<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1997
REGISTRATION NO. 333-29213
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
VISION TWENTY-ONE, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
FLORIDA 8741 59-3384581
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
<TABLE>
<C> <C>
VISION TWENTY-ONE, INC. THEODORE N. GILLETTE, PRESIDENT AND CEO
7209 BRYAN DAIRY ROAD VISION TWENTY-ONE, INC.
LARGO, FLORIDA 34647 7209 BRYAN DAIRY ROAD
(813) 545-4300 LARGO, FLORIDA 34647
(Address, including zip code, and telephone (813) 545-4300
number, including area code, of registrant's (Name, address, including zip code, and
principal executive offices) telephone number, including area code, of
agent for service)
</TABLE>
---------------------
WITH COPIES TO:
<TABLE>
<C> <C>
DARRELL C. SMITH, ESQUIRE JEFFREY M. STEIN, ESQUIRE
SHUMAKER, LOOP & KENDRICK, LLP KING & SPALDING
101 E. KENNEDY BLVD., SUITE 2800 191 PEACHTREE STREET
TAMPA, FLORIDA 33602 ATLANTA, GEORGIA 30303-1763
(813) 229-7600 (404) 572-4600
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED JULY 23, 1997
PROSPECTUS
- --------------------------------------------------------------------------------
2,100,000 Shares
VISION 21 [Graphic of Company Logo]
Common Stock
- --------------------------------------------------------------------------------
All of the 2,100,000 shares of common stock, par value $.001 per share (the
"Common Stock"), offered hereby are being sold by Vision Twenty-One, Inc. (the
"Company"). Prior to this offering (the "Offering"), there has been no public
market for the Common Stock of the Company. It is currently anticipated that the
initial public offering price will be between $11.00 and $13.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
The Company has applied for inclusion of the Common Stock in The Nasdaq Stock
Market's National Market (the "Nasdaq National Market") under the symbol "EYES."
SEE "RISK FACTORS" ON PAGES 6 TO 15 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
=============================================================================================================
</TABLE>
(1) The Company, Theodore N. Gillette and Richard L. Sanchez, who are executive
officers, directors and principal stockholders of the Company, Bruce S.
Maller and Richard L. Lindstrom, M.D., who are directors of the Company, and
certain other selling stockholders of the Company (collectively the "Selling
Stockholders"), have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Principal and Selling Stockholders" and "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $900,000.
(3) The Company and the Selling Stockholders have granted the several
Underwriters 30-day over-allotment options to purchase in the aggregate up
to 315,000 additional shares of Common Stock on the same terms and
conditions as set forth above. If all such additional shares are purchased
by the Underwriters, the total Price to Public will be $ , the total
Underwriting Discounts and Commissions will be $ , the total
Proceeds to Company will be $ and the total Proceeds to Selling
Stockholders will be $ . See "Principal and Selling Stockholders"
and "Underwriting."
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made at the office of Prudential Securities Incorporated, One New York
Plaza, New York, New York, on or about August , 1997.
PRUDENTIAL SECURITIES INCORPORATED WHEAT FIRST BUTCHER SINGER
July , 1997
<PAGE> 3
[The inside front cover depicts a graphic of the Company's Local Area
Delivery System. The graphic sets forth the four elements contained within the
Local Area Delivery System. The four elements are labeled primary, secondary,
tertiary and surgical facilities on four separate boxes, one on top of the
other, and each box is successively smaller, forming the shape of a pyramid.
Within each box is a description of these elements within a Local Delivery
System. In addition, the inside front cover folds out to depict a map of the
United States with the states in which the Company operates highlighted in a
different color.]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus and information under "Risk Factors." Unless the
context otherwise requires, references in this Prospectus to the Company or
Vision Twenty-One include Vision Twenty-One, Inc., its predecessors and its
subsidiaries. As used herein, the term "Managed Providers" refers to the
licensed optometrists and ophthalmologists employed by professional associations
and providing eye care services at Company clinic facilities and ambulatory
surgical centers ("ASCs"); "Managed Professional Associations" refers to the
professional associations which are managed by the Company pursuant to long-term
management agreements ("Management Agreements"); "Contract Providers" refers to
the licensed optometrists and ophthalmologists who provide eye care services at
optometry and ophthalmology clinics and ASCs pursuant to the Company's managed
care contracts; and "Affiliated Providers" refers collectively to the Managed
Providers and the Contract Providers. Except as otherwise indicated, the
information contained in this Prospectus (i) assumes that the Underwriters'
over-allotment options will not be exercised and (ii) gives retroactive effect
to a reverse stock split resulting in an exchange of 1 share for 1.5 shares of
Common Stock issued and outstanding.
THE COMPANY
The Company provides a wide range of management and administrative services
to local area delivery systems ("LADS(SM)") established by the Company. LADS are
integrated networks of optometrists, ophthalmologists, ASCs and retail optical
centers that are designed to offer the full continuum of eye care services in
local markets. The Company began operations in 1984, providing management
services to seven optometrists practicing at eight clinic locations. The Company
currently provides its services to 11 LADS located in six states through which
660 Affiliated Providers deliver eye care services. Of these Affiliated
Providers, 72 are Managed Providers, consisting of 46 optometrists and 26
ophthalmologists practicing at 48 clinic locations and five ASCs, and 588 are
Contract Providers, consisting of 258 optometrists and 330 ophthalmologists
practicing at over 300 clinic locations and 35 ASCs. The Company signed its
first managed care contract in 1988 for 18,000 patient lives serviced through
the Company's network of optometrists practicing within retail optical
locations. The Company's Affiliated Providers, in conjunction with select
national retail optical chains operating over 300 retail optical centers,
deliver eye care services under the Company's 22 managed care contracts and
seven discount fee-for-service plans covering approximately 1.8 million patient
lives.
Eye care services in the United States are delivered through a highly
fragmented system of local providers that industry sources estimate consisted of
approximately 47,000 practicing eye care professionals in 1996, including
approximately 29,500 optometrists and 17,500 ophthalmologists. According to
industry sources, expenditures for all eye care services in the United States
were approximately $31.2 billion in 1995. Industry sources estimate $19.6
billion of these expenditures was spent on primary care, including approximately
$13.8 billion for optical goods (frames, lenses and accessories) and $5.8
billion for primary eye care services (routine eye exams, contact lens fitting
and diagnosis/management of eye disease), while $11.6 billion was spent on
secondary and tertiary care, including $6.9 billion for ophthalmology services
(medical and surgical eye care) and $4.7 billion for facility services (services
provided by hospital facilities and ASCs). The Company believes several trends
are effecting the growth of the overall eye care industry as well as the
delivery of eye care services. First, as the "baby boom" generation ages, the
demand for eye care services at all levels is expected to increase to treat such
conditions as glaucoma, cataracts and other eye disorders that naturally occur
as part of the aging process. Second, technological advances and innovations in
such areas as refractive surgery utilizing the excimer laser to correct
nearsightedness are expected to contribute to increased spending on eye care
services. Third, the Company believes that patients are increasingly seeking
convenient and accessible primary eye care through retail centers where primary
eye care services and products are being bundled, thus making the retail optical
center an important access point for eye care delivery networks. Finally, as
more people become eligible to receive eye care benefits, the Company believes
there will be increased utilization of primary eye care services, which will in
turn lead to an increase in the demand for secondary and tertiary eye care
services.
3
<PAGE> 5
The Company's goal is to enable each of its LADS to capture the leading
market share of fee-for-service patients and managed care members. To achieve
its goal, the Company is focused on the following strategies: (i) developing
LADS in order to provide for a complete continuum of easily accessible, high
quality and affordable eye care services, (ii) increasing patient revenue and
cost efficiencies for each LADS through practice development and managed care
initiatives and (iii) expanding into select new markets to create regional
networks of LADS.
