTH CARE, INC.
(Name of small business issuer as specified in its charter)
Florida 59-3356439
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1511 N. Westshore Boulevard, Suite 1000
Tampa, Florida 33607
(Address of principal executive offices) (zip code)
(813) 289-2020
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: NONE
Title of Each Class: NONE
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or
any amendment to this Form 10-KSB. [X]
Issuer's revenues for the fiscal year ended December 31, 1996 were
$14,514.
As of March 26, 1997, there were outstanding 422,373 shares of Common
Stock, $0.01 par value per share. The aggregate market value of the
voting stock held as of March 26, 1997 by non-affiliates of the registrant
computed based on the price at which the stock was sold on December 31,
1996 (the date of the last known transaction) was $4,223,730.
DOCUMENTS INCORPORATED BY REFERENCE:
Documents Form 10-K Reference
Transitional Small Business Disclosure Format (check one):
Yes [_] No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Vision Health Care, Inc. (the "Registrant" or the "Company") was
formed as a Florida corporation in May 1995 for the purpose of purchasing
substantially all the operating assets of Vision Care, Inc., a non-stock,
not-for-profit Florida corporation ("VCI"). VCI was formed in 1968 to
engage in the management, administration and provision of prepaid vision
care services in Florida. At the time VCI was founded in 1968, Florida
law required that entities licensed to offer prepaid vision care service
plans be not-for-profit corporations. Florida law was amended in 1993 to
allow for-profit enterprises to be licensed to offer prepaid vision care
service plans.
In the face of cost-cutting challenges faced by the entire health
care industry, a group of officers and directors of VCI determined that
VCI's business could be best furthered through a for-profit enterprise.
Accordingly, those officers and directors organized the Company for the
purpose of purchasing substantially all of VCI's assets at a price equal
to their market value and continuing VCI's prepaid vision care service
plan business.
In March 1996, the Company signed an agreement with VCI (the "Asset
Purchase Agreement") to acquire substantially all of VCI's assets (the
"Acquisition"). The Acquisition was consummated and became effective as
of January 1, 1997. Following is a description of the Company's business,
including VCI's business as it was conducted prior to the Acquisition.
The Plans
As a reaction to the continued rapid increases in the cost of health
care, including vision care, employers and insurers have sought means to
reduce the cost of direct fee-for-service reimbursement plans. In
particular, health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs") and other third party health organizations have
been developed to offer a broad range of health care services, including
vision care services, based on capitated fees for membership. VCI's
prepaid vision care service plans, which offer specified services and
products at pre-determined prices (the "Plans"), historically have been
offered under the name "VSP" via a license from Vision Service Plan,
which operates directly or through license arrangements in other states
(see "VSP License Agreement" below), or under VCI's internally developed
program targeted at HMOs and PPOs known as Primary Plus. The Plans
constitute a large portion of the assets purchased by the Company from VCI
pursuant to the terms of the Asset Purchase Agreement.
The Company does not anticipate making any significant changes to the
way VCI managed, administered and provided its products and services.
However, the Company does intend to place more emphasis on the cost-
effective access to health care, build on VCI's reputation to deliver
vision health care services efficiently and effectively, and expand
services. Management believes that the ability to do that is
significantly enhanced by a for-profit corporate structure which provides
the corporation with flexibility that a not-for-profit entity does not
have, including, among other things, the ability to raise capital through
stock offerings.
The Company contracts with public and private employers, HMOs, PPOs,
health insurance carriers, self-insured corporations, unions and other
associations (collectively, the "Sponsors") to provide prepaid group
managed vision care services to members, clients or employees of the
Sponsors who choose to participate in a Plan (the "Participants"). The
Sponsors provide access to a large number of potential Participants
thereby enabling the Company to reach a greater number of persons
without the economic burden of marketing directly to the public. As of
December 31, 1996, VCI had contracts with 503 Sponsors.
To the extent necessary, the Company develops a Plan for each Sponsor
that is tailored to meet the needs of the particular Sponsor and its
members, employees or clients. Then, in exchange for fixed payments made
by the respective Sponsors for each enrolled Participant or by the
enrolled Participants themselves, Participants obtain eye health
examinations, corrective lenses and frames through the Company's network
of more than 1,100 Providers for no additional payment, unless there is a
deductible or a required co-payment. Participants may select glasses and
other vision products covered by the Plan, or choose from a wide variety
of upgraded frames and lenses at an additional cost. Upgraded items
include, among other things, designer frames, designer sunglasses, tints,
ultra-violet filters, anti-reflective coatings, specialty lenses, sports
and occupational eyewear, photochromatic lenses and polycarbonate lenses.
Complete contact lens services, including testing, fitting and servicing,
as well as post-cataract and pediatric eyecare services are also
available.
Management determines an appropriate premium for a Sponsor's Plan
based upon a number of factors, including the total number of Participants
in the Plan, the services to be provided to Plan Participants and the
historical use of the Plan's services by similar Participants. The exact
premium amount is then negotiated by management and the Sponsor at the
time the Company enters into an agreement with the Sponsor. The amount of
the premium is included in the agreement between the Sponsor and the
Company and generally cannot be adjusted until the expiration of the
current term of such agreement. The term of the agreement generally
ranges between one and two years. Moreover, an agreement typically is not
terminable by either the Sponsor or the Company (although the Company may
terminate the agreement for the Sponsor's failure to remit premiums)
unless the terminating party provides the non-terminating party with notice
of cancellation ranging from 30 to 180 days prior to the expiration of the
term of the agreement. Historically, approximately 95% of the Sponsors
renewed their contracts with VCI.
Sponsors contract for Plans because they are a relatively inexpensive
way of providing an additional health care benefit to members, clients,
employees and other beneficiaries. In addition to tailoring a Plan to meet
the needs of a particular Sponsor and its members, employees or clients,
the Company also prepares all Plan literature and claim forms for Sponsors
and their Participants; recruits Providers to provide eyecare services to
Participants; provides data processing services for billing accounts, and
renders payments to Providers and other vendors in connection with eyecare
services rendered to Participants; monitors utilization of services by
Participants; and provides quality control procedures relating to
services. The Company believes that Sponsors typically offer their
members, clients or employees participation in the Plans as a health care
option or as an enhancement to the basic benefits offered to such members,
clients or employees.
The Company believes there are several features of the Plans in
addition to the advantages discussed above that make choosing a Plan a
smart decision for Sponsors. First, the Plans are convenient. The
Company provides a state-wide panel of Providers from which a Participant
can choose in order to get the maximum benefit from a Plan. The Company
uses a pre-certified benefit form which allows a Participant utilizing the
services of panel Providers to receive covered services without making any
payment (unless the particular Plan requires a deductible or co-payment)
or completing any claims paperwork. In addition to convenience, the Plans
provide quality and cost control. The Company maintains quality control
standards for examinations and lens fabrication and encourages its panel
Providers to order high quality frames. Quality control is also enhanced
by committees that review claims and resolve complaints.
The Company also receives revenues through its administrative service
programs for managing Sponsors' self-funded plans. In exchange for
processing claims, providing data processing for billing accounts, and
performing other services for those Sponsors, the Company receives a cost
reimbursement and an administrative fee.
In short, the Company believes that it has acquired from VCI an
effective structure for providing vision care products and services to
Sponsors and Participants. Accordingly, the Company anticipates operating
its business in much the same manner that VCI operated its business for
more than 28 years.
VSP License Agreement
Substantially all of VCI's revenues were derived from Plans marketed
under the service marks "Vision Service Plan", or "VSP," as the result of
a service mark licensing agreement with Vision Service Plan, the nation's
largest provider of prepaid vision service plans. Vision Service Plan is
a non-profit PPO that has been providing vision care benefits for more
than 40 years and was one of the first PPOs to focus exclusively on group
vision care, designing and administering its first vision benefit plan in
1954. Vision Service Plan has expanded to become the largest vision
network in the country, with more than 23,000 providers. Vision Service
Plan offers vision care service plans directly in 47 states and the
District of Columbia, and indirectly in the remaining 3 states (including
Florida) under service mark licensing agreements with other providers of
prepaid vision care service plans.
In 1988, VCI and Vision Service Plan entered into a service mark
license and reciprocal service agreement (the "License Agreement"), giving
VCI the exclusive right in Florida to use the federally registered and
common law service marks "VSP" and "Vision Service Plan" in exchange for
license fees equal to $2,000 per year. The License Agreement (which was
assigned to the Company in the Acquisition) gives the Company the
advantages of being associated with the largest vision care network in the
U.S. while maintaining the advantages of local control over the quality of
vision care services.
Under the License Agreement, the Company also provides reciprocal
services through its Providers to participants in other VSP plans who
happen to reside in Florida but whose sponsors are based outside the
state. These sponsors have contracted with another VSP entity, whether
Vision Service Plan or one of its other licensees, for prepaid vision care
services for their covered participants. Likewise, under the reciprocal
arrangements with Vision Service Plan, Participants who reside outside
Florida but whose Florida-based Sponsors have contracted with the Company
for Plan coverage utilize the services of VSP provider networks in other
states.
Revenues from VCI Plans offered under the VSP name, including both
prepaid and administrative service programs (net of claim costs),
accounted for approximately 83.6%, 88.4% and 91.8% of VCI's revenues in
1996, 1995 and 1994, respectively. Additionally, revenues from reciprocal
business for services provided by VSP Providers to Florida residents
participating in non-VCI plans offered by Vision Service Plan or its
licensees in other states accounted for approximately 1.3%, 1.5% and 3.1%
of VCI's revenues (net of claim costs) in 1996, 1995 and 1994,
respectively. The Company estimates that as of December 31, 1996, there
were approximately 31,500 Participants residing out-of-state who were
covered by VSP reciprocal arrangements under VCI Plans.
Prior to the Acquisition, Vision Service Plan notified VCI that it
intends to terminate the License Agreement effective December 31, 1997.
While the reason for the notification was not disclosed by Vision Service
Plan, VCI advised the Company that it believes Vision Service Plan is
considering offering vision care service plans directly in Florida. The
Company, through authorized representatives, has conducted several
negotiation sessions with certain officers and directors of Vision Service
Plan in an attempt either to extend the License Agreement or to establish
a transition period during which Vision Service Plan would forebear from
actively marketing and selling vision care service plans directly in
Florida under the service marks "VSP" and/or "Vision Service Plan" to
avoid product confusion in the relevant market among patients and
Providers. An agreement in principle for such a transition period has
been reached and has been approved by the Board of Directors of both
Vision Service Plan and the Company, subject to review and preparation of
a formal document by the attorneys for Vision Service Plan and the
Company. The agreement in principle provides for an 18-month transition
period at the conclusion of which Vision Service Plan will begin selling
its vision care service plans directly in Florida under the service marks
historically used by VCI and the Company. During and at the conclusion of
the anticipated transition period, the Company believes that it will be
able to (1) maintain many of its Sponsors, Participants and Providers by
converting Sponsors' plans from VSP Plans to the Company's own proprietary
plans and (2) negotiate arrangements for the provision of services on a
reciprocal basis to Participants out-of-state. However, there can be no
assurance that it will be able to do so. The VSP service mark is well
known and management believes that it gave VCI and gives the Company a
marketing advantage with Sponsors. Moreover, if the License Agreement is
terminated, the Company eventually would lose virtually all revenue from
reciprocal business in Florida for out-of-state VSP Plans.
Primary Plus
Primary Plus, which was purchased by the Company in the Acquisition,
was created by VCI in 1993 to take advantage of the additional revenue
potential generated by the shift in emphasis in health care to HMOs and
managed care. It serves as a proprietary vehicle for Plans marketed to
HMOs, which generally use Providers who traditionally have not been panel
Providers under the VSP Plans marketed by VCI. By contrast, VSP Plans are
marketed primarily to businesses, school boards, and other governmental
agencies. As a result of the differing needs and objectives of the groups
targeted by each type of Plan, the rates and products of the two types of
Plans are very different. Primary Plus usually includes all medical and
surgical eyecare as well as routine eye examinations, eyeglasses and
contact lenses, while VSP Plans generally only cover routine examinations,
eyeglasses and contact lenses.
As of December 31, 1996, 12 HMOs with approximately 320,000
Participants in the aggregate have contracted for Primary Plus Plans.
Primary Plus Plans accounted for approximately 11.4%, 5.8% and 2.4% of
VCI's revenues in 1996, 1995 and 1994, respectively. Revenues generated
from Primary Plus Plans are lower than those generated from VSP Plans due
to the competitive nature of the managed care market and the less
expensive benefit packages offered to Primary Plus Participants. Primary
Plus is able to compete in this market by directing patient volume to
Providers who are willing to accept lower reimbursements and negotiating
competitive lab arrangements that lower Primary Plus' corresponding
expense levels. Given the increasing emphasis on health care cost
containment and the concomitant growth in HMOs, the Company intends to
emphasize the marketing of Primary Plus to HMOs.
As of December 31, 1996, Primary Plus also was providing
administrative services to two PPOs covering approximately 275,000 members.
Similar to its administrative service programs discussed above (see "The
Plans"), the Company receives revenues on a cost reimbursement plus
administrative fee basis.
The Providers
The Company's programs are designed to provide savings to individual
consumers, insurance companies and employers by reducing the cost of
frames, eyeglass lenses, contact lenses and eye examinations. The
proliferation of optical chain stores and other volume eyewear dispensers
has resulted in competitive pressures on the practices of various
independent optometrists and dispensing opticians. One of the goals of
VCI was to assist such vision care professionals in maintaining or
increasing the volume of their practices while enabling consumers to
reduce their eye care costs. The Company intends to continue that goal by
maintaining and attracting new Providers.
Each Provider must be a licensed practicing doctor of optometry or
ophthalmology. Currently, there are approximately 2,800 licensed
potential Providers in Florida, of which 2,000 are optometrists and 800
are ophthalmologists. The Company's process of selecting potential
Providers includes a review of references from existing Providers and
regulatory agencies, personal interviews and telephone calls to
references. The majority of Providers are optometrists who are licensed
professionals specializing in vision examinations, but who are limited in
their ability to treat eye diseases. Optometrists generally have completed
four years of post-graduate education following completion of a bachelor's
degree. The other Providers are ophthalmologists, who are medical doctors
specializing in the care, treatment and surgery of eyes. As of December
31, 1996, VCI had Provider Agreements with more than 1,100 Providers.
Those agreements were assigned by VCI to the Company in the Acquisition.
As a result, the Company has continued services to current Sponsors and
Participants without interruption, and on substantially the same
contractual terms with the Providers as those reflected in the historical
financial statements of VCI.
The Company anticipates using the same method of contracting with
Providers that VCI used. VCI entered into a separate written agreement
with each optometrist or ophthalmologist who became a Provider (the
"Provider Agreement"). Under a Provider Agreement, the Provider agrees to
furnish health care services to Participants in the Plans at predetermined
fees. The Provider Agreement requires that the Provider, among other
things, conduct his or her professional practice in accordance with the
prevailing practices and standards of the profession and the community.
In addition, the Provider must maintain and retain records relating to
Participants in such form as required by law and accepted medical
practice.
Generally, the Provider Agreements assigned to the Company in the
Acquisition do not have fixed terms and are terminable by the Company upon
30 days written notice to the Provider and by the Provider upon 90 days
written notice to the Company. Historically, the majority of Providers
renewed their agreements with VCI. In order to interest a greater number
of Sponsors, the Company believes that it must establish a larger network
of Providers and will focus its efforts on developing such a network by
continuing to seek highly qualified and geographically diverse Providers.
VCI generally contracted with Providers to provide services to
Participants simultaneously with the development of a Participant base in
a particular geographic area, although at times VCI entered into
agreements with Providers in advance of the development of a Participant
base in certain areas in connection with VCI's marketing efforts. The
Company does not expect to alter that strategy. The Provider generally
decides to participate in Plans in order to supplement their practices.
The Plans enable Providers to treat additional patients who are
Participants without requiring them to give up any of their existing
patients or the opportunity to obtain new patients who are
non-Participants. Although patients who are Participants generally pay
fees which are less than those paid by non-Participant patients, the
incremental revenues from Participant patients may be an additional source
of revenue to the Provider with little or no increase in overhead costs.
There can be no assurance, however, that all of the Providers will
continue to participate in the Plans even if their participation results
in such an increase in volume, since that portion of their practices may
become less profitable than other aspects of their practices.
The Company's Strategy
The Company believes current market conditions in vision care favor
companies which provide meaningful cost containment to the buyer. The
Company further believes there are significant niches within each market
offering attractive opportunities for companies which are responsive to
consumer demand for affordable vision care. To take advantage of these
market conditions, the Company's business strategy is to:
* Emphasize cost-effective access to health care. The Company
believes that rising vision care costs will cause buyers to seek
cost containment. The Company plans to focus on this demand by
providing low cost prepaid vision care programs.
* Build on VCI's managed care reputation and capabilities. The
Company believes that VCI was a vision care leader in the
Florida market place because of the quality of its Provider
network, the number of its Sponsors and the development of
flexible and cost-effective vision care services. The Company
intends to build on that reputation and continue to expand VCI's
range and offering of services.
* Expand services. In response to market opportunities, the
Company intends to continue VCI's strategy of expanding its
product lines and services. New delivery systems that eliminate
the pre-certified benefit form are being positioned in the
Provider networks for implementation as required. In addition,
new product lines emphasizing discount and value added benefits
at more competitive prices are being researched and developed.
Select Provider networks are being recruited to provide non-
standard VSP product services.
Marketing and Promotion
VCI did not market its prepaid plans directly to the public, and the
Company expects to follow suit. The Company believes that the success of
prepaid vision care plans depends upon its ability to attract and maintain
Sponsors with a substantial number of members, clients or employees for
enrollment in prepaid programs. VCI's efforts were directed primarily to
Sponsors located in Florida. However, if the VSP License Agreement is
terminated, the Company may seek to expand its operations to other
geographical locations or attempt to affiliate with other providers of
prepaid vision care service plans. Marketing to potential Sponsors will
continue to be conducted primarily through direct personal contact and
solicitation by the Company's management. The Company also intends to
continue marketing prepaid programs through attendance at trade shows and
by advertising in appropriate trade journals, as well as through networks
of independent health insurance brokers.
VCI marketed its prepaid plans in Puerto Rico through insurance
agents. Because the Puerto Rico marketplace has great potential for
development, the Company will continue those efforts. In order to be
successful, the Company believes that a full-time sales representative is
necessary to educate brokers, agents and the public on the value of the
benefits being offered.
Competition
The Company competes in Florida with at least four other prepaid
vision plans. The membership of one such plan (United Vision Care Plan,
Inc.) was limited to Dade County public school employees and their
families, generating approximately $2.1 million of revenues in 1995. The
Company recently secured the Dade County contract, leaving United Vision
with limited activity in Florida. The second company (Apollo, Inc.)
operates primarily in southeast Florida and Puerto Rico, offering prepaid
and discount vision care services to HMOs and group members. Apollo's
revenues in 1995 were approximately $.3 million. The third company
(Spectera Eyecare of Florida, Inc., f/k/a United Eyecare of Florida, Inc.)
received its initial licensure in Florida in July 1993. Spectera is part
of a larger vision health care organization that primarily provides
services in the Northeast. It currently has limited operations in Florida
with revenues of approximately $.3 million in 1995. A fourth company is
being formed by the American Academy of Ophthalmology and is contemplating
operations in 1998 or 1999. The Provider Agreements do not prohibit
Providers from providing services to any other prepaid vision plan.
Furthermore, there are a sufficient number of qualified opticians,
optometrists and ophthalmologists in Florida to establish independent
provider networks.
In addition to Florida's other prepaid vision plans, a number of
other prepaid vision plans operate in various parts of the United States,
many of which possess memberships and financial, marketing and other
resources much greater than that of the Company. The Company's primary
bases of competition with those other prepaid vision plans are savings
provided to Sponsors and Participants, quality of service, administration
and management, convenience, and availability.
Government Regulation
Chapter 636 of Florida Statutes, the "Prepaid Limited Health Service
Organization Act of Florida (the "Prepaid Act"), and the regulations
promulgated thereunder, prohibit a commercial enterprise, such as the
Company, from operating a prepaid optometric service plan without
obtaining and maintaining a certificate of authority from the Insurance
Department. The Company has been issued a certificate of authority in
accordance with the Prepaid Act. The Prepaid Act requires, among other
things, that the affairs, transactions, accounts, business records and
assets of a licensed entity be examined by the Insurance Department at
least once every three years. In lieu of making its own financial
examination, the Department may accept an independent certified public
accountant's audit report prepared on a statutory accounting basis. A
licensed entity is also required to file with the Insurance Department
certain annual, quarterly and miscellaneous reports, and to maintain a
minimum surplus in an amount which is the greater of $150,000 or 10% of
its total liabilities. Violation of these provisions can result in the
suspension or revocation of the entity's certificate of authority, or in
the imposition of fines.
VCI is licensed under the Puerto Rico Insurance Code as a life and
disability insurance company, which is the type of license necessary to
provide prepaid vision care service plans in Puerto Rico. VCI provided
only reciprocal services through its Providers to participants in other
VSP plans who reside in Puerto Rico but whose sponsors are based
elsewhere, and the revenues from such services were immaterial. The
Company is in the process of having VCI's license transferred to the
Company by the Puerto Rico Commissioner of Insurance. Although the
Company intends to market its prepaid plans in Puerto Rico, the Company's
Puerto Rico operations will more than likely be minimal in nature with the
primary focus being the provision of reciprocal services. The Company
does not plan to underwrite life or disability insurance in Puerto Rico.
The Commissioner of Insurance may require the Company as a licensee to
make special reports from time to time with respect to particular losses
or claims, or on any other matter that he/she deems advisable. Furthermore,
as a condition to licensing, the Company must appoint a licensed general
agent who is a resident of Puerto Rico with the power or duty to supervise
the underwriting and policy service operations of the Company. Once VCI's
license is transferred to the Company, violations of the Puerto Rico
Insurance Code could result in the suspension or revocation of, or a
refusal to renew, the Company's license, or the imposition of fines.
The Company provides Medicaid Plans, and its Primary Plus Plans
include Medicare Participants. As a result, the Company is required to
comply with extensive federal and state regulations in order to receive
reimbursement for Medicare and Medicaid Participants. There can be no
assurance that Medicare and Medicaid will not reduce their benefits in the
future or impose other regulations or requirements that may have an
adverse effect on the Company's financial condition.
The Company believes that its programs, and the relationships between
and among the Company, its Sponsors, Participants and Providers were
designed to comply with existing laws, and that the Company's operations
are currently in compliance therewith. The Company fully expects to
comply with all applicable laws and regulations. However, there is no
assurance that future laws and regulations will not be adopted, or
existing laws and regulations will not be modified or interpreted in a
manner that would materially adversely affect the Company.
Employees
The Company hired all of VCI's employees after the Acquisition. As
of March 26, 1997, the Company had 63 employees (60 of which are full
time), including 58 administrative personnel (55 full time), and 5 sales
personnel (all full time). The Company is not a party to any collective
bargaining agreement and considers its relationship with its employees to
be good.
ITEM 2. DESCRIPTION OF PROPERTY
The Company assumed all of VCI's liabilities under its office leases
with independent third parties. The Company's corporate offices consist
of 12,675 square feet of space located at 1511 North Westshore Boulevard,
Suite 1000, Tampa, Florida 33607. The Company pays a monthly base rent of
$20,333 under a 62-month non-cancelable operating lease agreement which
expires on October 31, 1999. The monthly rent will increase $528
beginning on September 1, 1997 and another $528 on each September 1
thereafter, until the expiration of the lease. The Company is also liable
for its pro rata share of any operating costs incurred annually by the
lessee that are greater than $7.00 per square foot of total square footage
leased. The Company has one five-year option to extend the lease at fair
market value at the time of the exercising of such option. In addition,
the Company leases satellite offices in Longwood and Coral Springs,
Florida. In the opinion of the Company's management, each of these
properties is adequately covered by insurance.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding (nor is
its property the subject of any pending legal proceeding) other than
routine claims litigation that is incidental to the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year covered by this Form 10-KSB.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no trading market for the Common Stock of the Company and
one is not expected to develop in the future.
As of March 26, 1997, there were approximately 207 holders of record
of the Common Stock.
The Company has not paid cash dividends on the Common Stock and does
not anticipate doing so in the foreseeable future. The Company intends to
retain earnings, if any, to support the Company's growth. Subject to the
following two sentences, any future determination as to the payment of
dividends will be at the discretion of the Board of Directors of the
Company and will depend upon the Company's future operating results,
financial condition and capital requirements, general business conditions
and such other factors as the Board of Directors deems relevant. The
payment of dividends will be prohibited between the date the Put Option is
exercised, if exercised, and the date such transaction closes. See "ITEM
12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -- Put Option." The
payment of dividends also will be limited by provisions of the Florida
Insurance Code that require the Company to maintain at all times a minimum
surplus in an amount which is the greater of $150,000 or 10% of the
Company's total liabilities.
In October 1995, the Company sold an aggregate of 126,000 shares of
Common Stock (adjusted to reflect a stock split in March 1996 of 1.75
shares for each share of Common Stock) to its 15 founding shareholders for
an aggregate of $24,000 cash, in connection with the organization of the
Company. The sale was made in reliance on Section 4(2) of the Securities
Act of 1933 as a transaction not involving a public offering.
ITEM 6. PLAN OF OPERATION
General
As stated above, the Company was formed in May 1995 for the purpose
of purchasing substantially all of VCI's assets and had no revenues from
operations prior to the Acquisition. The Acquisition was consummated and
became effective as of January 1, 1997. The Company intends to continue
managing, administering and providing its products and services in the
same manner as VCI did in the past. See "ITEM 1 - DESCRIPTION OF
BUSINESS."
VCI's revenues historically increased primarily because of the sale
of VSP and Primary Plus Plans to additional Sponsors and the growth in the
number of Participants in existing Sponsor groups. The Company believes
that this growth can be attributed in part to VCI's Providers and staff
establishing relationships with the Sponsors and Participants that
instilled confidence in the delivery of VCI's products and services. The
Company anticipates that the growth trend in the number of Sponsors and
the number of Participants in existing Sponsor groups will continue.
In an attempt to expand its Provider base and to create certain
operating efficiencies, the Company has entered into initial negotiations
with Columbia/HCA Healthcare Corporation ("Columbia") to establish a
network provider agreement. Columbia is one of the largest health care
providers in the world, owning and/or operating hospitals, medical
clinics, ambulatory surgicenters and other health care related facilities
across the United States, including Florida. To date, discussions have
centered around the Company agreeing to (1) use Columbia's surgicenter
exclusively (when geographically feasible) to perform ophthalmological
surgical procedures covered under the Company's eye care plans, and (2)
add Columbia's affiliated ophthalmologists serving as eye care providers
in Florida to the Company's network of preferred provider
ophthalmologists. The negotiations are ongoing and accordingly, there can
be no assurance that the Company and Columbia will reach an agreement.
Liquidity and Capital Resources
VCI's principal sources of cash generally were the receipt of
premiums, reciprocal revenues and administrative fee payments, and
investment income. VCI's average accounts receivable turnover for the
past three years was approximately 38 days and the turn-around time for
claims was approximately 33 days. VCI invested cash balances pending
future payments of claims and other operating expenses. In September
1992, VCI entered into a revocable trust agreement and transferred all
certificates of deposit and marketable securities to the trustee. The
trust was created to relieve VCI's management of the administrative burden
associated with investing excess funds, including reconciling numerous
accounts, updating signatories and moving funds. The Company does not
anticipate any change in those patterns.
Historically, VCI met its statutory surplus requirements by
withholding a specified percentage of fees due to Providers. VCI's
contracts with its Providers expressly authorized VCI to withhold these
fees as a benefit reserve without creating any obligation on the part of
VCI to pay them to the Providers. The Board of Directors classified
approximately $5.1 million of the withheld amounts as a liability as of
December 31, 1995 due to increases in VCI's net assets from income from
operations. VCI paid $3.1 million of the liability prior to the
acquisition of VCI's assets by the Company. The remaining $2.0 million of
professional fees due to Providers, which the Company assumed from VCI, is
expected to be paid, without interest, during the next 10 years, as cash
flow permits.
VCI's principal demands for liquidity generally were benefit costs
and administrative expenses such as salary, commissions, printing, rent,
etc. The Company anticipates that the cash reserves and the cash flow
available from operations will be adequate to meet the capital and
liquidity needs of the Company in both the short and long term. The
Company does not anticipate any significant capital expenditures in the
foreseeable future. However, in the event the Company seeks to accelerate
its growth, additional capital may be necessary.
Employees
The Company hired all of VCI's employees, effective as of January 1,
1997, representing approximately 55 administrative personnel and 5 sales
personnel. The Company does not anticipate any significant change in the
number of employees in the next 12 months.
Inflation
Management does not believe that inflation had a material effect on
the results of VCI's operations. Furthermore, during periods of
significant inflation, the Company believes that its premium increases and
cost control measures will reduce, to a certain extent, the potential
adverse effect of inflation on its future operations.
Accounting for Investments
The Company will account for its investments in accordance with
Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities. The adoption of this
standard will not materially affect the Company's financial position or
its results of operations. It is anticipated that the Company will have a
positive intent and ability to hold its marketable securities to maturity
and will accordingly classify them as held-to-maturity securities reported
at amortized cost.
ITEM 7. FINANCIAL STATEMENTS
Table of Contents
Pages
Report of Independent Accountants 1
Financial Statements:
Balance Sheets 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-12
Report of Independent Accountants
To the Board of Directors
Vision Health Care, Inc.
We have audited the accompanying balance sheets of Vision Health Care,
Inc. (the Company), as of December 31, 1996 and 1995, and the related
statements of operations, stockholders' equity, and cash flows for the
year ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Vision Health Care,
Inc., as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
Jacksonville, Florida
March 14, 1996
<PAGE>
Vision Health Care, Inc.
Balance Sheets
as of December 31, 1996 and 1995
ASSETS 1996 1995
Current assets:
Cash and cash equivalents $ 2,691,316 $ 24,000
Short-term investment 2,500,000 -
Interest receivable 5,964 -
Receivable from affiliate 15,407 -
--------- ------
Total current assets 5,212,687 24,000
Other assets:
Organization costs - 15,134
--------- ------
$ 5,212,687 $ 39,134
========= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 50,513 $ 15,134
Income taxes payable 2,690 -
Debt 2,500,000 -
--------- ------
Total current liabilities 2,553,203 15,134
--------- ------
Commitments
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized, no shares issued
and outstanding
Common stock, $.01 par value, 10,000,000
shares authorized, 388,505 and 126,000
shares issued and outstanding at
December 31, 1996 and 1995,
respectively 3,885 1,260
Common stock subscribed, 33,868 shares 339 -
Additional paid-in capital 2,983,506 22,740
Common stock subscription receivable (338,680) -
Retained earnings 10,434 -
--------- ------
Total stockholders' equity 2,659,484 24,000
--------- ------
Total liabilities and stockholders'
equity $ 5,212,687 $ 39,134
========= ======
The accompanying notes are an integral part of the financial statements.
<PAGE>
Vision Health Care, Inc.
Statement of Operations
for the year ended December 31, 1996
Revenues:
Interest $ 14,514
-------
Total revenues 14,514
Administrative expense 1,390
Provision for income taxes 2,690
-------
Net income $ 10,434
=======
Net income per common share $ .02
=======
Weighted average number of common shares outstanding 579,873
=======
The accompanying notes are an integral part of the financial statements.
<PAGE>
Vision Health Care, Inc.
Statement of Stockholders' Equity
for the year ended December 31, 1996 and for the period from May 9, 1995
(inception) through December 31, 1995
<TABLE>
<CAPTION>
Additional
Common Stock Common Stock Subscriptions Paid-In
Shares Dollars Shares Dollars Receivable Capital Net Income Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common shares 72,000 $ 720 - $ - $ - $ 23,280 $ - $ 24,000
Issuance of common shares as a
result of 1.75:1 stock split 54,000 540 - - - (540) - -
Balance at December 31, 1995 126,000 1,260 - - - 22,740 - 24,000
Issuance of common shares in
public offering 262,505 2,625 33,868 339 (338,680) 2,960,766 - 2,625,050
Net income - - - - - 10,434 10,434
Balance at December 31, 1996 388,505 $ 3,885 33,868 $ 339 $(338,680) $2,983,506 $ 10,434 $2,659,484
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Vision Health Care, Inc.
Statement of Cash Flows
for the year ended December 31, 1996
Cash flows from operating activities:
Net income $ 10,434
Adjustments to reconcile net income to cash provided by
operating activities:
Changes in assets and liabilities:
Interest receivable (5,964)
Receivable from affiliate (15,407)
Accounts payable (35,379)
Income tax payable 2,690
--------
-
Net cash provided by operating activities (27,132)
--------
-
Cash flows from investing activities:
Purchase of short-term investment (2,500,000)
Reimbursement of organizational costs 15,134
---------
Net cash used in investing activities (2,484,866)
---------
Cash flows from financing activities:
Proceeds from sale of common stock by a public offering 2,625,050
Proceeds from borrowings 2,500,000
---------
Net cash provided by financing activities 5,125,050
---------
Net increase in cash 2,667,316
Cash and cash equivalents at beginning of year 24,000
---------
Cash and cash equivalents at end of year $2,691,316
=========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Vision Health Care, Inc.
Notes to Financial Statements
1. Organization and Public Offering:
Vision Health Care, Inc. (the "Company"), incorporated in May 1995
under the laws of Florida, was organized for the purpose of purchasing
substantially all of the operating assets of Vision Care, Inc. ("VCI")
and continuing the management, administration and provision of prepaid
vision care services in Florida conducted by VCI. The Company filed a
Registration Statement on Form S-1 with the Securities and Exchange
Commission with respect to their initial public offering of common
shares of equity (the "Offering"), which registration statement became
effective in July 1996. The Company used the proceeds and certain
borrowings to acquire the assets of VCI as of January 1, 1997 (the
"Acquisition") for $5 million. The Company qualifies as a C Corporation
for federal income tax purposes. The Company had no operations for the
year ended December 31, 1995.
The Company will account for the acquisition based upon the purchase
method whereby the total purchase price will be allocated to tangible
and intangible assets and liabilities based upon their respective fair
values (see Note 11).
2. Summary of Significant Accounting Policies:
Cash and Cash Equivalents - All highly liquid investments with a
maturity of three months or less when purchased are considered to be
cash equivalents. The Company's cash and cash equivalents at December
31, 1996 consist primarily of short-term money market investments.
Net Income Per Common Share - Net income per common share has been
computed by dividing net income applicable to common stockholders by
the weighted average number of common stock and equivalents
outstanding. Common stock equivalents that have a dilutive effect
represent outstanding common stock options. Common stock issued within
one year of the Offering is treated as outstanding for all of 1996.
Income Taxes - The Company recognizes the future tax consequences of
transactions or events in the period the transactions or events are
recognized in the financial statements. Deferred tax assets and
liabilities are recorded for temporary differences by applying enacted
statutory tax rates applicable to future years to differences between
financial statement carrying amounts and tax bases of existing assets
and liabilities.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Debt:
Debt at December 31, 1996 consists of a note payable to a financial
institution with an interest rate of 5.35%. The note is collateralized
by the short-term investment discussed in Note 8 with the principal due
in a single payment on December 31, 1997. Interest accrues and is
payable in monthly installments through December 31, 1997.