The Company earns practice management fees by providing Managed Providers
with a wide range of management and administrative services. These management
and administrative services are designed to increase patient flow while
effecting cost efficiencies, and to permit the Managed Provider to concentrate
on the delivery of easily accessible, high quality and affordable eye care
services. The Company also earns revenues by entering into capitated managed
care contracts with third-party insurers and payors and by administering
indemnity fee-for-service plans for its Affiliated Providers. The Company
believes it provides its Affiliated Providers with significant advantages in
negotiating, obtaining and effectively administering managed care contracts
through its experienced management team, management information systems, greater
capital resources and more efficient cost structure.
THE ACQUISITIONS
In a series of acquisitions completed from December 1996 through July 1997,
the Company acquired the business assets of 28 optometry clinics, 20
ophthalmology clinics, 21 optical dispensaries and five ASCs. Business assets
consist of certain non-medical and non-optometric assets, including accounts
receivables, leases, contracts, equipment and other tangible and intangible
assets. Concurrently, the Company entered into long-term management agreements
with the related professional associations employing 46 optometrists and 26
ophthalmologists. See "The Acquisitions."
THE OFFERING
Common Stock Offered by the Company....... 2,100,000 shares
Common Stock to be Outstanding after the
Offering(1)............................... 8,212,681 shares
Use of Proceeds........................... To repay outstanding indebtedness
and to finance the acquisition and
development of optometry and
ophthalmology clinics and ASCs.
See "Use of Proceeds," "Certain
Transactions" and "Underwriting."
Proposed Nasdaq National Market Symbol.... EYES
- ---------------
(1) Excludes (a) an aggregate of 1,600,000 shares of Common Stock reserved for
issuance under the Company's stock plans (the "Plans"), pursuant to which
options to purchase approximately 682,667 shares have been granted as of
July 22, 1997, (b) an aggregate of 1,175,000 shares of Common Stock which
are issuable upon the exercise of warrants granted by the Company and (c) an
aggregate of 79,805 shares of Common Stock which are being held in escrow as
contingent consideration in several acquisitions. See "The Acquisitions,"
"Management -- The Stock Option Plans," "Certain Transactions" and
"Underwriting."
RISK FACTORS
Investors should consider the material risk factors involved in connection
with an investment in the Common Stock and the impact to investors from various
events which could adversely affect the Company's business. See "Risk Factors."
4
<PAGE> 6
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------- ------------------------------
PRO FORMA PRO FORMA
1994 1995 1996 1996(1) 1996 1997 1997(2)
------- ------- ------- ---------- ------- ------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $ 1,192 $ 3,082 $ 9,564 $ 40,712 $ 2,100 $ 7,718 $ 11,403
Operating expenses............... 1,340 4,299 15,524 43,185 2,923 7,939 11,229
------- ------- ------- ---------- ------- ------- ----------
Income (loss) from operations.... (148) (1,217) (5,960) (2,473) (823) (221) 174
Net income (loss)................ (153) (1,226) (6,120) (2,478) (825) (448) 168
Pro forma net income (loss) per
common share(3)................ $ (0.33) $ 0.02
Pro forma weighted average number
of common shares
outstanding(3)................. 7,529,107 7,529,107
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $(6,158) $(6,158) $10,774
Total assets.............................................. 19,990 26,737 38,275
Long-term debt and capital lease obligations,
including current maturities............................ 10,509 10,509 953
Stockholders' equity...................................... 3,395 10,142 32,678
</TABLE>
- ---------------
(1) Gives effect to the following transactions as if they were completed on
January 1, 1996: (i) the 1996 Acquisitions, (ii) the Pinellas Acquisition,
(iii) the Recent Acquisitions, (iv) the Offering and the application of the
estimated net proceeds therefrom. See "The Acquisitions" and "Selected Pro
Forma Financial Data."
(2) Gives effect to the following transactions as if they were completed on
January 1, 1997: (i) the Pinellas Acquisition, (ii) the Recent Acquisitions,
(iii) the Offering and the application of the estimated net proceeds
therefrom. See "The Acquisitions" and "Selected Pro Forma Financial Data."
(3) Reflects the pro forma net income (loss) per share assuming an increase in
the weighted average number of outstanding shares to the extent necessary to
repay the existing indebtedness as described in "Use of Proceeds." See Note
6 to the Company's Unaudited Pro Forma Consolidated Financial Information
for a description of the computation of pro forma net income (loss) per
common share.
(4) Gives effect to the Recent Acquisitions as if they were completed as of
March 31, 1997. See "The Acquisitions."
(5) Gives effect to the Offering and the application of the estimated net
proceeds therefrom. See "Selected Pro Forma Financial Data."
5
<PAGE> 7
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this Prospectus,
in connection with an investment in the Common Stock offered hereby.
This Prospectus contains forward looking statements that involve risks and
uncertainties. Those statements appear in a number of places in this Prospectus
and include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other things:
(i) the future financial prospects of the Company; (ii) potential acquisitions
by the Company and the successful integration of both completed and future
acquisitions; (iii) the ability of the Company to efficiently and effectively
manage its Managed Providers; (iv) the use of the proceeds of the Offering; (v)
the Company's financing plans; (vi) trends affecting the Company's financial
condition or results of operations; (vii) the Company's growth strategy and
operating strategy; (viii) trends in the health care and managed care
industries; (ix) government regulations; (x) the declaration and payment of
dividends; (xi) the Company's current and future managed care contracts; (xii)
the Company's ability to continue to recruit Contract Providers, to convert
Contract Providers to Managed Providers, and to maintain its relationships with
Affiliated Providers; (xiii) the Company's relationship with BSM Consulting
Group and Bruce Maller; and (xiv) the Company's relationships with affiliated
retail optical companies. Prospective investors are cautioned that any such
forward looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward looking statements as a result of various
factors. The accompanying information contained in this Prospectus, including
without limitation the information set forth under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business," identifies important factors that could cause such
differences.
HISTORY OF LOSSES. Although the Company has experienced substantial
revenue growth, the Company incurred operating and net losses in the years ended
December 31, 1994, 1995 and 1996 and in the three months ended March 31, 1997.
As of March 31, 1997, the Company had an accumulated deficit of $8.0 million.
There can be no assurance that the Company will not incur further operating and
net losses or achieve profitability in the near future.
RISKS ASSOCIATED WITH EXPANSION STRATEGY. A significant portion of the
Company's expansion strategy is to grow its Managed Provider network through the
acquisition of certain assets of ophthalmology and optometry practices, ASCs and
related businesses. The success of the Company's expansion strategy will depend
on factors which include the following:
Ability to Identify and Consummate Suitable Acquisitions. The Company
intends to devote substantial resources to identifying, negotiating and
consummating appropriate acquisitions. The Company may compete for
acquisition opportunities with entities that have greater resources than
the Company. Additionally, there can be no assurance that suitable
acquisition candidates are available or can be identified or that
acquisitions can be consummated on terms favorable to the Company.
Integration of Acquisitions. The Company has made significant
acquisitions in the past year. In the past twelve months, the number of
clinics and ASCs managed by the Company, the size of its Contract Providers
network, and the number and size of its managed care contracts and related
covered lives have increased significantly. The Company's financial results
in fiscal quarters immediately following a material acquisition or series
of acquisitions may be adversely impacted while the Company attempts to
integrate the acquisition or acquisitions. There can be no assurance that
there will not be substantial unanticipated costs or problems associated
with the integration effort. During the first few months after an
acquisition, the Company's expenses related to an acquisition may exceed
the revenue it realizes from the acquisition and, accordingly, any such
acquisition may have a negative effect on the Company's short-term
operating results. As the Company pursues its expansion strategy, there can
be no assurance that the Company will be able to continue to successfully
integrate acquisitions and any failure or inability to do so may have a
material adverse effect on the Company's results of operations or financial
condition. In addition, acquisitions require the Company to attract and
retain competent and experienced management
6
<PAGE> 8
personnel and require the integration of reporting and tracking systems,
management information systems and other operating systems. At the present
time, the Company's management information systems have not been fully
integrated into the Company's recent acquisitions, and there can be no
assurance that the Company will be able to fully integrate its management
information systems in the near future. There can also be no assurance that
the Company will be able to attract suitable management or other personnel
or effectively expand its operating systems. The success of the Company's
expansion strategy will depend on the Company's ability to effectively
manage an increasing number of new acquisitions while continuing to manage
its existing business.