4. Option Plan:
In 1996, the Company established a stock option plan (the "Option
Plan") and a total of 157,500 shares of common stock was reserved for
issuance under the Option Plan. A committee of at least two directors,
who may or may not be employees, have the authority to determine the
terms of awards granted under the Option Plan, including, among other
things, the individuals who receive awards, the times when they receive
them, vesting schedules, the number of shares subject to each award and
the exercise price and term of each option.
Incentive stock options may be granted only to employees and only
within ten years from the date of adoption of the Option Plan. The
aggregate fair market value (determined at the time the option is
granted) of shares with respect to which incentive stock options may be
granted to any one individual under the Option Plan, or any other plan
of the Company or any parent or subsidiary, which stock options are
exercisable for the first time during any calendar year, may not exceed
$100,000. All options will become exercisable upon any event
constituting a change of control of the Company, which could have the
effect of deterring potential acquisitions of the Company.
In April 1996, the Committee granted a total of 131,906 non-qualified
options having a term of ten years and an exercise price of $.29 per
share, which, based upon an independent appraisal, the Company
determined represented the fair market value of the common stock on the
date of grant. These options vest as follows:
Number
of Options Vesting Terms
55,125 20% on grant date and 20% per year thereafter
70,875 25% on grant date and 75% by end of 1996
5,906 20% on date of employment (January 1, 1997) and 20% per
------- year for each year employed
131,906
=======
On December 31, 1996, the remaining 25,594 authorized options to
purchase common shares were granted in connection with the Put Option
transaction described in Note 6. These options are 100% vested, have a
term of ten years and an exercise price of $10 per share. The Company
valued these options at the price per common share as priced in the
Company's registration statement on Form S-1 as described in Note 1.
All options not already vested will vest upon any change of control
over the Company. No options had been exercised as of December 31,
1996.
The Company accounts for stock-based compensation pursuant to Statement
of Financial Accounting Standards No. 123, issued in October 1995. This
pronouncement established a fair value based method of accounting for
stock based compensation plans.
5. Capital Stock:
The Board of Directors is authorized to provide for the issuance of ten
million shares of the common stock, par value $.01 per share, and one
million shares of preferred stock, par value $.01 per share ("Preferred
Stock"). As of December 31, 1996, no shares of Preferred Stock had been
issued.
6. Put Option:
At the closing of the Company's Offering on December 31, 1996, Dental
Network, Inc., a Florida corporation ("DNI"), purchased 100,000 shares
of common stock at $10 per share (the "DNI Shares"). As a condition to
such purchase, certain shareholders in the Company (the "Put
Shareholders") gave DNI an option (the "Put Option") to sell all of the
DNI Shares to the Put Shareholders individually for an amount equal to
the initial price paid by DNI for the DNI Shares ($1,000,000), plus 12%
per annum. The Put Option is exercisable at any time beginning on
April 30, 1997 and ending on July 31, 1998, but becomes void if (i) the
Company merges with, is acquired by, or comes under common control with
DNI or (ii) there is a change of control of the Company which a
majority of the directors nominated by DNI approve.
The Put Option is secured by each Put Shareholder's pledge of the
shares of common stock now and hereafter owned by such Put Shareholder,
together with his options or rights therein to acquire common stock (to
the extent assignable) and the shares of common stock issuable upon
exercise of such options (all of the common stock and options pledged
by all of the Put Shareholders collectively are referred to as the
"Collateral"). In the event that DNI exercises the Put Option, the Put
Shareholders will have approximately 75 days to either purchase all of
the DNI Shares in exchange for $1,000,000, plus 12% per annum, or
deliver the Collateral to DNI which will result in DNI owning both the
DNI Shares and the shares constituting the Collateral.
The options for 25,594 shares (see Note 4) granted to the Put
Shareholders are included in the Collateral securing the Put Option.
The total number of these options is approximately equal to the number
of shares of common stock that remained available for issuance under
the Company's Option Plan.
7. Related Party:
The Company has certain board members and stockholders, who are also
board members of VCI.
Pursuant to the VCI asset purchase agreement, $300,000 of the Company's
expenses related to the Offering and the purchase of VCI's assets were
paid by VCI.
8. Concentration of Credit Risk:
The Company places cash deposits, which included short-term investments
used to purchase a certificate of deposit on January 2, 1997 which
matures December 31, 1997 and accrues interest monthly at an annual
rate of 4.5%, at a major bank. At December 31, 1996, bank account
balances exceeded Federal Depository Insurance limits by approximately
$5 million. Management believes credit risk related to these deposits
is minimal.
9. Commitments:
The Company conducts its operations in leased facilities under a
noncancelable operating lease expiring on October 31, 1999 which the
Company assumed in the purchase of VCI's assets. Base rent is not
subject to any adjustment based on a percentage increase in the
Consumer Price Index or any other similar type index.
The Company is also liable for its pro rata share of any excess
operating costs based on operating costs incurred annually that are
greater than $7.00 per square foot of total square footage leased. The
Company has one 5-year option to extend the lease at a base rent of the
fair market value at the time of the exercising of such option.
Minimum lease payments plus applicable state sales tax required under
the lease agreements are as follows:
1997 $ 270,029
1998 270,115
1999 228,862
-------
$ 769,006
=======
10. Recently Issued Accounting Pronouncements:
SFAS No. 128 "Earnings Per Share," revised the disclosure requirements
and increases the comparability of EPS data on an international basis
by simplifying the existing computational guidelines in APB Opinion No.
15. The pronouncement will require dual presentation of basic and
diluted EPS on the Company's statement of operations and is effective
for the Company's fiscal year ending December 31, 1997. The Company
believes that adoption will not have a material impact on its financial
statements.
SFAS No. 129, "Disclosures of Information About Capital Structure,"
establishes standards for disclosing information about an entity's
capital structure. The new accounting principle is effective for the
Company's fiscal year ending December 31, 1997. The Company believes
that adoption will not have a material impact on its current
disclosures.
11. Pro Forma Information (Unaudited):
The following unaudited pro forma balance sheet reflects the purchase
of VCI's assets by the Company, as described in Note 1, as if the asset
purchase had occurred on December 31, 1996. Such pro forma information
is based upon the historical balance sheets of the Company and VCI, as
of that date, giving effect to the acquisition and the application of
the proceeds of the Offering.
The following pro forma balance sheet is not necessarily indicative of
what the actual financial position of the Company would have been at
December 31, 1996, nor does it purport to represent the future
financial position of the Company.
ASSETS (in 000's)
Current assets:
Cash and short-term investments $ 2,034
Certificates of deposit and marketable securities 6,058
Accounts receivable 3,052
Other 258
------
Total current assets 11,402
Other assets, including goodwill of $92 471
------
Total assets $ 11,873
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Professional fees refundable $ 2,786
Liability for outstanding claims 2,920
Debt 2,500
Accounts payable and accrued expenses 551
------
Total current liabilities 8,757
------
Stockholders' equity:
Common stock 422
Additional paid in capital 2,694
------
Total stockholders' equity 3,116
------
Total liabilities and stockholders' equity $ 11,873
======
The following unaudited pro forma statement of operations for the year
ended December 31, 1996 is presented as if the purchase of VCI's assets
and the consummation of the Offering and the application of net
proceeds therefrom had occurred on January 1, 1996.
The pro forma statement of operations does not purport to present what
actual results of operations would have been if the acquisition of VCI
and the consummation of the Offering had occurred on such date or to
project results for any future period.
(in 000's
except for per
share data)
Revenues:
Prepaid programs $ 15,772
Managed care 2,183
Administrative service and reciprocal programs and other 545
Investment income 587
-------
Total revenues 19,087
-------
Costs and expenses:
Costs of benefits provided 14,243
General and administrative expenses 5,312
Retirement plan contributions 80
Depreciation and amortization 120
-------
Total costs and expenses 19,755
-------
Pro forma net loss $ (668)
=======
Weighted average number of common shares outstanding 579,873
=======
Pro forma loss per share $ (1.15)
=======
Note to pro forma statement of operations - Pro forma amounts are based
upon the historical results of the Company and VCI for the year ended
December 31, 1996 adjusted for the amortization of goodwill of $6,100
(calculated as the excess of the purchase price of $5,000,000 less the
net book value of the net operating assets purchased of $4,908,453
divided by the useful life of 15 years).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On January 4, 1997, the Company replaced Dwight Darby & Company with
Coopers & Lybrand L.L.P. as its new independent accountant. No report on
the Company's financial statements prepared by Dwight Darby & Company
contained an adverse opinion or disclaimer of opinion, or was modified as
to uncertainty, audit scope, or accounting principles. In addition, there
were no disagreements with Dwight Darby & Company on any matter of
accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which, if not resolved to Dwight Darby &
Company's satisfaction, would have caused it to make reference to the
subject matter of the disagreement(s) in connection with its report. The
decision to change accountants was approved by the Company's Board of
Directors.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth certain information concerning the
executive officers and directors of the Company:
Name Age Position
Howard J. Braverman, O.D.(1)(5)* . 50 Chairman of the Board of
Directors
Peter D. Liane, O.D.(1)* . . . . . 41 Chief Executive Officer,
President and Director
James W. Andrews, O.D.(2)* . . . . 44 Vice President and Director
Alan P. Fisher, O.D.(3)* . . . . . 46 Secretary and Director
Terrance W. Naberhaus, O.D.(2)* . . 40 Treasurer and Director
James R. Brauss, O.D.(1) . . . . . 49 Director
Stanley D. Braverman, M.D.(3)(5) . 46 Director
Allen L. Garrett(3) . . . . . . . . 57 Director
Scott F. Hilinski(4) . . . . . . . 28 Director
Landrum R. Landreth(1) . . . . . . 72 Director
Howard Levine, D.D.S(4). . . . . . 60 Director
Jeffery C. Locke, O.D.(3) . . . . . 36 Director
Raymond M. Neff(2) . . . . . . . . 55 Director
Stanley Shapiro, D.D.S.(4) . . . . 52 Director
Henry C. Tie Shue(4) . . . . . . . 54 Director
John M. Renaldo, O.D.(2) . . . . . 53 Director
Luis M. Perna, M.S.M. . . . . . . . 46 President of VSP Division
Roy L. Burgess, C.P.A., M.S.M . . 43 President of Primary Plus
Eugene T. Pizzo, Jr., M.S.M . . . . 54 Division
Ronald R. Barnette. . . . . . . . . 47 Controller
Vice President-Sales and
Marketing of VSP Division
_______________
* Member of the Executive Committee.
(1) Class 1 director whose term will expire at the 1997 annual meeting
of shareholders.
(2) Class 2 director whose term will expire at the 1998 annual meeting
of shareholders.
(3) Class 3 director whose term will expire at the 1999 annual meeting
of shareholders.
(4) Pursuant to the terms of the Put Option (see "ITEM 12 - CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS - Put Option"), Mr. Hilinski,
Dr. Levine, Dr. Shapiro and Mr. Tie Shue were elected in January 1997
to fill four vacancies on the Company's Board of Directors. All
four directors must stand for re-election at the 1997 annual meeting
of shareholders.
(5) Dr. Howard J. Braverman and Dr. Stanley D. Braverman are brothers.
Howard J. Braverman, O.D., Chairman of the Board of the
Company, has been a practicing O.D. with Braverman Eye Center since 1981.
Dr. Braverman was also associated with Eye Care of Florida from April 1994
to December 1994. Dr. Braverman has been a board member of FOA Charities,
Inc. (formerly Vision Care, Inc.) since January 1994 and of the Company
since its inception in 1995.
Peter D. Liane, O.D., Chief Executive Officer, President and
director of the Company, has practiced as an optometric physician with
Drs. Barrack and Liane, P.A. since 1979. Dr. Liane is the Immediate Past
President of the Florida Optometric Association and served as a board
member of VCI from January 1995 until February 1997. Dr. Liane has been a
board member of the Company since its inception in 1995.
James W. Andrews, O.D., Vice President and director of the
Company, has been a sole practitioner since March of 1994. Dr. Andrews
was a partner with Dr. Cravey, O.D. from January 1982 until March 1994.
Dr. Andrews has been a board member of FOA Charities, Inc. since January
1991 and of the Company since its inception in 1995.
Alan P. Fisher, O.D., Secretary and director of the Company,
has been an O.D. in private practice for more than the preceding five
years. Dr. Fisher has been a board member of FOA Charities, Inc.
since January 1991 and of the Company since its inception in 1995.
Terrance W. Naberhaus, O.D., Treasurer and director of the
Company, has been an O.D. with Brevard Optometry Associates since April
1990. Dr. Naberhaus served as a board member of VCI from January 1992
until February 1997. Dr. Naberhaus has been a board member of the Company
since its inception in 1995.
Raymond M. Neff, director of the Company, is President, Chief
Executive Officer, and director of FCCI Mutual Insurance Company. From
1987 to 1994, he was an administrator for FCCI Self Insurance Fund. During
that same period, Mr. Neff served as President, Chief Executive Officer and
director of Florida Employees Life Insurance Company and Florida Employees
Insurance Service Corporation. Mr. Neff is a director of Barnett Bank of
Southeast Florida and served as a board member of VCI from January 1992
until February 1997. Mr. Neff has been a board member of the Company since
its inception in 1995.
James R. Brauss, O.D., director of the Company, has been a
practicing O.D. with the firm of James R. Brauss, O.D., P.A. since 1988.
Dr. Brauss is on the Board of Directors of the Broward County Branch of
the American Lung Association and the Broward County Optometry Association
and was a board member of VCI from January 1990 to December 1995. Dr.
Brauss has been a board member of the Company since its inception in 1995.
John M. Renaldo, O.D., director of the Company, has been
operating as an independent contractor with Dr. Salvatore M. DeCanio, Jr.
since February 1996. Prior to working with Dr. Gary Enker at the Enker
Eye Center from October 1994 to February 1996, Dr. Renaldo practiced as
Dr. John M. Renaldo, P.A. Dr. Renaldo served as a board member of VCI
from January 1990 until February 1997. Dr. Renaldo has been a board
member of the Company since its inception in 1995.
Landrum R. Landreth, director of the Company, has been
retired for more than the preceding five years. Mr. Landreth served as a
board member of VCI from January 1993 until February 1997. Mr. Landreth
has been a board member of the Company since its inception in 1995.
Stanley D. Braverman, M.D.. director of the Company, has been
a practicing medical doctor, specializing in ophthalmology, since February
1981. Dr. Braverman became the Medical Director for VCI's Primary Plus
Division in October 1993 and now serves in the same capacity for the
Company. Dr. Braverman also is a clinical instructor in ophthalmology
at the University of Miami School of Medicine. Dr. Braverman has been a
board member of the Company since its inception in 1995.
Jeffery C. Locke, O.D., director of the Company, has been
practicing as Jeffery C. Locke, O.D., P.A. since 1990. In addition, Dr.
Locke became the Director of Quality Assessment of VCI in January 1994 and
Optometric Director of VCI in August 1995 and now holds these positions
with the Company. Dr. Locke has been a board member of the Company since
its inception in 1995.
Allen L. Garrett, C.L.U., director of the Company, helped to
form VCI's first panel of doctors in 1969 and 1970 and served as President
and Chief Executive Officer of VCI from January 1980 to January 1996. Mr.
Garrett is the past Chairman of the Council of Growing Companies. Mr.
Garrett has been a board member of the Company since its inception in
1995.
Scott F. Hilinski, director of the Company, is a partner with
Fleet Equity Partners, which is located in Providence, Rhode Island, where
he started as an associate in October 1995. From May 1993 to October
1995, Mr. Hilinski was an associate with TA Associates in Boston,
Massachusetts, and from August 1990 to May 1993 he was an associate with
Deloitte & Touche in Boston. Mr. Hilinski has been a board member of the
Company since January 1997.
Howard Levine, D.D.S., director of the Company, has served as
the Chief Operating Officer of OHS, Inc. (f/k/a Dental Network, Inc.) and
its subsidiaries (OHS of Georgia, Inc., Dental Administrators, Inc., and
OHS of Alabama, Inc., f/k/a Dental Benefits Management, Inc.) since 1996.
From 1964 until joining OHS, Inc., Dr. Levine was a practicing dentist in
private practice. Dr. Levine has been a board member of the Company since
January 1997.
Stanley Shapiro, D.D.S., director of the Company, has served
as the President and Chief Development Officer of OHS, Inc. (f/k/a Dental
Network, Inc.) and its subsidiaries (OHS of Georgia, Inc., Dental
Administrators, Inc., and OHS of Alabama, Inc., f/k/a Dental Benefits
Management, Inc.) since 1996. From 1970 until joining OHS, Inc., Dr.
Shapiro was a practicing dentist in private practice. Dr. Shapiro has been
a board member of the Company since January 1997.
Henry C. Tie Shue, director of the Company, has been involved
in the day to day management of Oral Health Services, Inc. and its
affiliates for more than the preceding five years. Mr. Tie Shue has been
a board member of the Company since January 1997.
Luis M. Perna, M.S.M. is President of the Company's VSP
Division. Prior to assuming this position with VCI in January 1996,
Mr. Perna served as Vice President of VCI's Operations from 1990 to 1995.
From 1973 to 1990, Mr. Perna was employed by Crown Life Insurance Company
of Canada in both U.S. group insurance sales and administrative
capacities. His final position there was Regional Manager, Group
Administration. Mr. Perna received his B.A. in Political Science from the
University of Florida in 1973 and his M.S. in Management from Florida
International University in 1976.
Roy L. Burgess, C.P.A., M.S.M. is the President of the
Company's Primary Plus Division where he is responsible for product
design, marketing, claims adjudication, underwriting, contract
preparation, customer service, provider relations and quality improvement.
Prior to joining VCI in July 1995, Mr. Burgess worked at Prudential Health
Care System for 10 years as Director of Operations for its multiple
managed care plans in Tampa and Orlando, Florida. Mr. Burgess received
his B.A. in Business Administration from the University of Florida in 1975
and his M.S. in Management from Rollins College in 1979.