Availability of Funds for Expansion Strategy. The Company's expansion
strategy will require that substantial capital investment and adequate
financing be available to the Company. Capital is needed not only for
acquisitions, but also for the integration of operations and the addition
of equipment and technology. The Company currently believes that the net
proceeds from this Offering, cash flow from operations and future
borrowings will be adequate to meet the Company's anticipated capital needs
for the next eighteen months. Thereafter, the Company may be required to
obtain financing through additional borrowings or the issuance of
additional equity or debt securities, which could have an adverse effect on
the value of the shares of Common Stock of the Company. There can be no
assurance that the Company will be able to obtain such financing or that,
if available, such financing will be on terms acceptable to the Company.
Any inability of the Company to obtain suitable additional financing could
cause the Company to change its expansion strategy, which could have a
material adverse effect on the Company.
Managed Care Contract Expansion. The success of the Company's
expansion strategy also will be dependent on its ability to expand its
managed care contract relationships. The ability of the Company to maintain
and expand its Contract Provider network and retail affiliations will be
important in expanding these contractual relationships with both existing
and new payors. Correspondingly, expanding managed care contract
relationships will be important in maintaining and expanding its Contract
Provider networks and retail affiliations. Additionally, the ability to
effect acquisitions that add to the Company's Managed Provider network will
be dependent upon the Company's ability to expand its managed care contract
relationships.
Risks Associated with Merger Transactions. Several of the Company's
acquisitions have been accomplished by way of merger. As a result of such
merger transactions, there could be potential liabilities to which the
Company could be subject. The agreements entered into in connection with
the acquisitions provide for the Company to be fully indemnified against
any losses incurred by the Company as a result of certain material
liabilities. However, while the Company is not aware of any such
liabilities, there can be no assurance that the Company will not incur
losses in the event that the indemnifications are inadequate to reimburse
the Company for any such losses.
RELIANCE ON AFFILIATED PROVIDERS. The Company's revenue depends on revenue
generated by the Affiliated Providers. There can be no assurance that the
practices managed by the Company will continue to maintain successful practices,
that the Management Agreements between the Company and such professional
associations will not be terminated or that the Managed Providers will continue
to be employed by the professional associations. Under the Management
Agreements, the Company has agreed with the professional associations that,
subject to certain exceptions, it will not provide management services for any
practice located within five miles of such professional associations without
first obtaining the express written consent of the professional associations.
The Company's ability to expand the managed care business will be dependent upon
the Company's ability to recruit and maintain an expanded Contract Provider
network as well as to market such network successfully to payors. The inability
to effectively expand the network and contractual relationships with payors
would have a material adverse effect on the Company's growth strategy.
Additionally, the practice management fees earned by the Company pursuant to
substantially all of its Management Agreements will fluctuate depending on
variances in revenues and expenses of the Managed Professional Association and
thus the Company's revenue and profitability in connection with its Management
Agreements will be directly and adversely affected by poor operating results of
its Managed Professional Associations.
7
<PAGE> 9
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS AND CAPITATED FEE
ARRANGEMENTS. As an increasing percentage of the population is covered by
managed care organizations, the Company believes that its success will be, in
part, dependent upon its ability to negotiate managed care contracts with HMOs,
health insurance companies and other third party payors pursuant to which
services will be provided on a risk-sharing or capitated basis. Managed care
contracts accounted for 21.1% and 24.2% of the Company's pro forma revenues for
the year ended December 31, 1996 and the three month period ended March 31,
1997, respectively. Revenue derived from contractual arrangements with certain
affiliates of Humana accounted for 60.3% and 16.7% of the Company's historical
revenues for the year ended December 31, 1996 and the three months ended March
31, 1997, respectively. Any adverse development in the Company's relationship
with Humana would have a material adverse effect on the Company's results of
operations and financial condition. There can be no assurance that the Company
will be able to maintain a relationship with Humana or any other association
with which it has a managed care contract. Most of the Company's managed care
contracts are for one year terms which automatically renew and the contracts are
terminable by either party on sixty days notice. Under some of these contracts,
the health care provider may accept a pre-determined amount per month per
patient in exchange for providing all necessary covered services to the patients
covered under the agreement. These contracts pass much of the risk of providing
care from the payor to the provider. The proliferation of these contracts in
markets served by the Company could result in greater predictability of revenue,
but less certainty with respect to profitability. There can be no assurance,
however, that the Company will be able to negotiate satisfactory arrangements on
a risk-sharing or capitated basis. In addition, to the extent that patients or
enrollees covered by these contracts require, in the aggregate, more frequent or
extensive care than is anticipated, operating margins may be reduced or the
revenue derived from these contracts may be insufficient to cover the costs of
the services provided. Any such developments could have a material adverse
effect on the Company's results of operations or financial condition.
GOVERNMENT REGULATIONS. Business arrangements between business
associations that provide practice management services and ophthalmologists and
optometrists are regulated extensively at the state and federal levels,
including regulation in the following areas:
Corporate Practice of Optometry and Ophthalmology. The laws of many
states prohibit corporations that are not owned entirely by eye care
professionals from employing eye care professionals, having control over
clinical decision-making, or engaging in other activities that are deemed
to constitute the practice of optometry and ophthalmology. The Company
contracts with professional associations (which are owned by one or more
licensed optometrists or ophthalmologists), which in turn employ or
contract with licensed optometrists or ophthalmologists to provide
professional services. The Company performs only non-professional services,
is not representing to the public or its customers that it provides
professional eye care services, and is not exercising influence or control
over the practices of the eye care practitioners employed by the
professional associations. Furthermore, the Management Agreements between
the Company and the Managed Professional Associations specifically provide
that all decisions required by law to be made by professionals shall be
made by such professionals. While certain shareholders of Managed
Professional Associations that perform the practice of medicine or
optometry are also involved in Company management, they act independently
when making decisions on behalf of their professional corporations and the
Company has no right (and does not attempt to exercise any right) to
control those decisions.
Fee-Splitting and Anti-kickback Laws.
State Law. Many states prohibit "fee-splitting" by eye care
professionals with any party except other eye care professionals in the
same professional corporation or practice association. In most cases,
these laws have been construed as applying to the paying of a portion of
a fee to another person for referring a patient or otherwise generating
business, and not to prohibit payment of reasonable compensation for
facilities and services (other than the generation of referrals), even
if the payment is based on a percentage of the practice's revenues. In
addition, most states have laws prohibiting paying or receiving any
remuneration, direct or indirect, that is intended to induce referrals
for health care products or services. For example, the Florida
fee-splitting law prohibits
8
<PAGE> 10
paying or receiving any commission, bonus, kickback, or rebate, or
engaging in any split-fee arrangement in any form for patient referrals
to providers of health care goods or services. According to a Florida
court of appeals decision interpreting this law, it does not prohibit a
management fee that is based on a percentage of gross income of a
professional practice if the manager does not refer patients to the
practice. Similarly, the Arizona law prohibits "dividing a professional
fee" only if it is done "for patient referrals". Other states, such as
Illinois and New York, have fee-splitting statutes that have been
interpreted to prohibit any compensation arrangements that are based on
a percentage of physician's revenue, and such laws preclude the Company
from using its typical management arrangement in those states.
Federal Law. Federal law prohibits the offer, payment,
solicitation or receipt of any form of remuneration in return for the
referral of patients covered by federally funded health care programs
such as Medicare and Medicaid, or in return for purchasing, leasing,
ordering or arranging for the purchase, lease or order of any product or
service that is covered by a federal program. For this reason, the
Management Agreement provides that the Company will not engage in direct
marketing to potential sources of business, but will only assist the
practice's personnel in these endeavors by providing training, marketing
materials and technical assistance.
Advertising Restrictions. Many states prohibit eye care
professionals from using advertising which includes any name other than
their own, or from advertising in any manner that is likely to lead a
person to believe that a non eye care professional is engaged in the
delivery of eye care services. The Management Agreement provides that
all advertising shall conform to these requirements.