Eugene T. Pizzo, Jr., M.S.M., is the Controller of the
Company. From 1982 until his promotion to Controller of VCI in 1990, Mr.
Pizzo served as VCI's office manager. Prior to joining VCI, Mr. Pizzo was
a career officer in the United States Air Force for 20 years during which
time he received his M.S. in Management from Troy State University.
Ronald R. Barnette is the Company's Vice President of
Marketing. Mr. Barnette joined VCI in 1989 and was appointed Vice
President of Marketing in February 1990. Prior to joining VCI, Mr.
Barnette served as an account executive with Vision Service Plan from 1984
to 1988, a marketing representative with 3M Company from 1979 to 1984, and
a marketing representative with General Motors Corp. from 1971 to 1979.
Mr. Barnette received his B.S. in Marketing from Virginia Polytechnic
Institute in 1971.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
The Company does not have a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934 (the "1934
Act") and therefore is not subject to the reporting requirements of
Section 16 of the 1934 Act.
ITEM 10. EXECUTIVE COMPENSATION
Directors' Compensation
Board members receive $350 for the first day of a board
meeting, $250 for each subsequent day, and reimbursement for any
reasonable out-of-pocket expenses. In addition, the Chairman of the Board
and the President each receive $9,600 per year, and the Vice President,
Secretary and Treasurer each receive $2,400 per year.
Directors also are eligible to receive options under the
Stock Option Plan described below. See "ITEM 12 - CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS - Option Plan."
Executive Compensation
Because the Company had no operating history, compensation
information for executive officers is not available for the fiscal year
ended December 31, 1996. The following table summarizes the compensation
received by the Company's Chief Executive Officer and each of its most
highly compensated executive officers other than the Chief Executive
Officer whose total annual base salary and bonus exceeded $100,000 (the
"Named Executives") in their capacity as executive officers of VCI during
1996. The Company does not anticipate any change in such compensation,
except for annual increases in the ordinary course of business and
consistent with past practice.
1996 Annual Compensation from VCI
Name and Other Annual All Other
Principal Year Salary Bonus Compensation Compensation
Position (1) (2)
Peter D. Liane, 1996 -0- -0- -0- -0-
O.D., Chief
Executive Officer
and President(3)
Luis M. Perna, 1996 $105,115 $21,500 -0- $6,325
M.S.M., President
of VSP Division
Roy L. Burgess, 1996 $129,942 $19,471 -0- $7,819
C.P.A., M.S.M.,
President of
Primary Plus
Division
Ronald R. 1996 $ 68,615 $45,052 -0- $4,129
Barnette, Vice
President of
Marketing
_______________
(1) Excludes certain personal benefits such as health insurance, the
total value of which did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus for the Named Executive.
(2) Consists of contributions to VCI's profit-sharing plan.
(3) Dr. Liane currently serves as the Chief Executive Officer and
President of the Company, but, other than any applicable director
fees, Dr. Liane is not compensated for serving in such capacity.
Information with respect to fiscal years 1994 and 1995 is not reported
because the Company was not a reporting company pursuant to Section 13(a)
or 15(d) of the Exchange Act at any time during those years.
The following table sets forth information with respect to grants of
options to purchase shares of Common Stock during 1996 to the Named
Executives.
Stock Option Grants in 1996
% of Market
Total Price per
Options Share of
Number of Granted Underlying
Securities to Security
Underlying Employees Exercise on
Options in Fiscal Price per Date of Expiration
Name Granted(1) 1996 Share Grant Date
Peter D. Liane, 15,750(2) 12.77% $ 0.29 $ 0.29 04/09/06
O.D. 3,488(3) 2.83% $10.00 $10.00 12/19/06
Luis M. Perna, 7,875(4) 6.34% $ 0.29 $ 0.29 04/09/06
M.S.M.
Roy L. Burgess, 7,875(4) 6.34% $ 0.29 $ 0.29 04/09/06
C.P.A., M.S.M. 2,327(3) 1.89% $10.00 $10.00 12/19/06
Ronald R. Barnette -0- -0- -0- -0- -0-
_________________
(1) The options shown on this table have a term of 10 years.
(2) 7,875 of the options vested 20% on grant and vest an additional 20%
at the end of each full year thereafter.
The remaining 7,875 options were fully vested as of December 31,
1996.
(3) The options were immediately exercisable on the date of grant.
(4) The options vested 20% on grant and vest an additional 20% at the
end of each full year thereafter.
No options were exercised during 1996.
Employment Agreements
The Company has entered into two year employment agreements with Luis M.
Perna, President of the Company's VSP Division, and Roy L. Burgess,
President of the Company's Primary Plus Division, and a one year employment
agreement with Ron Barnette, Vice President of Marketing. Mr. Perna's
agreement provides for an annual base salary of $110,000, a discretionary
annual bonus, and participation in certain incentive compensation plans.
Mr. Burgess' agreement provides for an annual base salary of $133,500 and
an annual bonus of at least $12,000. Mr. Barnette's agreement provides
for an annual base salary of $72,000 and incentive payments tied to the
annualized volume of VSP contracts and the sale of Primary Plus contracts.
Messrs. Perna's and Burgess' agreements will be renewed automatically for
an additional year on each anniversary date thereof, unless any party
gives written notice of nonrenewal. During their employment with the
Company, and for a period of two years thereafter in the case of Messrs.
Perna and Burgess and one year in the case of Mr. Barnette, the
individuals are prohibited from competing with the Company directly or
indirectly in any business involving the soliciting or administering of
eye care within a state in which the Company offers such coverage or
services and actually writes business.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 26, 1997, certain
information regarding the beneficial ownership of Common Stock by each
person known by the Company to be the beneficial owner of more than 5% of
the Company's outstanding Common Stock, by each director of the Company,
by each director nominee, by each Named Executive, and by all directors
and executive officers of the Company as a group. Each person named in
the table has sole voting and investment power with respect to all Common
Stock shown as beneficially owned by such person.
Shares of
Common Stock
Name and Address of Beneficially Percentage of
Beneficial Owner Owned Ownership
Dental Network, Inc.(1) 100,000 23.68%
James W. Andrews, O.D.(2)(3) 23,638 5.41
Ronald R. Barnette(4) 2,500 0.59
James R. Brauss, O.D.(5) 8,932 2.11
Howard J. Braverman, O.D.(6)(7) 26,053 5.95
Stanley D. Braverman, M.D.(7) 7,500 1.78
Roy L. Burgess, C.P.A., 20,852 4.87
M.S.M.(4)(8)
Alan P. Fisher, O.D.(2)(9) 22,388 5.12
Allen L. Garrett(10) 7,875 1.86
Scott F. Hilinski(11) 0 0.00
Landrum R. Landreth(12) 10,375 2.46
Howard Levine, D.D.S.(1) 0 0.00
Peter D. Liane, O.D.(2)(13) 24,888 5.70
Jeffery C. Locke, O.D.(14)(15) 10,240 2.42
John W. McClane, III, O.D.(16) 5,750 1.36
Terrance W. Naberhaus, O.D.(2)(15) 22,388 5.12
Raymond M. Neff(14)(17) 9,040 2.13
Luis M. Perna, M.S.M.(4)(18) 13,525 3.18
John M. Renaldo, O.D.(14)(19) 9,040 2.13
Stanley Shapiro, D.D.S.(1) 0 0.00
Henry C. Tie Shue(1) 0 0.00
All directors and executive 219,234 51.91%
officers as a group (18 persons)
(1) The business address of Dental Network, Inc., Dr. Levine, Dr.
Shapiro and Mr. Tie Shue is 5775 Blue Lagoon Drive, Miami, Florida
33126.
(2) The number of shares beneficially owned includes 14,513 shares that
are subject to currently exercisable options and excludes 4,725
shares that are subject to options that are not currently
exercisable.
(3) The business address of Dr. Andrews is 5062 Mobile Highway,
Pensacola, Florida 32506.
(4) The business address of Mr. Barnette, Mr. Burgess and Mr. Perna is
1511 North Westshore Boulevard, Suite 1000, Tampa, Florida 33630.
(5) The business address of Dr. Brauss is 520 N.E. 30th Street, Wilton
Manors, Florida 33334.
(6) The number of shares beneficially owned includes 15,678 shares that
are subject to currently exercisable options and excludes 4,725
shares that are subject to options that are not currently
exercisable.
(7) The business address of Dr. Howard J. Braverman and Dr. Stanley D.
Braverman is 1935 E. Hallandale Beach Boulevard, Hallandale, FL
33009.
(8) The number of shares beneficially owned includes 5,477 shares that
are subject to currently exercisable options and excludes 4,725
shares that are subject to options that are not currently
exercisable.
(9) The business address of Dr. Fisher is 2025 East Edgewood Drive,
Lakeland, Florida 33803.
(10) Mr. Garrett's address is 4522 Culbreath Avenue, Tampa, Florida 33607.
(11) The business address of Mr. Hilinski is Mail Stop: R1 MO F12C, 50
Kennedy Plaza, Providence, Rhode Island 02903.
(12) Mr. Landreth's address is 2303 Bourgogne Drive, Tallahassee,
Florida 32308.
(13) The business address of Dr. Liane is 100 West Bay Street,
Jacksonville, Florida 32202.
(14) The number of shares beneficially owned includes 1,165 shares that
are subject to currently exercisable options.
(15) The business address of Dr. Locke and Dr. Naberhaus is 2420 South
Babcock Street, Melbourne, Florida 32901.
(16) The business address of Dr. McClane is 113 City Smitty Drive, St.
Marys, Georgia 31558.
(17) The business address of Mr. Neff is 2601 Cattlemen Road, Sarasota,
Florida 34232.
(18) The number of shares beneficially owned includes 3,150 shares that
are subject to currently exercisable options and excludes 4,725
shares that are subject to options that are not currently
exercisable.
(19) The business address of Dr. Renaldo is 4400 North Federal Highway,
Suite 134, Boca Raton, Florida 33431.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All of the executive officers, directors, nominees for election as a
director and 5% shareholders of the Company, except for four, are or have
been within the past two years, members and officers or directors of VCI.
The following table indicates the positions with VCI and the Company of
each executive officer, director and 5% shareholder of the Company:
Positions with VCI
(n/k/a FOA Charities, Positions with
Name Inc.) Company
James W. Andrews, O.D. Board Member Vice President and
Director
James R. Brauss, O.D.(1) Former Board Member Director
Howard J. Braverman, O.D.(2) Board Member Chairman of the
Board of Directors
Stanley D. Braverman, M.D. Medical Director Medical Director
and Director
Roy L. Burgess, C.P.A., M.S.M. President of Primary President of
Plus Division Primary Plus
Division
Alan P. Fisher, O.D. Board Member Secretary and
Director
Allen L. Garrett Former President and Director
Chief Executive
Officer
Scott F. Hilinski None Director
Landrum R. Landreth Former Board Member Director
Howard Levine, D.D.S. None Director
Peter D. Liane, O.D. Former Board Member Chief Executive
Officer, President
and Director
Jeffery C. Locke, O.D. Director of Quality Director of
Assessment and Quality Assessment
Optometric Director and Optometric
Director and
Director
John W. McClane, III, O.D. Board Member Nominee for
Director
Terrance W. Naberhaus, O.D. Former Board Member Treasurer and
Director
Raymond M. Neff Former Board Member Director
Luis M. Perna, M.S.M. President of VSP President of VSP
Division Division
John M. Renaldo, O.D. Former Board Member Director
Stanley Shapiro, D.D.S. None Director
Henry C. Tie Shue None Director
_______________
(1) Dr. Brauss served as a board member of VCI from January 1990 to
December 1995.
(2) Dr. Braverman owns more than 5% of the Company's outstanding Common
Stock. See "ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT."
(3) Mr. Garrett was President and Chief Executive Officer of VCI until
January 1996.
The Acquisition
The Asset Purchase Agreement provided that the purchase price of
VCI's assets would be the fair market value of the assets as of December
31, 1995, as established by the appraisal of an independent business
appraisal firm retained by VCI, and for the price to be adjusted by an
amount equal to any increase or decrease n the net book value of VCI from
December 31, 1995 to the end of the last calendar month preceding the date
of closing. The appraisal firm determined that the fair market value of
VCI's assets was $5 million as of December 31, 1995. As of December 31,
1996, there was no increase or decrease in VCI's book value, resulting in
a purchase price of $5 million.
The Asset Purchase Agreement required the Company to assume
substantially all of the liabilities of VCI, including a liability of $2.0
million (after giving effect to a $3.1 million payment to Providers that
took place prior to closing), representing professional fees previously
withheld by VCI as reserves, and obligations incurred in the ordinary
course under agreements with Sponsors, Providers and Participants. The
Asset Purchase Agreement contained standard representations and warranties
and indemnities requiring VCI to indemnify the Company for such matters as
litigation arising from the conduct of VCI's business prior to the
Acquisition, breaches by VCI of the contracts transferred to the Company,
and violations of law by VCI prior to the Acquisition. Management of the
Company is not aware of the existence of any such potential or threatened
litigation, breaches or violations.
VCI reimbursed the Company for $300,000 in actual and reasonable
transaction expenses incurred by the Company in connection with the
Acquisition and the Company's initial public offering, as well as paid
VCI's own legal and accounting expenses and the cost of the appraisal.
VCI appointed a special committee in connection with the negotiation
and execution of the Asset Purchase Agreement, consisting of a VCI
director and two VCI members, none of whom is an officer or director of
the Company. The special committee was advised by its own counsel in
connection with the transaction, and the special committee retained the
independent appraisal firm that determined the fair market value of VCI's
assets. Consummation of the Acquisition was subject to the affirmative
vote by VCI's members which was obtained at an annual meeting of members
held in May 1996.
Option Plan
The Company has established a stock option plan (the "Option Plan")
for the purpose of attracting and retaining the Company's executive
officers and other key employees, directors, and key non-employee advisors
in a manner that will align their interests with those of the Company's
shareholders. A total of 157,500 shares of Common Stock have been
reserved for issuance under the Option Plan. A committee of at least two
directors, who may or may not be employees (the "Committee"), have the
authority to determine the terms of awards granted under the Option Plan,
including, among other things, the individuals who receive awards, the
times when they receive them, vesting schedules, performance goals
triggering the exercisability of options, whether an option is an
incentive or non-qualified option and the number of shares to be subject
to each award. Currently, the Committee members are Howard J. Braverman,
O.D., Alan P. Fisher, O.D., and Terrance W. Naberhaus, O.D.
The exercise price and term of each option will be fixed by the
Committee, except that the exercise price for each stock option which is
intended to qualify as an incentive stock option must be at least equal to
the fair market value of the stock on the date of grant and the term of
the option cannot exceed 10 years. In the case of an incentive stock
option granted to an individual who owns (or is deemed to own) at least
10% of the total combined voting power of all classes of stock of the
Company, the exercise price must be at least 110% of the fair market value
on the date of grant and the term cannot exceed five years. Incentive
stock options may be granted only to employees and only within 10 years
from the date of adoption of the Option Plan. The aggregate fair market
value (determined at the time the option is granted) of shares with
respect to which incentive stock options may be granted to any one
individual under the Option Plan, or any other plan of the Company or any
parent or subsidiary, which stock options are exercisable for the first
time during any calendar year, may not exceed $100,000. An optionee may,
with the consent of the Committee, elect to pay for the shares to be
received upon exercise of his options in cash or shares of Common Stock or
any combination thereof. All options will become exercisable upon any
event constituting a change of control of the Company, which could have
the effect of deterring potential acquisitions of the Company.
In April 1996, the Committee granted a total of 131,906 non-
qualified options as follows: (i) 55,125 to executive officers, directors
and/or shareholders of the Company who spent considerable time and effort
in connection with organizing the Company and furthering the Acquisition
(the "Organizing Group"); (ii) 70,875 to those, including key non-employee
advisors and executive officers of the Company, who played a key role in
encouraging continued Provider and Sponsor participation in the Plans that
the Company assumed from VCI (the "Network Development Group") and (iii)
5,906 to Messrs. Pizzo and Barnette who became officers of the Company
upon completion of the Acquisition. Each of the following individuals, as
members of both the Organizing Group and the Network Development Group,
received 15,750 options each: Howard J. Braverman, Chairman of the Board;
Peter D. Liane, Chief Executive Officer and President; James W. Andrews,
Vice President; Alan P. Fisher, Secretary; and Terrance W. Naberhaus,
Treasurer. In addition, the Committee awarded 7,875 options each to
Messrs. Perna and Burgess, both of whom are shareholders of the Company
and were executive officers of VCI and became executive officers of the
Company following the Acquisition, in connection with the time they
devoted outside normal working hours as members of the Organizing Group.
The options have a term of 10 years and an exercise price of $.29
per share, which the Company determined represented the fair market value
of the Common Stock on the date of grant. All options granted to the
Organizing Group vested 20% on grant and vest an additional 20% at the end
of each full year after grant, assuming the holders remain in their
capacities of officers or directors of the Company. The options granted
to each member of the Network Development Group vested 25% upon acceptance
by that member of the responsibility of promoting Provider and Sponsor
participation and 75% at the end of 1996 as to each member of that group
who fulfilled his or her responsibilities in the opinion of the Committee.
The options of Messrs. Pizzo and Barnette vested 20% upon the commencement
of their employment with the Company and the balance at 20% per year for
each year during which they remain employed by the Company. All options
not already vested will vest upon any change of control of the Company.
Put Option
At the closing of the Company's initial public offering on December
31, 1996, Dental Network, Inc., a Florida corporation ("DNI"), purchased
100,000 shares of Common Stock at $10 per share (the "DNI Shares"). In
negotiating its purchase of shares, DNI requested that the Company give
DNI the ability to liquidate its investment (in the form of a put option)
because DNI did not want to remain a 25% investor indefinitely. However,
under generally accepted accounting principles, a put to the Company would
adversely affect the Company's shareholders' equity. Accordingly, the
Company approached its principal shareholders about the possibility of
granting the put.
James W. Andrews, O.D., Howard J. Braverman, O.D., Roy L. Burgess,
C.P.A., M.S.M., Alan P. Fisher, O.D., Mitchell W. Legler, Peter D. Liane,
O.D., Jeffrey C. Locke, O.D., Terrance W. Naberhaus, O.D., Raymond M. Neff
and John M. Renaldo, O.D. (the "Put Shareholders") gave DNI an option (the
"Put Option") to sell all of the DNI Shares to the Put Shareholders
individually for the Put Price (as defined below). The Put Option is
exercisable at any time beginning on April 30, 1997, and ending on July
31, 1998, but becomes void if (i) the Company merges with, is acquired by,
or comes under common control with DNI or (ii) there is a change of
control of the Company which a majority of the directors nominated by DNI
approve. The Put Price is an amount equal to the initial price paid by
DNI for the DNI Shares ($1,000,000), plus 12% per annum.
Each Put Shareholder is severally, but not jointly, liable for the
following approximate percentage of the Put Option: Andrews (13.63%),
Braverman (18.18%), Burgess (9.09%), Fisher (13.63%), Legler (4.55%),
Liane (13.63%), Locke (4.55%), Naberhaus (13.63%), Neff (4.55%), and
Renaldo (4.55%). The obligations of each Put Shareholder under the Put
Option are secured by such Put Shareholder's pledge of the shares of
Common Stock now and hereafter owned by such Put Shareholder, together
with his options or rights therein to acquire Common Stock (to the extent
assignable) and the shares of Common Stock issuable upon exercise of such
options (all of the Common Stock and options pledged by all of the Put
Shareholders collectively are referred to as the "Collateral"). In the
event that DNI exercises the Put Option, the Put Shareholders will have
approximately 75 days to (1) purchase all of the DNI Shares in exchange
for the Put Price or (2) deliver the Collateral to DNI in termination of
the Put Option. If any Put Shareholder is unable or unwilling to purchase
his pro rata portion of the DNI Shares, the other Put Shareholders have
the right to buy his shares and post his share of the funds, but if they
do not do so, the entire Put Option will be satisfied by the delivery of
the Collateral, in which event DNI will own both the DNI Shares and the
shares constituting the Collateral.
In exchange for granting the Put Option, the Company's Board of
Directors granted each Put Shareholder options to purchase a pro rata
portion of 25,594 shares of Common Stock (collectively, the "Guaranty
Options") equal to the percentage of the Put Option that he granted. The
options, which are 100% vested, have a term of 10 years and an exercise
price of $10.00 per share, and are included in the Collateral securing the
Put Option. The total number of Guaranty Options is approximately equal
to the number of shares of Common Stock that remained available for
issuance under the Company's stock Option Plan.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 The Asset Purchase Agreement dated March 21, 1996, by and
between the Registrant and Vision Care, Inc., was attached as an Exhibit
to the Registrant's S-1 Registration Statement No. 333-3530 filed April
12, 1996, and is incorporated herein by reference.
2.2 First Amendment to Asset Purchase Agreement dated December
30, 1996, by and between the Registrant and Vision Care, Inc.
2.3 Put and Security Agreement dated December 19, 1996, by and
among the Registrant, Dental Network, Inc., and certain of the Company's
shareholders.
2.4 Promissory Note in the amount of $2.5 million dated as of
December 31, 1996, in favor of SunTrust Bank, Tampa Bay.
2.5 Assignment of Deposit Account, dated as of December 31,
1996, in favor of SunTrust Bank, Tampa Bay.
2.6 Assignment of Certificate of Deposit, dated as of January
2, 1997, in favor of SunTrust Bank, Tampa Bay.
3.1 The Registrant's Amended and Restated Articles of
Incorporation were attached as an Exhibit to the Registrant's S-1
Registration Statement No. 333-3530 filed April 12, 1996, and are
incorporated herein by reference.
3.2 The Registrant's Amended and Restated Bylaws were attached
as an Exhibit to the Registrant's S-1 Registration Statement No. 333-3530
filed April 12, 1996, and are incorporated herein by reference.
10.1 Stock Option Plan was attached as an Exhibit to the
Registrant's S-1 Registration Statement No. 333-3530 filed April 12, 1996,
and are incorporated herein by reference.
10.2 Form of Stock Option Agreement was attached as an Exhibit to
the Registrant's S-1 Registration Statement No. 333-3530 filed April 12,
1996, and are incorporated herein by reference.
16. Letter on Change in Certifying Accountant.
27. Financial Data Schedule.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 1997.
VISION HEALTH CARE, INC.
By: /s/ Peter Liane
Peter Liane, President and Chief
Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: March 31, 1997 /s/ Howard Braverman
Howard Braverman, Chairman of the Board
Date: March 31, 1997 /s/ Peter Liane
Peter Liane, President, Chief Executive Officer
and Director
Date: March 28, 1997 /s/ James W. Andrews
James W. Andrews, Vice President and Director
Date: March 31, 1997 /s/ Alan P. Fisher
Alan P. Fisher, Secretary and Director
Date: March 31, 1997 /s/ Terrance W. Naberhaus
Terrance W. Naberhaus, Treasurer
(Principal Financial Officer and
Principal Accounting Officer) and Director
Date: March __, 1997 _______________________________________________
James R. Brauss, Director
Date: March __, 1997 /s/ Stanley Braverman
Stanley Braverman, Director
Date: March 28, 1997 /s/ Allen L. Garrett
Allen L. Garrett, Director
Date: March __, 1997 ______________________________________________
Scott F. Hilinski, Director
Date: March 27, 1997 /s/ Landrum R. Landreth
Landrum R. Landreth, Director
Date: March __, 1997 ______________________________________________
Howard Levine, Director
Date: March 27, 1997 /s/ Jeffrey C. Locke
Jeffrey C. Locke, Director
Date: March 31, 1997 /s/ Ray Neff
Ray Neff, Director
Date: March 28, 1997 /s/ John M. Renaldo
John M. Renaldo, Director
Date: March __, 1997 ______________________________________________
Stanley Shapiro, Director
Date: March __, 1997 ______________________________________________
Henry C. Tie Shue, Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS
FILED PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT
BY NON-REPORTING ISSUERS
At the time of filing of this Form 10-KSB, no annual report covering the
Registrant's last fiscal year, nor any proxy material with respect to any
annual meeting or other meeting of the Registrant's security holders, has
been sent to the Registrant's security holders. Accordingly, the
Registrant hereby undertakes to furnish the Commission four copies of
(1) any annual report to security holders covering the Registrant's last
fiscal year, and (2) every proxy statement, form of proxy or other proxy
soliciting material sent to more than 10 of the Registrant's security
holders with respect to the 1997 annual meeting of security holders.
EXHIBIT INDEX
2.1 The Asset Purchase Agreement dated March 21, 1996, by and between
the Registrant and Vision Care, Inc., was attached as an Exhibit to the
Registrant's S-1 Registration Statement No. 333-3530 filed April 12, 1996,
and is incorporated herein by reference.
2.2 First Amendment to Asset Purchase Agreement dated December 30,
1996, by and between the Registrant and Vision Care, Inc.
2.3 Put and Security Agreement dated December 19, 1996, by and among
the Registrant, Dental Network, Inc., and certain of the Company's
shareholders.
2.4 Promissory Note in the amount of $2.5 million dated as of December
31, 1996, in favor of SunTrust Bank, Tampa Bay.
2.5 Assignment of Deposit Account, dated as of December 31, 1996, in
favor of SunTrust Bank, Tampa Bay.
2.6 Assignment of Certificate of Deposit, dated as of January 2, 1997,
in favor of SunTrust Bank, Tampa Bay.
3.1 The Registrant's Amended and Restated Articles of Incorporation
were attached as an Exhibit to the Registrant's S-1 Registration Statement
No. 333-3530 filed April 12, 1996, and are incorporated herein by
reference.
3.2 The Registrant's Amended and Restated Bylaws were attached as an
Exhibit to the Registrant's S-1 Registration Statement No. 333-3530 filed
April 12, 1996, and are incorporated herein by reference.
10.1 Stock Option Plan was attached as an Exhibit to the Registrant's S-
1 Registration Statement No. 333-3530 filed April 12, 1996, and are
incorporated herein by reference.
10.2 Form of Stock Option Agreement was attached as an Exhibit to the
Registrant's S-1 Registration Statement No. 333-3530 filed April 12, 1996,
and are incorporated herein by reference.
16. Letter on Change in Certifying Accountant.
27. Financial Data Schedule.
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Amendment") is
made as of December 31, 1996 by and between VISION HEALTH CARE, INC., a
Florida corporation whose address is 100 West Bay Street, Jacksonville,
Florida 32202 ("Buyer"), and VISION CARE, INC., a Florida not-for-profit
corporation whose address is 1511 N. Westshore Boulevard, Suite 1000,
Tampa, Florida 33630 ("Seller").
Recitation of Facts
A. Buyer and Seller are parties to an Asset Purchase Agreement
dated as of March 21, 1996 (as amended or modified, the "Agreement").
B. Buyer and Seller have agreed on certain amendments to the
Agreement, including, without limitation, changing the effective date of
the Closing (as defined in the Agreement) and the date for adjusting the
Purchase Price (as defined in the Agreement).
Agreement
NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00) and other
good and valuable consideration, the parties hereto agree as follows:
1. Recitals. The foregoing recitals are true and correct, and are
incorporated herein by this reference.
2. Definitions. The capitalized terms contained in this Amendment
shall have the same meaning as set forth in the Agreement.
3. Personal Property. Section 1.1.(b) of the Agreement is modified
to read in its entirety as follows:
1.1(b) Personal Property. All equipment, vehicles, supplies,
furniture and all other personal property (other than personal
property leased pursuant to personal Property Leases as defined in
Section 1.1.(c)) owned, utilized or held for use by Seller on the
Effective Date.
4. Recent Balance Sheet Liabilities. Section 2.1.(a) of the
Agreement is modified to read in its entirety as follows:
2.1.(a) Recent Balance Sheet Liabilities. The accounts
payable and accrued Liabilities reflected or reserved against on the
Recent Balance Sheet (as defined in Section 4.4), but only in the
amounts so reflected or reserved, as adjusted for obligations
incurred and payments made in the ordinary course of business between
the date of the Recent Balance Sheet and the Effective Date; any
excess thereof shall continue to be the Liability of Seller.
5. Excess Reserve Liabilities. Section 2.1.(c) of the Agreement is
modified to read in its entirety as follows:
2.1.(c) Excess Reserve Liabilities. Liabilities related to
the professional fees withheld from providers' claims payments which
were classified as part of the "surplus" in the financial statements
referred to in Section 4.4 hereof but have been declared as
liabilities prior to the Closing Date (the "Excess Reserve
Liabilities").
6. Annual Reports. Section 3.1 of the Agreement is hereby amended
to read in its entirety as follows:
3.1 Purchase Price. The Purchase Price (the "Purchase Price")
for the Purchased Assets shall be the appraised Fair Market Value (as
defined in that certain valuation report prepared by Sheldrick
McGehee & Kohler valuing Seller as of December 31, 1995) of the
Purchased Assets, as determined by Sheldrick McGehee & Kohler, the
business valuation firm retained by Seller, and as adjusted to
reflect any increase or decrease in the net book value of Seller
between December 31, 1995 and December 31, 1996 (or such other date
as Buyer and Seller both agree to in writing). For purposes of this
Agreement "net book value" shall mean the difference between Seller's
Total Assets and Total Liabilities (i.e., Total Surplus).
7. Closing. The preamble of Article 14 of the Agreement is hereby
amended to read in its entirety as follows:
The closing of this transaction (the "Closing') shall take place
at the offices of Foley & Lardner, 200 Laura Street, Jacksonville,
Florida 32202, at 4:30 P.M. on December 30, 1996. Notwithstanding
the date of the Closing, Buyer shall not transfer the Purchase Price
to Seller, Seller shall not transfer the Purchased Assets to Buyer
and Buyer shall not assume the Assumed Liabilities until 12:01 A.M.
on January 1, 1997 (the "Closing Date") which shall be the effective
date and time of the transaction, or, to the extent necessary, as
soon as practicable thereafter.
8. Expenses. The preamble of Section 16.8.(a) of the Agreement is
hereby amended to read in its entirety as follows:
16.8.(a) Expenses to be Paid by Seller. Seller
acknowledges that it has agreed to reimburse Buyer up
to $300,000 to cover Buyer's actual and reasonable
expenses associated with the transactions provided for
in this Agreement. In addition, Seller shall pay, and
shall indemnify, defend and hold Buyer harmless from
and against, each of the following:
9. Full Force and Effect. The Agreement, as hereby modified, is
ratified and confirmed and all of its terms, covenants, conditions,
agreements and stipulations shall remain in full force and effect in
accordance with the provisions thereof on the date hereof, except as
modified herein.
10. Benefit. This Amendment shall be binding upon, inure to the
benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Nothing contained herein shall be deemed
to confer upon any other person, any right or remedy under or by reason of
this Amendment.
11. Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws and judicial decisions of the State
of Florida, without regard to conflict of law principles thereunder.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the day and year first above written.
VISION HEALTH CARE, INC.
("Buyer")
By: /s/ Peter D. Liane
Peter D. Liane, O.D., President
VISION CARE, INC.
("Seller")
By: /s/ Terrance W. Naberhaus
Terrance W. Naberhaus, O.D.,
Chairman of the Board
PUT AND SECURITY AGREEMENT
THIS PUT AND SECURITY AGREEMENT (the "Agreement") is made this 19th
day of December, 1996, and becomes effective upon the closing of the
Offering (as defined below), by and among VISION HEALTH CARE, INC., a
Florida corporation whose address is c/o Barrack & Liane, P.A., 100 West
Bay Street, Jacksonville, Florida 32202 ("VHC"), DENTAL NETWORK, INC., a
Florida corporation whose address is 5775 Blue Lagoon Drive, Miami,
Florida 33126 ("Investor") and James W. Andrews, O.D., Howard J.
Braverman, O.D., Roy L. Burgess, C.P.A., M.S.M., Alan P. Fisher, O.D.,
Mitchell W. Legler, Peter D. Liane, O.D., Jeffrey C. Locke, O.D., Terrance
W. Naberhaus, O.D., Raymond M. Neff and John M. Renaldo, O.D.
(collectively, the "Shareholders").
RECITATION OF FACTS
A. VHC was formed in May 1995 for the purpose of acquiring the
operating assets of Vision Care, Inc. ("VCI"), a non-stock, not-for-profit
Florida corporation that is engaged in the management, administration and
provision of prepaid vision care service plans in Florida.
B. In order to raise the funds necessary to purchase VCI's assets,
VHC filed a registration statement with the Securities and Exchange
Commission on Form S-1 (Registration No. 333-3530) under the Securities
Act of 1933, as amended, pursuant to which it is offering to sell up to
504,000 shares of VHC's common stock, $0.01 par value (the "Common Stock")
at $10.00 per share (the "Offering").
C. Simultaneously with the effectiveness hereof, Investor is
purchasing 100,000 shares of the Common Stock pursuant to the terms of the
Offering, subject to certain terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement and for
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. The following terms shall have the meanings
indicated below and shall be construed to have the broadest possible
meanings permitted under the Code:
"Agent" means Peter D. Liane, O.D., or his substitute as
appointed pursuant to Section 2.
"Agreement" means this Put and Security Agreement as it is
amended, modified or supplemented from time to time.
"Closing" means generally the execution and delivery of those
documents, securities and/or funds necessary to effect the transactions
contemplated by Section 3.(b) or Section 3.(c).
"Code" means the Uniform Commercial Code as enacted by the State
of Florida, as it shall be amended from time to time.
"Collateral" means (i) any and all shares of Common Stock, now
or hereafter owned by Shareholders, (ii) all of Shareholders' respective
options to acquire Common Stock which are assignable and held as of the
date hereof (as described in further detail on Schedule A) or held after
the date hereof, and (iii) the Shareholders' interests in their respective
options to acquire Common Stock which are not assignable and held as of
the date hereof (as described in further detail on Schedule A) or held
after the date hereof; or, to the extent there is substitute collateral as
provided for in Section 8 hereof, "Collateral" means such substitute
collateral in lieu of (i), (ii) and (iii).
"DNI Shares" means the shares of Common Stock purchased by
Investor in the Offering.
"Pro Rata" means pro rata based on the relative percentages set
forth on Schedule A.
"Put Notice" means the written notice delivered to each
Shareholder by Investor pursuant to Section 3.(a).
"Put Option" means the put option granted to Investor pursuant
to Section 3 hereof.
"Put Price" means $1,000,000, plus 12% per annum simple interest
calculated from the date of this Agreement through the day before the
Closing of a transaction pursuant to Section 3.(b).
"Security Interest" means the security interest (as that term is
defined by the Code) granted by this Agreement.
2. Agent. The parties agree that Agent shall act as the
spokesperson for the Shareholders and that no Shareholder other than Agent
shall have any authority to (a) advise Investor whether the Shareholders
as a group have elected (i) to purchase all of the DNI Shares in exchange
for the Put Price pursuant to Section 3.(b) or (ii) to deliver all the
Collateral pursuant to Section 3.(c) or (b) to otherwise bind the
Shareholders as a group pursuant hereto. All notices to the Shareholders
shall be deemed delivered to the Shareholders on the date deemed delivered
to Agent pursuant to Section 13.(j). Investor agrees to provide a copy of
any notice to Agent to each other Shareholder. In the event Agent dies,
is adjudged incompetent or otherwise is unable or unwilling to continue to
serve as Agent, a substitute Agent may be appointed by a majority-in-
interest of the other Shareholders.