In addition, the Company's managed care arrangements with health care
service payors on the one hand, and its network of Affiliated Providers on the
other, are subject to federal and state regulations, including the following:
Insurance Licensure. Most states impose strict licensure requirements
on health insurance companies, HMOs, and other companies that engage in the
business of insurance. In most states, these laws do not apply to
discounted fee-for-service arrangements or networks that are paid on a
"capitated" basis, i.e. based on the number of covered persons the network
is required to serve without regard to the cost of service actually
rendered, unless the association with which the network provider is
contracting is not a licensed health insurer or HMO. There are exceptions
to these rules in some states. For example, certain states require a
license for a capitated arrangement with any party unless the risk-bearing
association is a professional corporation that employs the eye care
professionals. In the event that the Company is required to become licensed
under these laws, the licensure process can be lengthy and time consuming
and, unless the regulatory authority permits the Company to continue to
operate while the licensure process is progressing, the Company could
experience a material adverse change in its business while the licensure
process is pending. In addition, many of the licensing requirements mandate
strict financial and other requirements which the Company may not
immediately be able to meet. Once licensed, the Company would be subject to
continuing oversight by and reporting to the respective regulatory agency.
Limited Health Service Plans. Some states permit managed care
networks that assume insurance risk, but only as to a limited class of
health services, to be licensed as limited health service plans, and
thereby avoid the need to be licensed as an insurer or HMO even if its
arrangements are with individual subscribers or self-insured employers. The
Company intends to seek such licensure in those states where it is
available for eye care networks. However, the Company may not be able to
meet such requirements in all cases.
Physician Incentive Plans. Medicare regulations impose certain
disclosure requirements on managed care networks that compensate providers
in a manner that is related to the volume of services provided to Medicare
patients (other than services personally provided by the provider). If such
incentive payments exceed 25 percent of the provider's potential payments,
the network is also required to show that the providers have certain "stop
loss" financial projections and to conduct certain Medicare enrollee
surveys.
9
<PAGE> 11
"Any Willing Provider" Laws. Some states have adopted, and others are
considering, legislation that requires managed care networks to include any
provider who is willing to abide by the terms of the network's contracts
and/or prohibit termination of providers without cause. Such laws would
limit the ability of the Company to develop effective managed care networks
in such states.
The Company and its affiliated professional associations are subject to a
range of antitrust laws that prohibit anti-competitive conduct, including price
fixing, concerted refusals to deal and divisions of markets. Among other things,
these laws limit the ability of the company to enter into Management Agreements
with separate practice groups that compete with one another in the same
geographic market. This does not apply to professionals within the same practice
group. In addition, these laws prevent acquisitions of business assets that
would be integrated into existing professional associations if such acquisitions
substantially lessen competition or tend to create a monopoly.
The several laws described above have civil and criminal penalties and have
been subject to limited judicial and regulatory interpretation. They are
enforced by regulatory agencies that are vested with broad discretion in
interpreting their meaning. The Company's agreements and activities have not
been examined by federal or state authorities under these laws and regulations.
For these reasons, there can be no assurance that review of the Company's
business arrangements will not result in determinations that adversely affect
the Company's operations or that certain agreements between the Company and eye
care providers or third party payors will not be held invalid and unenforceable.
In addition, these laws and their interpretation vary from state to state. The
regulatory framework of certain jurisdictions may limit the Company's expansion
into, or ability to continue operations within, such jurisdictions if the
Company is unable to modify its operational structure to conform with such
regulatory framework. Any limitation on the Company's ability to expand could
have an adverse effect on the Company. See "Business -- Government Regulations."
COST CONTAINMENT AND REIMBURSEMENT TRENDS. The Company estimates that on a
pro forma basis for the year ended December 31, 1996, 74.5% of the revenues
received by the professional associations currently managed by it were derived
from government sponsored health care programs and private third-party payors.
The health care industry has experienced a trend toward cost containment as
government and private third party payors seek to impose lower reimbursement and
utilization rates and negotiate reduced payment schedules with service
providers. The Company believes that these trends may result in a reduction from
historical levels in per patient revenue received by the professional
associations. Recent changes in Medicare payment rates will reduce payments to
optometrists and ophthalmologists. Medicare payments to physicians and other
practitioners are based on the "relative value units" ("RVUs") assigned to the
service in question. These RVUs were adjusted effective January 1, 1997 in a
manner that generally assigns a relatively lower value to services performed by
optometrists and ophthalmologists. As a result of these changes, the projected
Medicare payments to optometrists and ophthalmologists will be reduced by less
than five percent. Private insurance payments could also be affected to the
extent that the payment methodologies used by insurance companies are based on
the Medicare RVUs. Further reductions in payments to professionals or other
changes in reimbursement for health care services could have an adverse effect
on the Company's results of operations. There can be no assurance that any
potential reduced revenues and operating margins from such trends could be
offset through cost reductions, increased volume, introduction of new procedures
or otherwise. See "Business -- Governmental Regulations."
NON-COMPETITION COVENANTS. The Management Agreements require each
professional association to use its best efforts to enter into employment
agreements with each Managed Provider that include covenants not to compete with
the professional association for periods ranging from one to two years after
termination of employment, and which require the professional association's
shareholders to pay certain specified amounts to the Company if such shareholder
professionals violate their respective covenants not to compete. Laws affecting
the enforceability of such covenants vary significantly from state to state. In
most states, a covenant not to compete will be enforced only to the extent it is
necessary to protect a legitimate business interest of the party seeking
enforcement, does not unreasonably restrain the party against whom enforcement
is sought, and is not contrary to the public interest. This determination is
made based on all the facts and circumstances of the specific case at the time
enforcement is sought. For this reason, one cannot predict with certainty
whether a court will enforce such a covenant in a given situation. In addition,
it is unclear whether a management
10
<PAGE> 12
company's interest under a management agreement will be viewed by the courts as
the type of protectable business interest that would permit the management
company to enforce such a covenant or to require the managed professional
association to enforce such a covenant against the employed professional.
Furthermore, liquidated damages provisions will not be enforced unless the court
determines that the amount is a reasonable estimate of actual damages that would
be difficult to ascertain in a precise manner. Since the intangible value of the
Management Agreement depends primarily on the ability of the professional
association to preserve its business, which could be harmed if employed
professionals went into competition with the professional association, a
determination that these provisions will not be enforced could have a material
adverse effect on the Company. See "Business -- Management Agreements."
Additionally, the Company is not permitted under certain circumstances to expand
its Affiliated or Managed Provider network within a certain geographical area
surrounding a Managed Provider without prior consent of the Managed Provider.
Such covenants could serve to limit market penetration opportunities within a
LADS and thus have an adverse effect on the Company's ability to expand within a
LADS.
RISKS ASSOCIATED WITH BSM RELATIONSHIP. The Company has exclusive
consulting agreements with leading ophthalmology practice consultants BSM
Consulting Group ("BSM") and Bruce S. Maller. The agreements are for a term of
five years and may be terminated by a party only for "cause" in the event of a
material breach which remains uncured for 30 days or the occurrence of certain
events related to bankruptcy. Mr. Maller is the chief executive officer of BSM
and a director of the Company. BSM and Mr. Maller assist the Company in
identifying and evaluating suitable ophthalmology practices for acquisition,
integrating of the acquired practices and providing strategic planning designed
to enhance the growth and development of the Affiliated Providers. A large part
of the success of the Company in implementing its growth strategy will depend on
the ability of such consultants to identify and evaluate suitable ophthalmology
practices and to assist Managed Providers in growing their practices, and there
can be no assurance that the consultants will be able to provide such services
successfully. Furthermore, in the event that such consultants are no longer able
to provide such services for any reason, there can be no assurance that the
Company will be able to retain other consultants with similar expertise or
undertake these tasks internally. Therefore, the loss of the services of either
BSM or Maller could have a material adverse effect on the Company. See "Certain
Transactions."
RISKS RELATED TO AMORTIZATION OF INTANGIBLE VALUE IN MANAGEMENT
AGREEMENTS. The Company's pro forma combined total assets reflect substantial
intangible assets in the form of Management Agreements with Managed Providers.