3. Put Option In Favor of Investor.
(a) Put Option. Beginning on the 120th day following the
Florida Department of Insurance's approval of the transactions
contemplated herein, and extending to and including July 31, 1998,
Investor shall have the right to require the Shareholders (acting as a
group) to elect to either (1) purchase all of the DNI Shares, severally
but not jointly (in the respective percentages set forth on Schedule A),
in exchange for the Put Price pursuant to Section 3.(b), or (2) deliver
all of the Collateral pursuant to Section 3.(c). The right shall be
exercised by delivering written notice (the "Put Notice") to Agent and
each of the other Shareholders. Upon the receipt of the Put Notice by
Agent, the Shareholders, acting as a group through Agent, shall have 73
days to notify Investor in writing of their intent to either purchase all
of the DNI Shares in exchange for the Put Price pursuant to Section 3.(b)
or to deliver all of the Collateral pursuant to Section 3.(c); provided,
however, that the Shareholders shall use reasonable efforts to make an
election as soon as possible after Agent's receipt of the Put Notice and
shall notify Investor as soon as practicable after they have made such
election. In the event that the Shareholders have not notified Investor
in writing within such 73-day period, the Shareholders shall be deemed to
have made an election to deliver all of the Collateral to Investor
pursuant to Section 3.(c).
(b) Sale of DNI Shares. The Shareholders may satisfy their
obligations under Section 3.(a) by purchasing all of the DNI Shares in
exchange for the Put Price, in which case Investor shall deliver all of
the DNI Shares free of all security interests and other claims, interests
and encumbrances by surrendering all certificates representing the DNI
Shares, duly endorsed if the Shareholders shall so require or accompanied
by appropriate instruments of transfer satisfactory to the Shareholders,
at VHC's principal office. In the event any Shareholder's purchase of his
Pro Rata share of the DNI Shares requires Florida Department of Insurance
approval, each Shareholder agrees to file any necessary applications with
the Department as soon as practicable, and Investor agrees to cooperate in
the making of any such applications. Investor agrees to execute such
other documents as the Shareholders may reasonably require in connection
with the delivery of the DNI Shares. Upon the delivery of his Pro Rata
portion of the Put Price, the consummation of the Closing and Florida
Department of Insurance approval (if necessary), no Shareholder shall have
any further liability or obligation under this Section 3, each Shareholder
shall be treated for all purposes of this Agreement as the owner of his
Pro Rata portion of the DNI Shares and this Agreement shall terminate.
(c) Transfer of the Collateral. In the event that the
Shareholders do not satisfy their obligations under Section 3.(a) by
purchasing all of the DNI Shares in exchange for the Put Price, each
Shareholder shall transfer his Pro Rata portion of the Collateral to
Investor free of all security interests and other claims, interests and
encumbrances by surrendering any certificates and other documents
representing the Collateral held by such Shareholder, duly endorsed if
Investor shall so require or accompanied by appropriate instruments of
transfer satisfactory to Investor, at VHC's principal office. In the
event Investor's ownership of the Collateral requires Florida Department
of Insurance approval, Investor agrees to file any necessary applications
with the Department as soon as practicable, and each Shareholder agrees to
cooperate in the making of any such applications. Upon the transfer of
his Pro Rata portion of the Collateral and the consummation of the
Closing, no Shareholder shall have any further liability or obligation
under this Section 3, Investor shall be treated for all purposes of this
Agreement as the owner of the Collateral and this Agreement shall
terminate. If the Collateral is transferred to Investor pursuant to this
Section 3.(c), the Shareholders will no longer have the right to exercise
any unexercised options held on the date of such transfer, and such
options shall expire at Investor's direction at the Closing or any time
thereafter. VHC shall be a third party beneficiary to the preceding
sentence. Notwithstanding anything in this Section 3.(c) to the contrary,
at the election of Investor, Investor may deliver to VHC on behalf of any
Shareholder not later than 10 days before the Closing the option exercise
price of any non-assignable options held by such Shareholder shall use the
money to exercise such options, and VHC shall deliver the underlying
shares of Common Stock to Investor at the Closing.
(d) Closing. The Closing of (1) the purchase and sale of the
DNI Shares or (2) the transfer of the Collateral, as the case may be,
shall take place at VHC's principal office on the seventy-sixth day after
the Agent receives the Put Notice (provided that if such day is a
Saturday, Sunday or holiday, then on the next business day), or on such
other day as Investor and Agent shall agree to in writing. The parties
agree that any transaction hereunder that requires Florida Department of
Insurance approval shall be closed in escrow pending such approval, with
Investor directing the investment of any escrowed funds resulting from the
Shareholders' purchase of the DNI Shares pursuant to Section 3.(b).
(e) Termination. The Put Option (assuming that it has not been
exercised) becomes void if (i) VHC merges with, is acquired by, or comes
under common control with Investor or (ii) there is a change of control of
VHC which a majority of the Investor Nominees (as defined below) approved.
4. Representations, Warranties and Covenants of VHC and the
Shareholders. To induce Investor and the Shareholders to enter into and
perform this Agreement, VHC and the Shareholders, as applicable, make the
following representations, warranties and covenants to Investor, each of
which is true and correct on the date hereof and shall remain true and
correct to and including the date of a Closing.
(a) Corporate.
(i) Organization. VHC is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Florida.
(ii) Corporate Power. VHC has all requisite corporate
power and authority to own, operate and lease its properties, to
carry on its business as and where such is now being conducted, to
enter into this Agreement and the other documents and instruments to
be executed and delivered by VHC and to carry out the transactions
contemplated hereby and thereby.
(b) Authority. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by
VHC pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of
VHC. No other corporate act or proceeding on the part of VHC or its
shareholders is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by VHC pursuant
hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the
other documents and instruments to be executed and delivered by VHC
pursuant hereto will constitute, valid and binding agreements of VHC,
enforceable in accordance with their respective terms, except as such may
be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable
principles. All actions have been taken, if required, so that the
provisions of Sections 607.0901 and 607.0902, Florida Statutes, are and
shall be inapplicable to Investor's purchase of the DNI Shares and to all
other transactions contemplated by this Agreement.
(c) No Violation. Neither the execution and delivery of this
Agreement or the other documents and instruments to be executed and
delivered by VHC pursuant hereto, nor the consummation by VHC of the
transactions contemplated hereby and thereby (a) will violate any
applicable law or order, (b) will require any authorization, consent,
approval, exemption or other action by or notice to any government entity,
except for the Florida Department of Insurance's approval of VHC's
Application for Certificate of Authority, Statement of Acquisition of
Control with respect to Vision Care, Inc.'s assets, and the transactions
contemplated by this Agreement, or (c) will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or will result in the termination
of, or accelerate the performance required by, any term or provision of
the Articles of Incorporation or Bylaws of VHC or of any contract,
commitment, understanding, arrangement, agreement or restriction of any
kind or character to which VHC is a party.
(d) Investor Representation on VHC's Board of Directors. VHC
represents that it currently has four vacancies on its Board of Directors
and promptly following the date hereof shall elect four nominees selected
by Investor and reasonably acceptable to VHC's Board of Directors
(collectively, "Investor Nominees") to fill the four vacancies. Two
Investor Nominees shall be elected to a one-year term, one Investor
Nominee shall be elected to a two-year term and one Investor Nominee shall
be elected to a three-year term. Each Investor Nominee shall be nominated
for re-election at the first meeting of shareholders of VHC at which
directors are to be elected following the expiration of his respective
initial term, and each Shareholder agrees to vote his shares of Common
Stock in favor of such election. Thereafter, so long as Investor
continues to beneficially own at least 100,000 shares of Common Stock, at
each annual or special meeting of shareholders of VHC at, or the taking of
action by written consent of shareholders of VHC with respect to, which
any directors are to be elected, Investor shall have the right to nominate
for election to the Board of Directors that number of directors (such
directors also, "Investor Nominees") which, when added to the number of
directors who are then Investor Nominees and who will continue to serve as
directors without regard to the outcome of the election at such meeting or
by such consent, represents 25% of the total number of directors. In
computing the number of Investor Nominees, any fraction is to be rounded
down to the nearest whole number. VHC will support the nomination of each
Investor Nominee and will exercise all authority under applicable law to
cause each Investor Nominee to be elected to the Board, and each
Shareholder agrees to vote his shares of Common Stock in favor of such
election. In addition, VHC's Board of Directors shall elect an Investor
Nominee reasonably acceptable to the Board to fill any mid-term vacancy
created by the resignation or other early termination of the term of an
Investor Nominee prior to its scheduled expiration, and VHC agrees to
allow at least one Investor Nominee the opportunity to serve on each
committee formed by its Board of Directors. As a condition to their
election, each Investor Nominee must agree to resign from the Board of
Directors at the Closing, if any, of the Shareholders' purchase of DNI
Shares pursuant to Section 3.(b).
(e) Removal of Blank Check Preferred Stock; Meetings Called by
Shareholders. VHC's Board of Directors has approved, and the Board shall
submit to VHC's shareholders at VHC's 1997 annual meeting of shareholders,
a proposed amendment to its Articles of Incorporation (i) removing the
provision authorizing "blank check" preferred stock that can be issued by
the Board of Directors with rights and preferences established by the
Board, and (ii) reducing the percentage of shareholders required to call a
special meeting of the shareholders from 35% to 15%. VHC's Board of
Directors shall recommend that VHC's shareholders vote in favor of such
matters and each Shareholder agrees to vote his shares of Common Stock in
favor of such matters. VHC shall use reasonable best efforts to hold its
1997 annual meeting no later than March 31, 1997.
(f) No Dividends. VHC agrees that it will not declare any
dividend on the Common Stock on and between the date that Agent receives
the Put Notice and the date of the Closing, if any.
(g) Insurance. VHC agrees that it will use reasonable efforts
to obtain a directors' and officers' liability insurance policy as soon as
practicable after the closing of the Offering and to maintain such
coverage with respect to such periods as an Investor Nominee shall serve
as a director.
(h) Return of Subscription Funds. In the event that the
Florida Department of Insurance has not approved the transactions
contemplated by this Agreement on or before January 31, 1997, VHC shall,
within 10 days after Investor's demand therefor, return all of Investor's
funds used to purchase the DNI Shares, together with interest thereon.
The Company acknowledges that Investor's subscription for the purchase of
the DNI Shares is subject to the condition precedent that Investor shall
have obtained an advance of $1,000,000 under its credit agreement with
Nationsbank.
(i) Issuance of Shares to Health Care Facilities. VHC agrees
that it will not issue any shares of Common Stock or other form of
security to any entity which is engaged, or which is an affiliate of
another entity which is engaged, to VHC's knowledge, in the principal
business of owning or operating physical facilities for use by health care
providers, without the prior written consent of Investor.
(j) Sale of Shares in Offering. VHC agrees that it will not
sell more than 300,000 shares of Common Stock in the Offering.
(k) Further Actions. VHC shall take all actions that may be
necessary or appropriate, from time to time, to effectuate the purposes of
and the transactions contemplated by this Agreement, and shall not give
effect to any action by any Shareholder which is inconsistent with the
provisions of this Agreement, including Sections 3, 7 and 12.
(l) Legal Opinion. Prior to and as a condition of the release
from escrow to VHC of the subscription funds representing the purchase
price of the DNI Shares, Foley & Lardner, as counsel to VHC, shall deliver
an opinion to Investor covering such matters as are customary for
transactions of this type and as to which Investor's counsel may
reasonably request.
5. Representations, Warranties and Covenants of Investor. To
induce VHC and the Shareholders to enter into and perform this Agreement,
Investor makes the following representations, warranties and covenants to
VHC and the Shareholders, each of which is true and correct on the date
hereof and shall remain true and correct to and including the date of a
Closing.
(a) Organization. Investor is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Florida.
(b) Corporate Power. Investor has all requisite corporate
power and authority to own, operate and lease its properties, to carry on
its business as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed and
delivered by Investor and to carry out the transactions contemplated
hereby and thereby.
(c) Authority. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by
Investor pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors and shareholders of Investor. No other corporate act or
proceeding on the part of Investor or its shareholders is necessary to
authorize this Agreement or the other documents and instruments to be
executed and delivered by Investor pursuant hereto or the consummation of
the transactions contemplated hereby and thereby. This Agreement
constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Investor pursuant hereto will
constitute, valid and binding agreements of Investor, enforceable in
accordance with their respective terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors'
rights generally, and by general equitable principles.
(d) No Violation. Neither the execution and delivery of this
Agreement or the other documents and instruments to be executed and
delivered by Investor pursuant hereto, nor the consummation by Investor of
the transactions contemplated hereby and thereby (a) will violate any
applicable law or order, (b) will require any authorization, consent,
approval, exemption or other action by or notice to any government entity,
except for the Florida Department of Insurance's approval of the
transactions contemplated by this Agreement, or (c) will violate or
conflict with, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or will result
in the termination of, or accelerate the performance required by, any term
or provision of the Articles of Incorporation or Bylaws of Investor or of
any contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which Investor is a party.
(e) Legal Opinion. Prior to the closing of the Offering, Steel
Hector & Davis, LLP, as counsel to Investor, shall deliver an opinion to
VHC covering such matters as are customary for transactions of this type
and as to which VHC's counsel may reasonably request.
6. Further Representations and Warranties of the Shareholders. To
induce VHC and Investor to enter into and perform this Agreement, each
Shareholder makes the following representations, warranties and covenants
to VHC and Investor, each of which is true and correct on the date hereof
and shall remain true and correct to and including the date of a Closing.
(a) Power; Solvency. Such Shareholder has the full power and
authority to enter into this Agreement and this Agreement has been duly
executed and is enforceable in accordance with its terms, except for such
limits thereon arising from bankruptcy and similar laws. As of the date
hereof, such Shareholder's assets are equal to or exceed in value such
Shareholder's liabilities, and such Shareholder is paying his debts as
they become due.
(b) Good Title. That portion of the Collateral owned by such
Shareholder as of the date hereof is, and hereafter will be, owned free
and clear of all security interests and other claims, interests and
encumbrances, except the Security Interest and the transfer restrictions
set forth in VHC's Articles of Incorporation (which transfer restrictions
are not applicable to the transactions contemplated by Section 3 of this
Agreement).
(c) Security Interest. Such Shareholder has taken all action
necessary such that, simultaneously with the effectiveness hereof,
Investor has a perfected Security Interest in the Collateral owned by the
Shareholder as of the date hereof, as described in Section 8 below.
7. Further Covenants of the Shareholders. So long as this
Agreement has not been terminated as provided hereafter, each Shareholder:
(a) Title. Will defend the Collateral owned by such
Shareholder against the claim of all other persons;
(b) No Encumbrances. Will keep the Collateral owned by such
Shareholder free of all security interests and other claims, interests and
encumbrances, except the Security Interest and the transfer restrictions
set forth in VHC's Articles of Incorporation;
(c) No Sale, Etc. Will not assign, deliver, sell, transfer,
lease or otherwise dispose of (including dispositions by operation of law)
any portion of the Collateral owned by such Shareholder, or any interest
therein;
(d) Location of Shareholders. Will notify Investor in writing
at least 30 days in advance of any change in such Shareholder's address
from that specified below his signature;
(e) Stock Powers, etc. Has executed and delivered and will
execute and deliver to Investor such stock powers, stock certificates and
other documents, and take such other action as Investor may deem advisable
to perfect the Security Interest created by this Agreement;
(f) Taxes. Will pay all taxes, assessments and other charges
of every nature, and any penalties or interest with respect thereto, which
may be levied, assessed or imposed on or against the Collateral owned by
such Shareholder and in connection with the Security Interest therein and
any transfer thereof to Investor;
(g) Preserve Rights. Will not take or permit to be taken any
action which might (i) jeopardize or diminish any right of such
Shareholder or Investor in the Collateral owned by such Shareholder or
(ii) be inconsistent with the obligation to transfer all of the Collateral
to Investor pursuant to Section 3.(c); provided, however, that the
retirement or other termination, whether voluntary or involuntary, of any
Shareholder's employment or other relationship with VHC which results in
the termination of such Shareholder's rights and interest in any option in
accordance with the terms thereof shall not violate this covenant;
(h) Compliance with Laws. Will in all material respects comply
with all laws and regulations, including all securities laws, will timely
file all forms, reports and schedules required to be filed by or with all
governmental agencies and otherwise timely make all disclosures required
to be made in connection with the Collateral owned by such Shareholder;
and
(i) Further Assurances. Will take all other action reasonably
requested by Investor at any time and from time to time to effectuate the
intent of this Agreement, to protect and preserve the Collateral owned by
such Shareholder, and to protect, preserve and perfect the Security
Interest of Investor.
8. Grant of Security Interest. In order to secure the
Shareholders' obligations set forth in Section 3, each Shareholder hereby
pledges, delivers, transfers and assigns to Investor certificates, stock
powers duly endorsed in blank and other documents evidencing, and grants
to Investor a continuing, unconditional and perfected Security Interest
in, that portion of the Collateral owned by such Shareholder to secure the
prompt, timely and complete payment of the Put Price or, if applicable,
the transfer of all of the Collateral, upon the exercise of the Put
Option. Notwithstanding anything herein to the contrary, all
Shareholders, as a group, may substitute cash or U.S. Treasuries (of a
type and with a fair market value acceptable to Investor acting
reasonably) for the Collateral, provided that the cash or U.S. Treasuries
is for an amount equal to or greater than $1,205,000, provided, however,
that once substituted, such cash or U.S. Treasuries shall serve as the
Collateral and no further substitutions shall be permitted. All interest
earned on such substitute collateral shall be for the benefit of the
Shareholders and, to the extent not utilized to satisfy the Put Price,
will be refunded to the Shareholders.
9. Default. If all of the Shareholders acting together fail, upon
Investor's exercise of the Put Option, to elect to purchase and to
purchase the DNI Shares in exchange for the Put Price or to transfer the
Collateral to Investor in accordance with the terms and conditions set
forth in Section 3, then Investor may retain the DNI Shares and, as its
sole remedy, take title to all of the Collateral. Each Shareholder
authorizes and appoints Investor, after the occurrence of such default, as
such Shareholder's attorney-in-fact to transfer all or, in Investor's sole
discretion, any part of the Collateral into Investor's name or that of its
nominee so that Investor or its nominee may appear of record as the sole
owner of the shares of stock.