Intangible assets represent approximately 67% of total assets and almost four
times total stockholders' equity. The intangible asset value represents the
excess of cost over the fair value of the separate assets acquired in connection
with rights received by the Company under its acquired Management Agreements.
There can be no assurance that the value of such assets will ever be realized by
the Company. These intangible assets are expected to be amortized on a
straight-line basis over their estimated useful lives ranging from 20 to 40
years. The Company evaluates on a regular basis whether events and circumstances
have occurred that indicate that all or a portion of the carrying amount of the
asset may no longer be recoverable, in which case an additional charge to
earnings would become necessary. Any determination requiring the write-off of a
significant portion of unamortized intangible assets would adversely affect the
Company's results of operations. See "Selected Pro Forma Financial Data."
RELATIONSHIP WITH RETAIL OPTICAL COMPANIES. An important factor in the
Company's business and growth strategy is its strategic affiliations with retail
optical companies in the Company's markets. The Company currently has
contractual arrangements with Eye Care Centers of America, Inc. and For Eyes
Optical, which are terminable by either party under certain circumstances, and
there can be no assurance that the Company will be able to maintain these
arrangements. The Company expects to gain benefits from strategic affiliations
with optical retailers through increasing patient flow into a LADS, increasing
opportunities to obtain managed care contracts and providing an opportunity to
add affiliated optometrists practicing within retail optical locations. However,
under applicable regulations these retailers may not be required to refer
patients to the Affiliated Providers and there can be no assurance that the
Company's arrangements with retail optical companies will result in the intended
benefits to the Company. Additionally, in those markets where more than one
affiliated optical retailer operates and competes with others, the Company may
have to choose among such optical retailers. There can be no assurance that the
Company will be able to successfully
11
<PAGE> 13
establish strategic affiliations in any particular market or that any such
affiliations will be successful. The inability of the Company to maintain and
develop its strategic affiliations could have a material adverse effect on the
Company's business, results of operations and financial condition.
COMPETITION. The health care industry is highly competitive and subject to
continual changes in the methods by which services are provided and the manner
in which health care providers are selected and compensated. The Company
believes that private and public reforms in the health care industry emphasizing
cost containment and accountability will result in an increasing shift of eye
care from highly fragmented, individual or small practice providers to larger
group practices, affiliated practice groups or other eye care delivery systems.
The Company competes with other physician practice management companies which
seek to acquire the allowable business assets of and provide management services
to eye care professionals, some of which have substantially greater financial
resources than the Company. Companies in other health care industry segments,
such as managers of other hospital-based specialties or currently expanding
large group practices, some of which have financial and other resources greater
than those of the Company, may become competitors in providing management to
providers of eye care services. Increased competition could have a material
adverse effect on the Company's financial condition and results of operations.
The basis for competition in the practice management area is service, pricing,
strength of the delivery network, strength of operational systems, the degree of
cost efficiencies and synergies, marketing strength, management information
systems, managed care expertise, patient access and quality assessment programs.
The Company also competes with other providers of eye care services, including
HMOs, PPOs and private insurers, for managed care contracts, many of which have
larger provider networks and greater financial and other resources than the
Company. Managed care organizations compete on the basis of administrative
strength, size, quality and geographic coverage of their provider networks,
marketing abilities, informational systems, the strategy of their managed care
contracts, operating efficiencies and price. See "Business -- Competition."
RISKS ARISING FROM HEALTH CARE REFORM. There can be no assurance that the
laws and regulations of the states in which the Company operates will not change
or be interpreted in the future either to restrict or adversely affect the
Company's relationships with its Affiliated Providers or the operation of the
professional associations with which it contracts. Federal and state governments
are currently considering various types of health care initiatives and
comprehensive revisions to the health care and health insurance systems. Some of
the proposals under consideration, or others that may be introduced, could, if
adopted, have a material adverse effect on the Company's financial condition and
results of operations. It is uncertain what legislative programs, if any, will
be adopted in the future, or what actions Congress or state legislatures may
take regarding health care reform proposals or legislation. In addition, changes
in the health care industry, such as the growth of managed care organizations
and provider networks, may result in lower payments for the services of the
Affiliated Providers, which could have a material adverse effect on the Company.
Congress and the Clinton administration recently announced a balance budget
agreement that is expected to lead to future legislation. When compared to
projected Medicare spending levels under current law, the agreement would reduce
Medicare spending by $115 billion over five years and $430 billion over 10
years. The vast majority of these savings would come from reductions in payments
for services of health care facilities, practitioners and other providers.
Although Congress has not agreed to specific reductions, it appears that
Congressional leaders will use the President's proposed fiscal 1998 budget as
the starting place for future legislation. The President's proposed budget
would, among other things, (i) reduce payments to managed care plans from the
current rate of 95% of fee-for-service rates, (ii) reduce payment rates in
geographic areas that have high service utilization rates, (iii) reduce the
annual inflation adjustment for ASC fees, (iv) eliminate disparities in payment
rates for similar services by physicians in different specialties, and (v)
eliminate payments for assistants at surgery. It is impossible to determine
precisely how these changes will affect payments for services of
ophthalmologists, optometrists and ASC facilities until the final legislation is
adopted. Any reductions in payment for these services could have an adverse
effect on the Company's results of operations and financial condition. See
"Business -- Governmental Regulations."
RISKS ASSOCIATED WITH EYE CARE SERVICES. The Company's business entails an
inherent risk of claims of liability. The optometrists, ophthalmologists and
ASCs which the Company contracts with are involved in the delivery of health
care services to the public and, therefore, are exposed to the risk of
professional liability
12
<PAGE> 14
claims. As a result of the Company's providing management services pursuant to
its Management Agreements, the Company will also be named as a co-defendant in
professional liability lawsuits against its Affiliated Providers from time to
time. The Company does not control the practice of optometry or ophthalmology by
the Affiliated Providers or the compliance with regulatory and other
requirements directly applicable to the Affiliated Providers and their
practices. Claims of this nature, if successful, could result in substantial
damage awards to the claimants that may exceed the limits of any applicable
insurance coverage. Insurance against losses related to claims of this type can
be expensive and varies widely from state to state. The Company is indemnified
under the Management Agreements for claims against the professional associations
with which it contracts and maintains liability insurance for itself. Successful
malpractice claims asserted against the professional associations, however,
could have an adverse effect on the Company's profitability. The Company
maintains an umbrella insurance policy which includes professional liability and
general liability insurance on a claims made basis in the amounts of $5 million
per incident, and $5 million in the aggregate per year. While the Company
believes it maintains reasonable levels of liability insurance coverage, there
can be no assurance that a pending or future claim or claims will not be
successful or, if successful, will not exceed the limits of available insurance
coverage or that such coverage will continue to be available at acceptable costs
and on favorable terms. See "Business -- Management Agreements."
DEPENDENCE ON KEY INDIVIDUALS. The success of the Company is dependent
upon the continued services of the Company's senior management. The loss of the
services of one or more of these individuals, including the Company's Chairman,
President and Chief Executive Officer, Theodore N. Gillette, O.D. could have a
material adverse effect on the Company. The Company and Dr. Gillette are parties
to an employment agreement which expires on September 30, 2001 and is renewable
for subsequent one year terms. See "Management -- Employment Agreements." There
can be no assurance that Dr. Gillette will remain employed by the Company during
such period or that his employment agreement will be renewed. The Company
believes that its future success will also depend in part upon its ability to
attract and retain qualified management personnel. Competition for such
personnel is intense and the Company competes for qualified personnel with
numerous other employers, some of whom have greater financial and other
resources than the Company. There can be no assurance that the Company will be
successful in attracting and retaining such personnel. See "Management."