10. Voting of Pledged Shares. Unless and until the Collateral is
transferred to Investor pursuant to the terms and conditions of this
Agreement, each Shareholder shall continue to have the right (subject to
his obligations under this Agreement) to:
(a) attend all meetings of shareholders of VHC held after the
date of this Agreement and to vote the shares of such Shareholder's stock
which comprise the Collateral at those meetings;
(b) consent to any action by or concerning VHC for which the
consent of the shareholders of VHC is or may be necessary or appropriate;
and
(c) without limitation to do all things which such Shareholder
could do as a shareholder of VHC.
11. Distributions in Respect of Collateral. Whether or not a
material breach of a representation, warranty or covenant made by a
Shareholder herein has occurred, each Shareholder assigns to, and
authorizes Investor to receive, any interest, principal, dividends,
distributions, or other income or payments of whatever nature (whether in
cash or in kind) now or hereafter made in respect of the Collateral,
including those made in connection with the dissolution, liquidation, sale
of all or substantially all assets, merger, consolidation, or other
reorganization of VHC, or any stock dividend, stock split,
recapitalization, reclassification or otherwise (collectively,
"Distributions"), to surrender such Collateral or any part thereof in
exchange therefor, and to hold any such Distribution as part of the
Collateral; provided, however, that Investor or its nominee need not
collect any such Distribution on any Collateral or give any notice of
nonpayment with respect to such Distributions and further provided that if
no material breach of a representation, warranty or covenant made by a
Shareholder herein shall have occurred (or would result), each Shareholder
may receive for his own account any regular cash dividends.
12. Covenants Not to Compete.
(a) In Favor of VHC. While any individual nominated by
Investor sits on VHC's Board of Directors, Investor will not, directly or
through a subsidiary, engage in the business of providing vision care
plans, or own an equity interest in or, through its nominee, hold a board
of directors' position with a business organization engaged in the
business of providing vision health plans, or otherwise engage in any
practice the purpose of which is to evade the provisions of this covenant
not to compete, provided, however, that the foregoing shall not prohibit
(i) the continuation of Investor's existing arrangements with other vision
care plans, or (ii) the ownership of securities of corporations which are
listed on a national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed 5% of the
outstanding shares of any such corporation. The parties agree that the
geographic scope of this covenant not to compete shall extend throughout
the State of Florida. In the event a court of competent jurisdiction
determines that the provisions of this covenant not to compete are
excessively broad as to duration, geographical scope or activity, it is
expressly agreed that this covenant not to compete shall be construed so
that the remaining provisions shall not be affected, but shall remain in
full force and effect, and any such over broad provisions shall be deemed,
without further action on the part of any person, to be modified, amended
and/or limited, but only to the extent necessary to render the same valid
and enforceable in such jurisdiction.
(b) In Favor of Investor.
(i) While Investor owns any shares of Common Stock
(including the DNI Shares), VHC will not, directly or indirectly, engage
in, continue in or carry on the business of providing and/or administering
dental care plans (including owning or controlling any financial interest
in any corporation, partnership, firm or other form of business
organization which is so engaged), or otherwise engage in any practice the
purpose of which is to evade the provisions of this covenant not to
compete, provided, however, that the foregoing shall not prohibit the
ownership of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market in
an amount which shall not exceed 5% of the outstanding shares of any such
corporation.
(ii) While Investor owns at least 100,000 shares of Common
Stock and in the event the Shareholders transfer the Collateral to
Investor pursuant to Section 3.(c), for a period of one year thereafter,
no Shareholder will, directly or indirectly, engage in, continue in or
carry on the business of providing and/or administering vision care plans
(including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization
which is so engaged), or otherwise engage in any practice the purpose of
which is to evade the provisions of this covenant not to compete,
provided, however, that the foregoing shall not prohibit the continuation
of such Shareholder's existing ownership of, investments with or other
relationships with any individual or entity engaged in the business of
providing and/or administering vision care plans, nor shall it prohibit
the ownership of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market in
an amount which shall not exceed 5% of the outstanding shares of any such
corporation nor shall it prohibit any other passive ownership in or
investment by any Shareholder in a non-public company which constitutes
10% or less of the equity thereof. Notwithstanding the foregoing, a
Shareholder shall not be subject to this covenant not to compete after the
expiration (without exercise) of the Put Option, unless the Shareholder
owns shares of Common Stock or other equity securities of the Company.
(iii) The parties agree that the geographic scope of
the covenants not to compete set forth in this Section 12.(b) shall extend
throughout the State of Florida. In the event a court of competent
jurisdiction determines that the provisions of either covenant not to
compete are excessively broad as to duration, geographical scope or
activity, it is expressly agreed that this covenant not to compete shall
be construed so that the remaining provisions shall not be affected, but
shall remain in full force and effect, and any such over broad provisions
shall be deemed, without further action on the part of any person, to be
modified, amended and/or limited, but only to the extent necessary to
render the same valid and enforceable in such jurisdiction.
13. Miscellaneous Provisions.
(a) Care of Collateral, Etc. Investor shall exercise
reasonable care in the custody and preservation of the Collateral to the
extent required by law and it shall be deemed to have exercised reasonable
care if it takes such action for that purpose as the Shareholders shall
reasonably request in writing.
(b) Headings. The headings contained in this Agreement are for
convenience and reference purposes only, and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
(c) Pronouns and Plurals. Whenever required by the context,
any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns,
pronouns and verbs shall include the plural and vice versa.
(d) Time. Time is of the essence for this Agreement.
(e) Costs of Litigation. The parties agree that the prevailing
party in any action brought with respect to or to enforce any right or
remedy under this Agreement shall be entitled to recover from the other
party or parties all reasonable costs and expenses of any nature
whatsoever incurred by the prevailing party in connection with such
action, including, without limitation, attorneys' fees (whether incurred
at trial or on appeal) and prejudgment interest.
(f) Waiver. No single or partial exercise of any right, power
or privilege under this Agreement shall preclude the further exercise of
such right, power or privilege, or the exercise of any other right, power
or privilege. No waiver shall be valid against any party hereto unless
made in writing and signed by the party against whom enforcement of such
waiver is sought and then only to the extent expressly specified therein.
(g) Assignment; Benefit. No assignment by any party hereto
shall relieve such party of its obligations hereunder. The terms "VHC,"
"Investor" and "Shareholders" as used in this Agreement include the heirs,
personal representatives, successors and/or assigns of those parties and
this Agreement shall benefit and bind such parties. Except to the extent
expressly provided for herein, nothing contained in this Agreement shall
be deemed to confer upon any other person any right or remedy under or by
reason of this Agreement.
(h) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws and judicial decisions
of the State of Florida, without regard to conflict of law principles
thereunder.
(i) Amendment and Modification. The parties hereto may amend,
modify and supplement this Agreement in such manner as may be agreed upon
by them in writing.
(j) Notice. All notices, requests, demands and other
communications required or permitted by this Agreement shall be in writing
and given to the parties at the addresses set forth in the introductory
paragraph or below their signatures, as applicable, or at such other
address as may be designated in writing from time to time by one party to
the others. All such communications shall be (a) personally delivered;
(b) sent by telecopier, facsimile transmission or other electronic means
of transmitting written documents; or (c) sent by private overnight mail
courier service. If personally delivered, such communications shall be
deemed delivered upon actual receipt by Agent or Investor, as the case may
be; if electronically transmitted pursuant to this paragraph, such
communications shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); and
if sent by overnight courier pursuant to this paragraph, such
communications shall be deemed delivered upon actual receipt by Agent or
Investor, as the case may be.
(k) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(l) Waiver of Jury Trial. VHC, EACH OF THE SHAREHOLDERS AND
INVESTOR, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, HEREBY WAIVE ANY RIGHT
THEY MIGHT OTHERWISE HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT, OR IN THE COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.
(m) Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties hereto with respect to the
transactions contemplated herein, and there have been and are no
agreements, understandings, restrictions, representations or warranties
between the parties other than those set forth or provided for herein.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
as of the date first written above.
VISION HEALTH CARE, INC., a DENTAL NETWORK, INC., a
Florida corporation Florida corporation
By: /s/ Peter D. Liane By: /s/ Henry Tie Shue
Peter D. Liane, President Henry Tie Shue, President
/s/ James W. Andrews /s/ Peter D. Liane
James W. Andrews, O.D. Peter D. Liane, O.D.
Address:____________________ Address:____________________
____________________________ ____________________________
Telephone No.: Telephone No.:
Facsimile No.: Facsimile No.:
/s/ Howard J. Braverman /s/ Jeffrey C. Locke
Howard J. Braverman, O.D. Jeffrey C. Locke, O.D.
Address:____________________ Address:____________________
____________________________ ____________________________
Telephone No.: Telephone No.:
Facsimile No.: Facsimile No.:
/s/ Roy L. Burgess /s/ Terrance W. Naberhaus
Roy L. Burgess, C.P.A., M.S.M. Terrance W. Naberhaus, O.D.
Address:____________________ Address:____________________
____________________________ ____________________________
Telephone No.: Telephone No.:
Facsimile No.: Facsimile No.:
/s/ Alan P. Fisher /s/ Raymond M. Neff
Alan P. Fisher, O.D. Raymond M. Neff
Address:____________________ Address:____________________
____________________________ ____________________________
Telephone No.: Telephone No.:
Facsimile No.: Facsimile No.:
/s/ Mitchell W. Legler /s/ John M. Renaldo
Mitchell W. Legler John M. Renaldo, O.D.
Address:____________________ Address:____________________
____________________________ ____________________________
Telephone No.: Telephone No.:
Facsimile No.: Facsimile No.:
/s/ Patty Fisher /s/ Harriet D. Legler
Patty Fisher Harriet D. Legler
Address:____________________ Address:____________________
____________________________ ____________________________
Telephone No.: Telephone No.:
Facsimile No.: Facsimile No.:
/s/ Christina C. Locke /s/ Judy L. Renaldo
Christina C. Locke Judy L. Renaldo
Address:____________________ Address:____________________
____________________________ ____________________________
Telephone No.: Telephone No.:
Facsimile No.: Facsimile No.:
<PAGE>
SCHEDULE A
GUARANTY PERCENTAGE
<TABLE>
<CAPTION>
Number of Number Shares
Number Original of New Purchased Total Shares Guaranty
Shareholder of Shares1 Options2 Options3 in Offering4 and Options Percentage
<S> <C> <C> <C> <C> <C> <C>
Andrews, J. 7,875 15,700 3,488 0 27,063 13.63%
Braverman, H. 15,750 15,700 4,653 0 36,103 18.18%
Burgess, R. 7,875 7,850 2,327 0 18,052 9.09%
Fisher, A. 7,875 15,700 3,488 0 27,063 13.63%
Legler, M. 7,875 0 1,165 0 9,040 4.55%
Liane, P. 7,875 15,700 3,488 0 27,063 13.63%
Locke, J. 7,875 0 1,165 0 9,040 4.55%
Naberhaus, T. 7,875 15,700 3,488 0 27,063 13.63%
Neff, R. 7,875 0 1,165 0 9,040 4.55%
Renaldo, J. 7,875 0 1,165 0 9,040 4.55%
TOTAL 86,625 86,350 25,594 0 198,569 100.00%
_________________________________
1 Includes shares received prior to the Offering.
2 Includes options granted under VHC's incentive option plan.
3 Includes options granted for guarantee of Put Option.
4 Includes shares bought in the offering (excluding those bought
through IRAs).
</TABLE>
SUNTRUST Promissory Note
$ 2,500,000.00 As of December 31, 1996
The undersigned (whether or one or more hereinafter called "Maker"),
jointly and severally, promise(s) to pay to the order of SUNTRUST BANK,
TAMPA BAY, a Florida banking corporation (herein called "Bank") at its
offices located at 401 East Jackson Street, Tampa, Florida 33602, TWO
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00), together
with interest from the date hereof at the rate hereinafter provided, and
applicable fees in the following manner.
Repayment Schedule:
[X] Single Payment Principal due in Full On: December 31, 1997
Interest Payable: monthly on the last day of each
month, and at maturity.
[ ] Installment (including interest): In ______ __________________
Payment (No.) (Period)
Installments of $__________________ commencing on
_________________, 19___, and on the same day of each
successive ____________ thereafter, together with a
FINAL PAYMENT of $____________________ due and
payable on _________________, 19____.
[ ] Installment (plus interest): _______ ________________________
Period (No.) (Period)
Principal installments of $____________, plus
interest, commencing on _______________, 19___, and
on the same day of each successive ________________
thereafter, together with a FINAL PAYMENT of
$____________________, plus accrued interest due and
payable on _____________, 19___.
[ ] Multiple Principal and interest are payable as follows:_______
Payment _____________________________________________________
_____________________________________________________
[ ] ON DEMAND Principal payable ON DEMAND with Interest payable
___________________ commencing on ___________________
and each ________________ thereafter.
[ ] Prepayment Bank shall have the absolute and unconditional right,
Right at its sole discretion, to require Maker to pay the
entire loan balance, along with accrued unpaid
interest at any time after the sixty-first (61st)
month from the note date. If the bank elects to
exercise such right of payment, Bank will provide
Maker ninety (90) days prior written notice of its
intention to demand payment. If Bank does not
exercise such right of payment, the loan balance
outstanding, along with accrued unpaid interest is
due and payable on the one hundred twentieth (120th)
installment.
The Interest Rate Is As Follow: [ ] If checked here, the interest rate
provided herein shall be computed on the basis of a 365 day year and shall
be calculated for the actual number of days elapsed. If not checked, the
interest rate shall be computed on the basis of a 360 day year and shall
be calculated for the actual number of days elapsed.
Variable Interest Rate
[X] Not applicable
[ ] Applicable, provided however that the interest rate charged hereunder
shall never exceed the maximum rate allowed, from time to time, by
law. If the loan is for a consumer purpose and is secured by a
dwelling, the maximum interest rate charged will never exceed 18% per
annum or the state usury ceiling, whichever is less.
If applicable, the interest rate stated herein shall, from time to time,
automatically increase or decrease so that at all times it shall be
equivalent to (check appropriate box and complete):
[ ] ____% over the annual interest rate announced by SUNTRUST BANKS OF
FLORIDA, INC., from time to time, as the prime rate (which interest rate
is only a bench mark, is purely discretionary and is not necessarily the
best or lowest rate charged borrowing customers of any subsidiary bank of
Sun Banks, Inc.). Any such change in prime rate will increase or decrease
your periodic interest payments. Any change in prime rate shall be
effective at the beginning of the business day on which such change is
announced; or,
[ ] ____% over the ____________________________________________________
___________________________________________________________________
FIXED RATE [ ] Applicable at 5.35% per annum, simple interest. [ ] Not
Applicable.
LATE CHARGE If a payment is over 10 days late, you may be charged 5% of
FEE such payment as a late charge. A payment which is not
received on the due date shall be deemed late.
SERVICE FEE A service fee of the lesser of $50.00 or 2 percent of the
principal amount of this loan will be charged. The service
fee charge will not be refunded in the event of prepayment.
ADDITIONAL The Bank may charge various additional fees for servicing or
FEES processing the loan. The name of the fee shall describe the
work performed.
In the event any installment of principal or interest or any part
thereof is not paid when it becomes due, or in the event of any default
thereunder, the principal sum remaining unpaid hereunder, together with
all accrued and past due interest thereon, shall immediately and without
notice become due and payable at the election of the holder at any time
thereafter.
Notwithstanding any rate of interest provided herein, the interest
rate on any payment or payments of principal or interest, or any part
thereof, which is not made when due shall, thereafter, be at 3% over the
prime rate announced by SunTrust Banks of Florida, Inc. as described
above, but not to exceed the maximum amount permitted by law. Minimum
interest of $10.00 on any single payment loan or $15.00 on any installment
loan will be charged.
This note is [X] SECURED [ ] UNSECURED (Notwithstanding the fact that
this note is marked 'unsecured,' Maker understands and agrees that any
other security interest the Bank now holds or may hereafter acquire from
the Maker may secure this note).
As security for the payment of this note Maker has pledged or
deposited with Bank and hereby grants to Bank a security interest in the
following property: initially a deposit account of Maker at Bank in the
amount of $2,500,000.00 entitled "SunTrust Bank, Tampa Bay, in Escrow for
Vision Health Care, Inc.," and any proceeds thereof, and thereafter, a
certificate of deposit in the face amount of $2,500,000.00 issued by
SunTrust Bank, Tampa Bay in the name of Maker, and any replacement
thereof, together with all proceeds thereof (including all cash, stock and
other dividends and all rights to subscribe for securities incident to,
declared, or granted in connection with such property and including any
returned or unearned premiums from any insurance financed hereunder),
which property, together with all additions and substitutions hereafter
pledged or deposited with Bank, is called the Collateral. The Collateral
is also pledged as security for all other liabilities (primary, secondary,
direct, contingent, sole, joint, or several), due or to become due or
which may be hereafter contracted or acquired, of each Maker (including
each Maker and any other person) to Bank and for all renewals, extensions
or modifications of this note. The surrender of this note, upon payment
or otherwise, shall not affect the right of Bank to retain the Collateral
for such other liabilities.
Lender may request periodically as it deems necessary, complete and
current financial statements, balance sheets, profit and loss statements,
and cash flow information for Maker and Cosigner.
Maker understands and agrees that the jury waiver, the additional
agreements and provisions on the reverse side hereof, hereby incorporated
by reference, constitute agreements of the Maker and a part of this note.
Maker acknowledges receipt of a completed copy of this note.
Notice to Cosigner: You are being asked to guarantee this debt.
Think carefully before you do. If the borrower doesn't pay the debt, you
will have to. Be sure you can afford to pay if you have to, and that you
want to accept this responsibility.