CONTROL BY CURRENT STOCKHOLDERS AND MANAGEMENT. Upon completion of the
Offering, the Company's current officers and directors will own approximately
46.5% of the outstanding shares of Common Stock. Accordingly, these individuals,
as a group, will have the ability to control all matters requiring stockholder
approval, including the election of the Company's directors and any amendments
to the Company's Articles of Incorporation and Bylaws, and to control the
business of the Company. Such control could preclude any acquisition of the
Company and could adversely affect the market price of the Common Stock. See
"Principal and Selling Stockholders" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have 8,212,681 shares of Common Stock outstanding of which the
2,100,000 shares sold in the Offering (2,415,000 shares if the Underwriters'
overallotment options are exercised in full), will be freely tradeable without
restriction or the requirement of future registration under the Securities Act
of 1933 (the "Securities Act"). All of the remaining 6,112,681 shares are
Restricted Securities ("Restricted Securities") as that term is defined by Rule
144 promulgated under the Securities Act and are subject to certain restrictions
described below. 2,830,023 of the Restricted Shares will become eligible for
sale 90 days following the completion of this Offering but are subject to
certain lock-up agreements described below. Holders of the 3,282,658 remaining
Restricted Shares will be eligible to sell a portion of such shares pursuant to
Rule 144 beginning in September 1997. These shares are subject to certain
lock-up agreements described below and also subject to registration rights
agreements requiring the Company to register such shares under certain
circumstances. See "Description of Capital Stock -- Registration Rights" and
"Shares Eligible for Future Sale." The Company has reserved 1,600,000 shares of
Common Stock under the Plans for issuance pursuant to stock options granted by
the Company of which options to purchase 682,667 shares have been granted. See
"Management -- Stock Option Plans." In addition, 1,175,000 shares of Common
Stock are reserved for issuance pursuant to the exercise of warrants granted by
the Company. See "Description of Capital Stock -- Warrants." The warrant shares
are subject to registration rights agreements requiring the Company to register
such shares under
13
<PAGE> 15
certain circumstances and otherwise will be eligible for resale subject to all
of the limitations on resale imposed by Rule 144. See "Description of Capital
Stock -- Registration Rights."
The Company, the Selling Stockholders, and certain of its executive
officers and directors have executed agreements pursuant to which each has
agreed not to, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) of any shares of Common Stock
or other capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for, any shares of Common Stock or other capital
stock of the Company, for a period of 180 days after the date of this
Prospectus, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, except for bona fide gifts or
transfers affected by such stockholders other than on any securities exchange or
in the over-the-counter market to donees or transferees that agree to be bound
by similar agreements (the "Lock-up Agreements") and except for sales made by
Selling Stockholders pursuant to options granted to the Underwriters to purchase
an additional 315,000 shares to cover over-allotments, if any. In addition,
certain non-affiliates of the Company have entered into 180-day Lock-up
Agreements with the Company similar to the above Lock-Up Agreements which
prohibit the direct or indirect disposition of shares without the prior written
consent of the Company. Such non-affiliates have also contractually agreed that
they will be subject to the same restrictions as affiliates of the Company under
Rule 144. Prudential Securities Incorporated may, in its sole discretion, at any
time and without notice, release all or any portion of the shares of Common
Stock subject to such agreements. Sales of substantial amounts of Common Stock
in the public market, or the availability of such shares for future sale, could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise additional capital through an offering of its
equity securities. See "Shares Eligible for Future Sale" and "Underwriting."
The Company intends to file several registration statements under the
Securities Act to register all shares of Common Stock subject to then
outstanding stock options and Common Stock issuable pursuant to the Plans. The
Company expects to file these registration statements promptly following the
closing of the Offering, and such registration statements are expected to become
effective upon filing. Shares covered by these registration statements will
thereupon be eligible for sale in the public markets, subject to the Lock-up
Agreements relating to shares held by executive officers. See "Management" and
"Shares Eligible for Future Sale."
Following the Offering, the Company may issue its Common Stock from time to
time in connection with the acquisition of stock or assets of other companies.
Such securities may be issued in transactions exempt from registration under the
Securities Act. The Company currently expects for the foreseeable future to
continue to require contractual lock-up agreements and to provide registration
rights consistent with previous transactions for sellers receiving stock in
acquisitions.
CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions in the Company's
Articles of Incorporation and Bylaws and Florida law may make a change in
control of the Company more difficult to effect, even if a change in control
were in the stockholders' interest. Such provisions include certain
supermajority voting requirements contained in the Company's Articles of
Incorporation. The Company's Articles of Incorporation also provide that the
Board of Directors is divided into three classes of directors, elected for
staggered three-year terms. In addition, the Company's Articles of Incorporation
allows the Board of Directors to determine the terms of preferred stock which
may be issued by the Company without approval of the holders of the Common
Stock, and thereby enables the Board of Directors to inhibit the ability of the
holders of the Common Stock to effect a change in control of the Company. See
"Description of Capital Stock -- Certain Provisions of Florida Law." The Company
has entered into employment agreements with executive officers Theodore
Gillette, Richard Sanchez and Richard Welch, as well as certain other employees
of the Company, that require the Company to pay certain amounts to such
employees upon their termination following certain events including a change in
control of the Company. Such agreements may inhibit a change in control of the
Company. See "Management -- Employment Agreements."
RESTRICTIONS ON PAYMENT OF DIVIDENDS. The Company's future credit
facilities may place certain restrictions on the future payment of dividends.
Furthermore, the Company currently intends to retain all
14
<PAGE> 16
future earnings for the operation and expansion of its business and,
accordingly, the Company does not anticipate that any dividends will be declared
or paid for the foreseeable future. See "Dividend Policy."
POTENTIAL CONFLICTS OF INTEREST FROM RELATED PARTY TRANSACTIONS. There are
currently Management Agreements existing between the Company and professional
associations owned and controlled by several of the Company's officers,
directors and key employees which could create the potential for possible
conflicts of interests for such individuals. Any future transactions and
agreements or modifications of current agreements between the Company and such
individuals, other affiliates and their professional associations will be
approved by a majority of the Company's independent directors and will be on
terms no less favorable to the Company than those that could be obtained from
unaffiliated parties. See "Certain Transactions."
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of shares of Common Stock
in the Offering will experience an immediate and substantial dilution of
approximately $10.47 per share in the net tangible book value per share of
Common Stock from the assumed initial public offering price. See "Dilution."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to the
Offering, there has been no public market for the Company's Common Stock and
there can be no assurance that an active public market for the Common Stock will
develop or, if a trading market does develop, continue after the Offering. The
initial public offering price will be determined by negotiations among the
Company and the representatives (the "Representatives") of the Underwriters. See
"Underwriting" for a description of the factors to be considered in determining
the initial public offering price. The market price of the Common Stock could be
subject to significant fluctuations in response to variations in financial
results or announcements of material events by the Company or its competitors.
Quarterly operating results of the Company, changes in general conditions in the
economy or the health care industry, or other developments affecting the Company
or its competitors, could cause the market price of the Common Stock to
fluctuate substantially. The equity markets have, on occasion, experienced
significant price and volume fluctuations that have affected the market prices
for many companies' securities and that have often been unrelated to the
operating performance of these companies. Concern about the potential effects of
health care reform measures has contributed to the volatility of stock prices of
companies in health care and related industries and may similarly affect the
price of the Common Stock following the Offering. Any such fluctuations that
occur following completion of the Offering may adversely affect the market price
of the Common Stock.
15
<PAGE> 17
THE COMPANY
Vision 21 Physician Practice Management Company, Inc., a current subsidiary
of the Company ("Vision 21 PPMC"), was founded in 1984 to provide management
services to optometry practices owned primarily by the Company's Chief Executive
Officer, Theodore N. Gillette, O.D. At such time, Vision 21 PPMC contracted with
VisionWorks and Eckerd Optical (subsidiaries of Eckerd Corporation) to manage
optometry practices located within VisionWorks and Eckerd retail optical
centers. As Vision 21 PPMC expanded its network of optometry practices under
management, its management services were also expanded to include management
information systems, electronic claims processing, practice administration,
continuing education and credentialing of associated optometrists. By 1987,
management services were provided to over 20 optometry clinics located in the
state of Florida in close proximity to, or within, VisionWorks and Eckerd
Optical retail optical centers. Additionally, during that period Vision 21 PPMC
began to form strategic relationships with independent ophthalmologists to
provide its optometric patients with access to secondary and tertiary eye care
services.
In 1986, Vision 21 Managed Eye Care of Tampa Bay, Inc., a current
subsidiary of the Company ("Vision 21 MCO"), began to provide management and
administrative services to networks of eye care providers that offered primary,
secondary and tertiary eye care services. Vision 21 MCO was awarded its first
managed care contract in 1988 covering in excess of 18,000 patient lives, with
retail optical and optometric services provided by its network of eye care
providers.
The Company was incorporated in Florida on May 9, 1996. The principal
operating subsidiaries of the Company are Vision 21 Managed Eye Care of Tampa
Bay, Inc. and Vision 21 Physician Practice Management Company, Inc., both of
which merged with the Company in November 1996. See "Certain Transactions."
The Company's 660 Affiliated Providers provide eye care services to 11 LADS
located in six states. Of these Affiliated Providers, 72 are Managed Providers,
consisting of 46 optometrists and 26 ophthalmologists practicing at 48 clinic
locations and five ASCs, and 588 are Contract Providers, consisting of 258
optometrists and 330 ophthalmologists practicing at over 300 clinic locations
and 35 ASCs. The Company's Affiliated Providers, in conjunction with select
national retail optical chains operating over 300 retail optical centers,
deliver eye care services under the Company's 22 managed care contracts and
seven discount fee-for-service plans covering approximately 1.8 million patient
lives.
The principal executive office of the Company is located at 7209 Bryan
Dairy Road, Largo, Florida 34647, and its telephone number is (813) 545-4300.
THE ACQUISITIONS
1996 ACQUISITIONS
In December 1996, the Company completed a series of transactions resulting
in the acquisition of the business assets of 22 optometry clinics, nine
ophthalmology clinics, 15 optical dispensaries and one ASC. Business assets
consist of certain non-medical and non-optometric assets, including accounts
receivables, leases, contracts, equipment and other tangible and intangible
assets. Concurrently, the Company entered into Management Agreements with the
related professional associations employing 34 optometrists and 13
ophthalmologists. These acquisitions were accounted for by recording the assets
and liabilities at fair value and allocating the remaining costs to the related
Management Agreements. Additionally, the Company acquired substantially all the
business assets of a managed care company servicing four capitated managed care
contracts covering over 100,000 patient lives, which was accounted for under the
purchase method of accounting (collectively, the "1996 Acquisitions"). In
connection with the 1996 Acquisitions, the Company provided aggregate
consideration of $11.2 million, consisting of 2.1 million shares of Common
Stock, unsecured promissory notes in the aggregate principal amount of $1.9
million and $800,000 in assumed debt. Additionally, the Company may be required
to provide additional consideration of up to $316,000, consisting of up to
79,805 shares of Common Stock, in connection with several of the 1996
Acquisitions, which will be
16
<PAGE> 18
transferred out of escrow to certain sellers in the event they meet certain
post-acquisition performance targets. See "Certain Transactions."
Acquisitions of significant size in the 1996 Acquisitions include: (i) the
business assets of a professional association providing optometry services at 11
clinics located in Tampa, Port Richey, Clearwater, St. Petersburg, Palm Harbor,
and Seminole, Florida for a total consideration of $1.9 million, consisting of
373,971 shares of Common Stock and a promissory note in the amount of $416,000;
(ii) the business assets of a professional corporation providing ophthalmology
services at three clinics located in Tucson, Arizona for a total consideration
of $1.6 million, consisting of 396,612 shares of Common Stock; (iii) the
business assets of a professional association providing ophthalmology services
at one clinic located in St. Paul, Minnesota for a total consideration of $1.4
million, consisting of 247,108 shares of Common Stock and a promissory note in
the amount of $460,000; and (iv) the business assets of a professional limited
liability company providing ophthalmology services at two clinics located in
Tucson and Oro Valley, Arizona for a total consideration of $1.7 million,
consisting of 327,717 shares of Common Stock and a promissory note in the amount
of $396,000.
PINELLAS ACQUISITION
In March 1997, the Company completed the acquisitions of the business
assets of one ophthalmology clinic and one optical dispensary located in
Pinellas County, Florida. Concurrently, the Company entered into Management
Agreements with the related professional associations employing one optometrist
and six ophthalmologists (the "Pinellas Acquisition"). These acquisitions were
accounted for by recording assets and liabilities at fair value and allocating
the remaining cost to the related Management Agreements. In connection with the
Pinellas Acquisition, the Company provided aggregate consideration of $1.1
million, consisting of 128,541 shares of Common Stock.
RECENT ACQUISITIONS
Between May 1, 1997 and July 31, 1997, the Company completed the
acquisition of the business assets of one optometry clinic, ten ophthalmology
clinics, five optical dispensaries and four ASCs located in Sierra Vista, Mesa,
Phoenix, and Tucson, Arizona, and Fort Lauderdale, Florida. Concurrently, the
Company entered into Management Agreements with the related professional
associations employing five optometrists and seven ophthalmologists (the "Recent
Acquisitions"). These acquisitions were accounted for by recording the assets
and liabilities at fair value and allocating the remaining cost to the related
Management Agreements. In connection with the Recent Acquisitions, the Company
provided aggregate consideration of $6.8 million, consisting of 777,118 shares
of Common Stock, $19,000 in promissory notes and $29,000 in cash subject to
closing adjustments.
17
<PAGE> 19
RELATIONSHIPS WITH AFFILIATED PROVIDERS AND RETAIL OPTICAL COMPANIES
The Company provides practice management services pursuant to long-term
Management Agreements with professional associations employing Managed Providers
or with entities operating ASCs. This arrangement allows the Managed Providers
to focus on providing professional eye care services to patients. The related
professional associations receive payments from third-party payors or patients
for services provided. The Company receives management fees from the
professional associations for providing management services and employs all
administrative and non-professional staff for the clinic or ASC. The Company
owns all the business assets of the clinics and ASCs to the extent allowable by
law. Furthermore, the Company does not engage in the practice of optometry or
ophthalmology and does not control the practice of optometry or ophthalmology by
the Managed Providers or the compliance with regulatory and other requirements
directly applicable to the Managed Providers and their practices or the
operation of ASCs. The professional associations maintain full control over the
professional eye care services provided by the Managed Providers and set the
fees for all such services. See "Business -- Management Agreements."
The Company has also entered into managed care agreements with HMOs, health
insurance companies and other third-party payors pursuant to which the Company's
Managed Providers and Contract Providers provide eye care services to patients
who are covered by the payors' health benefit plans. The Company does not
provide practice management services to the Contract Providers. Furthermore, the
Company does not control the practice of optometry or ophthalmology by the
Contract Providers or the compliance with regulatory and other requirements
directly applicable to the Contract Providers and their practices or the
operation of ASCs.
The Company has contractual affiliations with ECCA Managed Vision Care,
Inc. ("ECCA") and For Eyes Managed Care, Inc. ("For Eyes"), subsidiaries of
retail optical chains that operate a combined total of over 300 optical retail
locations in 48 cities in the United States. As part of its strategic
relationship with ECCA, the Company's LADS provide certain eye care services to
customers of ECCA at retail optical centers located within the Company's local
area markets. In addition, the Company and ECCA jointly seek to benefit from
increasing managed care business by marketing to managed care plans an
integrated network of eye care providers that are able to offer primary,
secondary and tertiary care as well as retail optical products and services. In
its contractual agreement with For Eyes, the Company is a joint venture partner
in a general partnership called "Vision 21 Plus" in which the Company and For
Eyes each have a 50% interest. The objective of the joint venture is to maximize
opportunities for the Company in managed care by securing contracts and
providing comprehensive, fully integrated eye care products and services to
health care organizations and self-funded employer groups.
18
<PAGE> 20
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,100,000 shares of
Common Stock offered by the Company, at an assumed initial public offering price
of $12.00 per share, are estimated to be approximately $22.5 million (after
deducting underwriting discounts and commissions and estimated offering
expenses).