You may have to pay up to the full amount of the debt if the borrower
does not pay. You may also have to pay late fees or collection costs, which
increase this amount.
The Bank can collect this debt from you without first trying to collect
from the borrower. The Bank can use the same collection methods against you
that can be used against the borrower, such as suing you, garnishing your
wages, etc. If this debt is ever in default, the fact may become a part of
your credit record.
This notice is not the contract that makes you liable for the debt.
Address: P.O. Box 30349 As of December 31, 1996
VISION HEALTH CARE, Date
INC. (Seal)
Tampa, Florida 33630-3349 By:________________(Seal) ____________________
Howard J. Braverman, Date
Chairman
__________________ __________________ __________________ ________________
Proceeds Document Stamps Other Charges Note Amount
__________________ __________________ __________________ ________________
Officer Initials # Note Number Account Number Service Fee
If the variable interest rate is not applicable and if this note is
payable on demand, Bank reserves, and is hereby granted the right, to
adjust the interest rate from time to time by furnishing Maker with
written notice of such adjusted rate, provided, however, that no such
adjusted rate shall exceed the maximum rate allowed, from time to time, by
law.
Additions to, reductions or exchanges of, or substitutions for the
Collateral, payments on account of this note or increases of the same, or
other loans made partially or wholly upon the Collateral, may from time to
time, be made without affecting the provisions of this note.
Upon the happening of any of the following events, each of which
shall constitute a default hereunder, all liabilities of each Maker to
Bank shall thereupon or thereafter, at the option of the Bank, without
notice or demand, become due and payable: (a) failure of any Obligor
(which term shall mean and include each Maker, endorser, surety and
guarantor of this note) to perform any agreement hereunder to pay interest
thereon when due or requested or demanded or to pay any other liability
whatsoever to Bank when due; (b) the death of any Obligor; (c) the filing
of any petition under the Bankruptcy Code, or any similar federal or state
statute, by or against any Obligor; (d) an application for the appointment
of a receiver or the making of a general assignment for the benefit of
creditors by, or the insolvency of any Obligor; (e) the entry of a
judgment against any Obligor; (f) the issuing of any writ of attachment or
writ of garnishment, or the filing of any lien, against the property of
any Obligor; (g) the taking of possession of any substantial part of the
property of any Obligor at the instance of any governmental authority;
(h) the dissolution, merger, consolidation, or reorganization of any
Obligor; (i) the assignment by any Maker of any equity in any of the
Collateral without the written consent of Bank.
Bank is hereby given a lien upon and a security interest in all
property of each Maker now or at any time hereafter in the possession of
Bank in any capacity whatsoever, including but not limited to any balance
or share of any deposit, trust, or agent account as security for the
payment of this note, and a similar lien upon and security interest in all
such property of each Maker as security for the payment of all other
liabilities of each Maker to Bank (including liabilities of each maker and
any other person); and Bank shall have the same rights as to such property
as it has with respect to the Collateral.
Upon the occurrence of any default hereunder Bank shall have the
remedies of a secured party under the Uniform Commercial Code and, without
limiting the generality of the foregoing, Bank shall have the right,
immediately and without further action by it, to set off against this note
all money owed by Bank in any capacity to each or any Obligor, whether or
not due, and also to set off against all other liabilities of each Maker
to Bank all money owed by Bank in any capacity to each or any Maker; and
Bank shall be deemed to have exercised such right of set-off and to have
made a charge against any such money immediately upon the occurrence of
such default even though such a charge is made or entered on the books of
Bank subsequent thereto. Unless the Collateral is perishable or threatens
to decline speedily in value or is of a type customarily sold on a
recognized market, the Bank will give Maker reasonable notice of the time
and place of any public sale thereof or of the time after which any
private sale or any other intended disposition thereof is to be made. The
requirement of reasonable notice shall be met if such notice is mailed,
postage prepaid, to any maker at the address given below or at any other
address shown on the record of the Bank, at least five days before the
time of the sale or disposition. Sale at a wholesale dealers' auction is
a commercially reasonable disposition. Upon disposition of any Collateral
after the occurrence of any default hereunder, Maker shall be and remain
liable for any deficiency; and Bank shall account to Maker for any
surplus, but Bank shall have the right to apply all or any part of such
surplus (or to hold the same as a reserve against) any and all other
liability of each or any Maker to Bank. The Obligors, jointly and
severally, promise and agree to pay all costs and expenses of collection
and reasonable attorneys' fee, including costs, expenses and reasonable
attorneys' fees on appeal, if collected by legal proceedings or through an
attorney at law. Maker hereby waives any right to a trial by jury in any
civil action arising out of, or based upon, this note or the Collateral.
Bank shall exercise reasonable care in the custody and preservation
of the Collateral to the extent required by applicable statute, and shall
be deemed to have exercised reasonable care if it takes such action for
that purpose as Maker shall reasonably request in writing, but no omission
to do any act not requested by Maker shall be deemed a failure to exercise
reasonable care, and no omission to comply with any request of Maker shall
of itself be deemed a failure to exercise reasonable care. Bank shall not
be bound to take any steps necessary to preserve any rights in the
Collateral against prior parties and Maker shall take all necessary steps
for such purposes. Bank or its nominee need not collect interest on or
principal of any Collateral or give any notice with respect to it.
Bank shall have the right, which may be exercised at any time whether
or not this note is due, to notify the Obligors on any Collateral to make
payment to Bank on any amounts due or to become due thereon. In the event
of any default hereunder, Bank shall thereafter have, but shall not be
limited to, the following rights: (i) to pledge or transfer this note and
the Collateral and Bank shall thereupon be relieved of all duties and
responsibilities hereunder and relieved from any and all liability with
respect to any Collateral so pledged or transferred, and any pledgee or
transferee shall for all purposes stand in the place of Bank hereunder and
have all the rights of Bank hereunder; (ii) to transfer the whole or any
part of the Collateral into the name of itself or its nominee; (iii) to
vote the Collateral; (iv) to demand, sue for, collect, or make any
compromise or settlement it deems desirable with reference to the
Collateral; and (v) to take control of any proceeds of Collateral.
I HEREBY CONSENT TO THE ATTACHMENT OR GARNISHMENT OF MY EARNINGS.
No delay or omission on the part of Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other right
under this note. Presentment, demand, protest, notice of dishonor, and
extension of time without notice are hereby waived by each and every
Obligor. Any notice to Maker shall be sufficiently served for all
purposes if placed in the mail, postage prepaid, addressed to or left upon
the premises at, the address shown below or any other address shown on the
Bank's records.
I waive any and all privilege and rights which I may have under
Chapter 47, Florida Statutes, relating to venue, as it now exists or may
hereafter be amended. I agree that any action shall be brought in the
County in which the Bank's business office is located as designated above
or at which the loan was closed.
JURY WAIVER. MAKER AND BANK HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO
A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, WHETHER IN CONTRACT OR TORT,
AT LAW OR IN EQUITY, BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT AND ANY OTHER DOCUMENT OR INSTRUMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
BANK ENTERING INTO THIS AGREEMENT. FURTHER, MAKER HEREBY CERTIFIES THAT
NO REPRESENTATIVE OR AGENT OF BANK, NOR THE BANK'S COUNSEL, HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT, IN THE EVENT OF
SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. NO REPRESENTATIVE OR AGENT OF THE BANK, NOR BANK'S COUNSEL HAS
THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
Guaranty
In addition to the liability as endorsers, which the undersigned
hereby assume, for value received and intending to be legally bound, the
undersigned (and if more than one, each of them jointly and severally) (a)
hereby become surety to the payee of the within note, its successors,
endorsees and assigns, for the payment of the within note, and hereby
unconditionally guarantee the payment of the within note and all
extensions or renewals thereof and all sums payable under or by virtue
hereof including, without limitation, all amounts of principal and
interest and all expenses (including attorney's fees) incurred in the
collection thereof, the enforcement of rights thereunder or with respect
to any security therefor and the enforcement hereof, and waive
presentment, demand, notice of dishonor, protest and all other notices
whatsoever; and (b) consent and agree (i) that all or any of the
Collateral may be exchanged, released, surrendered or sold from time to
time, (ii) that the payment of the note, or any of the liabilities of the
Maker thereof, may be extended or said note renewed any number of times
and for any period (whether or not longer than the original period of said
note), (iii) that the holder of said note may grant any releases,
compromises or indulgences with respect to said note or any extensions or
renewals thereof or any security therefor or to any party liable
thereunder or hereunder (including but not limited to failure or refusal
to exercise one or more of the rights or remedies provided by said note),
and (iv) that any of the provisions of said note may be modified; all
without notice to or consent of and without affecting the liability of the
undersigned as endorsers and sureties, and further consent and agree that
any of the undersigned may be sued by the holder hereof with or without
joining any of the other endorsers or makers of said note and without
first or contemporaneously suing any such other persons, or otherwise
seeking or proceeding to collect from them or any of them, and without
first or contemporaneously undertaking to enforce any rights with respect
to any security.
The undersigned acknowledges having received and read the NOTICE TO
CO-SIGNER appearing on the reverse side hereof.
__________________________(Date) ___________________________________(Seal)
__________________________(Date) ___________________________________(Seal)
__________________________(Date) ___________________________________(Seal)
Florida Documentary Stamp Tax Required by law in the amount of $________
Has Been Paid Or Will be Paid Directly To The Department Of Revenue
Certificate Of Registration #___________________________________________
________________________________________________________________________
[ ] Renewal Note Stamps On Original
ASSIGNMENT OF DEPOSIT ACCOUNT
This Assignment of Deposit Account is made and entered into as of the
31st day of December, 1996, by VISION HEALTH CARE, INC. (hereinafter
Borrower).
WHEREAS, Borrower has requested a loan from SunTrust Bank, Tampa Bay
(hereinafter SunTrust) and SunTrust has agreed to such loan subject to the
terms and conditions of the loan documents;
WHEREAS, the loan will be initially secured by deposit account No.
0106020395250 titled in the name of "SunTrust Bank, Tampa Bay, in Escrow
for Vision Health Care, Inc." at SunTrust in the principal amount of
$2,500,000.00 (hereinafter Deposit Account);
WHEREAS, Borrower will thereafter provide to SunTrust Certificate of
Deposit, Customer No. 0602068788, Instrument No. 0000988, titled in the
name of "Vision Health Care, Inc.," to be issued on January 2, 1997, by
SunTrust Bank, Tampa Bay in the original amount of $2,500,000.00, having a
current balance of $2,500,000.00, which Certificate of Deposit presently
matures on December 31, 1997 (hereinafter Certificate of Deposit);
whereupon SunTrust will release the Deposit Account.
NOW, THEREFORE, for and in consideration of the promises and covenants
contained herein, the sufficiency of which is acknowledged by the
undersigned, it is agreed as follows:
1. SunTrust shall make a loan to Borrower in accordance with the
terms and conditions of the promissory note, this Assignment and
all related loan documents (hereinafter Loan Documents).
2. Borrower conveys, assigns, pledges and transfers to SunTrust the
Deposit Account together with any additions, replacements,
substitutions of the Deposit Account and all interest and
proceeds thereof whether now existing or at any time hereafter
acquired in connection with such Deposit Account. Borrower
further agrees from time to time to execute and deliver to
SunTrust any and all documents which in the opinion of SunTrust
are necessary to maintain said security interest.
3. On January 2, 1997, Borrower will obtain and deliver to SunTrust
the Certificate of Deposit, in return for the release by
SunTrust of its lien on the Deposit Account.
4. In the event of default by Borrower in the performance of the
terms and conditions of the Loan Documents, in addition to all
other rights and remedies prescribed by the Loan Documents,
without notice to Borrower, SunTrust shall have the right, but
not the obligation, to liquidate the Deposit Account and apply
the proceeds received from the liquidation of the Deposit
Account against the loan. The rights and remedies of SunTrust
under the Loan Documents in the event of default by Borrower
shall be cumulative.
5. Borrower warrants that:
A. There are no restrictions on disposition of the Deposit
Account, except in favor of SunTrust.
B. Except for the interest of SunTrust therein, Borrower is
the legal registered owner of the Deposit Account and holds
full and absolute beneficial title to the Deposit Account
free and clear of all liens, charges, encumbrances and
security interests of every kind and nature except as
follows: None.
C. The security interest created hereunder is a first priority
lien.
6. Borrower hereby irrevocably constitutes and appoints SunTrust as
Borrower's agent and attorney-in-fact for the purposes of
carrying out the provisions of this Assignment and taking any
action and executing any interest which SunTrust or Borrower
reasonably deems necessary or advisable to accomplish the
purposes hereof. The foregoing power of attorney is coupled
with an interest and shall be terminated only upon payment in
full of the obligation.
7. This Assignment is security for the loan and all other
indebtedness of the Borrower to SunTrust whether now or
hereafter existing, whether by way of renewal or modification,
or whether primary, secondary, direct or indirect, by
endorsement, guaranty or otherwise.
8. This Assignment shall be binding upon the Borrower, its heirs,
personal representatives, successors and assigns and shall inure
to the benefit of SunTrust and its successors and assigns.
BORROWER
VISION HEALTH CARE, INC.
By: /s/ Howard J. Braverman
Howard J. Braverman
Chairman
ASSIGNMENT OF CERTIFICATE OF DEPOSIT
This Assignment of Certificate of Deposit is made and entered into as
of the 2nd day of January, 1997, by VISION HEALTH CARE, INC. (hereinafter
Borrower).
WHEREAS, Borrower has requested a loan from SunTrust Bank, Tampa Bay
(hereinafter SunTrust) and SunTrust has agreed to such loan subject to the
terms and conditions of the loan documents;
WHEREAS, the loan will be initially secured by deposit account No.
0106020395250 titled in the name of "SunTrust Bank, Tampa Bay, in Escrow
for Vision Health Care, Inc." at SunTrust in the principal amount of
$2,500,000.00 (hereinafter Deposit Account);
WHEREAS, Borrower will thereafter provide to SunTrust Certificate of
Deposit, Customer No. 0602068788, Instrument No. 0000988, titled in the
name of "Vision Health Care, Inc.," to be issued on January 2, 1997, by
SunTrust Bank, Tampa Bay in the original amount of $2,500,000.00, having a
current balance of $2,500,000.00, which Certificate of Deposit presently
matures on December 31, 1997 (hereinafter Certificate of Deposit);
whereupon SunTrust will release the Deposit Account.
NOW, THEREFORE, for and in consideration of the promises and covenants
contained herein, the sufficiency of which is acknowledged by the
undersigned, it is agreed as follows:
1. SunTrust shall make a loan to Borrower in accordance with the
terms and conditions of the promissory note, this Assignment and
all related loan documents (hereinafter Loan Documents).
2. On the effective date hereof, Borrower will obtain and deliver
to SunTrust the Certificate of Deposit, in return for the
release by SunTrust of the Deposit Account.
3. Borrower conveys, assigns, pledges and transfers to SunTrust the
Certificate of Deposit together with any additions,
replacements, substitutions of the Certificate of Deposit and
all interest and proceeds thereof whether now existing or at any
time hereafter acquired in connection with such Certificate of
Deposit. Borrower further agrees from time to time to execute
and deliver to SunTrust any and all documents which in the
opinion of SunTrust are necessary to maintain said security
interest.
4. In the event of default by Borrower in the performance of the
terms and conditions of the Loan Documents, in addition to all
other rights and remedies prescribed by the Loan Documents,
without notice to Borrower, SunTrust shall have the right, but
not the obligation, to liquidate the Certificate of Deposit and
apply the proceeds received from the liquidation of the
Certificate of Deposit against the loan. The rights and
remedies of SunTrust under the Loan Documents in the event of
default by Borrower shall be cumulative.
5. Borrower warrants that:
A. There are no restrictions on disposition of the Certificate
of Deposit.
B. Borrower is the legal registered owner of the Certificate
of Deposit and holds full and absolute beneficial title to
the Certificate of Deposit free and clear of all liens,
charges, encumbrances and security interests of every kind
and nature except as follows: None.
C. The security interest created hereunder is a first priority
lien.
6. Borrower hereby irrevocably constitutes and appoints SunTrust as
Borrower's agent and attorney-in-fact for the purposes of
carrying out the provisions of this Assignment and taking any
action and executing any interest which SunTrust or Borrower
reasonably deems necessary or advisable to accomplish the
purposes hereof. The foregoing power of attorney is coupled
with an interest and shall be terminated only upon payment in
full of the obligation.
7. This Assignment is security for the loan and all other
indebtedness of the Borrower to SunTrust whether now or
hereafter existing, whether by way of renewal or modification,
or whether primary, secondary, direct or indirect, by
endorsement, guaranty or otherwise.
8. This Assignment shall be binding upon the Borrower, its heirs,
personal representatives, successors and assigns and shall inure
to the benefit of SunTrust and its successors and assigns.
BORROWER
VISION HEALTH CARE, INC.
By: /s/ Howard J. Braverman
Howard J. Braverman
Chairman
Dwight Darby & Company
Certified Public Accountants
March 25, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the statements by Vision Health Care, Inc. (copy
attached), which we understand will be filed with the Commission, pursuant
to Item 8 of Form 10-KSB, as part of the Company's Form 10-KSB report for
the year ended December 31, 1996. We agree with the statements concerning
our Firm in such Form 10-KSB.
Very truly yours,
/s/ Dwight Darby & Company
DWIGHT DARBY & COMPANY
Certified Public Accountants
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF VISION HEALTH CARE, INC. AS OF AND FOR THE YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,691,316
<SECURITIES> 2,500,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,214,077
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,214,077
<CURRENT-LIABILITIES> 2,503,603
<BONDS> 0
0
0
<COMMON> 4,224
<OTHER-SE> 2,694,426
<TOTAL-LIABILITY-AND-EQUITY> 5,214,077
<SALES> 0
<TOTAL-REVENUES> 14,514
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,514
<INCOME-TAX> 2,690
<INCOME-CONTINUING> 14,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,824
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