The Company intends to use the net proceeds from the Offering as follows:
(a) an aggregate of approximately $13.6 million to repay outstanding
indebtedness as follows: (i) $4.7 million of senior notes, the proceeds of which
were utilized for acquisitions and general corporate purposes and the repayment
of the Company's bank facility, which bear interest at 10% per annum and are due
in January 1998; (ii) $3.0 million of a senior note payable to Peter Fontaine, a
director of the Company, which bears interest at 8% per annum and is required to
be repaid upon completion of an initial public offering; (iii) $2.0 million of
senior subordinated notes, the proceeds of which were utilized for acquisitions
and general corporate purposes, which bear interest at 10% per annum and are due
upon the earlier of completion of an initial public offering or in December
1999; (iv) $1.9 million of notes payable to the sellers in the 1996
Acquisitions, which bear interest at 8% per annum and are due upon the earlier
of completion of an initial public offering or in March 1998; (v) $1.3 million
of senior subordinated notes which bear interest at 10% per annum and are due
upon the earlier of completion of an initial public offering or in December
1999; and (vi) $700,000 of notes payable in connection with an acquisition,
which bear interest at 8.5% per annum and are due upon completion of an initial
public offering and (b) an aggregate of $8.9 million to finance the acquisition
and development of optometry and ophthalmology clinics and ASCs. At this time,
the Company has no other pending or anticipated acquisitions which are
reasonably certain to occur. See "Certain Transactions" and "Underwriting."
Pending such uses, the net proceeds will be invested in short-term, investment
grade securities, certificates of deposit or direct or guaranteed obligations of
the United States government.
If the Underwriters' over-allotment options are exercised, the Company will
not receive any of the proceeds from the sale of the shares of Common Stock by
the Selling Stockholders. See "Principal and Selling Stockholders."
DIVIDEND POLICY
The Company has not paid or declared any dividends since its inception. The
Company currently intends to retain all future earnings for the operation and
expansion of its business and, accordingly, the Company does not anticipate that
any dividends will be declared or paid on the Common Stock for the foreseeable
future. Any future determination to pay cash dividends will be at the discretion
of the Board of Directors and will be dependent upon the Company's financial
condition, results of operations, capital requirements and other factors the
Board of Directors deems relevant. In addition, the Company's future credit
facilities may place certain restrictions on the future payment of dividends.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
19
<PAGE> 21
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997, (i) on an actual basis, (ii) on a pro forma basis to give effect
to the Recent Acquisitions and (iii) as adjusted for the issuance of 2,100,000
shares of Common Stock in the Offering at an assumed initial public offering
price of $12.00 per share and the application of the net proceeds therefrom,
which are estimated to be approximately $22.5 million (after deducting
underwriting discounts and commissions and estimated offering expenses). This
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Unaudited Pro Forma Consolidated Financial Information and
related Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt and capital lease
obligations(1)............................................ $ 4,415 $ 4,415 $ 796
------- ------- -------
Long-term debt and capital lease obligations(1)............. 6,094 6,094 157
------- ------- -------
Stockholders' equity(2):
Common Stock: $.001 par value; 50,000,000 shares
authorized, 5,335,563 shares outstanding, 6,112,681
shares outstanding, pro forma, 8,212,681 shares
outstanding, pro forma as adjusted..................... 5 6 8
Additional paid-in capital................................ 11,921 18,667 41,201
Deferred compensation..................................... (490) (490) (490)
Retained earnings......................................... (8,041) (8,041) (8,041)
------- ------- -------
Total stockholders' equity........................ 3,395 10,142 32,678
------- ------- -------
Total capitalization......................... $13,904 $20,651 $33,631
======= ======= =======
</TABLE>
- ---------------
(1) Before adjustment for the Offering, excludes $4.0 million of additional
indebtedness incurred by the Company after March 31, 1997 to be repaid from
the proceeds of the Offering.
(2) Excludes (a) an aggregate of 1,600,000 shares of Common Stock reserved for
issuance under the Plans, pursuant to which options to purchase 682,667
shares of Common Stock have been granted as of July 22, 1997, (b) an
aggregate of 1,175,000 shares of Common Stock which are issuable upon the
exercise of warrants granted by the Company and (c) an aggregate of 79,805
shares of Common Stock which are being held in escrow as contingent
consideration in several acquisitions. See "The Acquisitions,"
"Management -- The Stock Option Plans," "Shares Eligible for Future Sale"
and "Underwriting."
20
<PAGE> 22
DILUTION
Purchasers of Common Stock offered hereby will experience an immediate and
substantial dilution in the net tangible book value of the Common Stock from the
initial public offering price. At March 31, 1997, the pro forma net tangible
book value (deficit) of the Company was $(10.3 million), or $(1.69) per share.
Pro forma net tangible book value per share is determined by dividing the
Company's pro forma net tangible book value (tangible assets less total
liabilities, after giving effect to the Recent Acquisitions) by the number of
shares of Common Stock outstanding. After giving effect, as of such date, to the
sale of 2,100,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $12.00 per share and after deducting underwriting
discounts and commissions and estimated offering expenses, the pro forma net
tangible book value of the Company would have been $12.6 million, or $1.53 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.22 per share to existing stockholders and an immediate dilution in
net tangible book value of $10.47 per share to new investors purchasing shares
of Common Stock in the Offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... 12.00
Pro forma net tangible book value (deficit) at March
31, 1997.............................................. $ (1.69)
-------
Increase attributable to new investors................. 3.22
-------
Pro forma net tangible book value after the Offering........ 1.53
-------
Dilution in net tangible book value to new investors........ $ 10.47
=======
</TABLE>
The following table sets forth, on a pro forma basis at March 31, 1997 as
described above, the differences between the existing stockholders and the new
investors purchasing shares in the Offering with respect to the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company and the average price per share at an assumed initial public offering
price of $12.00 per share, without giving effect to the underwriting discounts
and commissions and estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 6,112,681 74.4% $ 10,141,802 28.7% $ 1.66
---------- ----- ------------ ------
New investors..................... 2,100,000 25.6 25,200,000 71.3 $ 12.00
---------- ----- ------------ ------
Total(1)................ 8,212,681 100.0% $ 35,341,802 100.0%
========== ===== ============ ======
</TABLE>
- ---------------
(1) Excludes (a) an aggregate of 1,600,000 shares of Common Stock reserved for
issuance under the Plans, pursuant to which options to purchase 682,667
shares have been granted as of July 22, 1997, (b) an aggregate of 1,175,000
shares of Common Stock which are issuable upon the exercise of warrants
granted by the Company and (c) an aggregate of 79,805 shares of Common Stock
which are being held in escrow as contingent consideration in several
acquisitions. To the extent that such stock options and warrants are
exercised, there will be further dilution to new investors. See
"Management -- The Stock Option Plans," "Shares Eligible for Future Sale,"
"Underwriting" and Notes 10 and 11 of Notes to Consolidated Financial
Statements. Assuming the Underwriters' over-allotment options are exercised
in full, the number of shares held by existing stockholders will be reduced
to 6,016,984 shares, or 70.5% of the total number of shares outstanding
after the Offering, and the number of shares held by new investors will
increase by 315,000 shares to 2,415,000 shares, or 29.5% of the total shares
of Common Stock outstanding after the Offering. See "Principal and Selling
Stockholders."
21
<PAGE> 23
SELECTED PRO FORMA FINANCIAL DATA
The pro forma financial data are derived from the Unaudited Pro Forma
Consolidated Financial Information of the Company appearing elsewhere in this
Prospectus. The Pro Forma Statement of Operations Data for the year ended
December 31, 1996 give effect to the following transactions as if they had
occurred on January 1, 1996: (i) the 1996 Acquisitions (ii) the Pinellas
Acquisition, (iii) the Recent Acquisitions, and (iv) the Offering at an assumed
public offering price of $12.00 per share and the application of the estimated
net proceeds therefrom. The Pro Forma Statement of Operations Data for the three
months ended March 31, 1997 give effect to the following transactions as if they
had occurred on January 1, 1997: (i) the Pinellas Acquisition, (ii) the Recent
Acquisitions, and (iii) the Offering at an assumed public offering price of
$12.00 per share and the application of the estimated net proceeds therefrom.
The Pro Forma Balance Sheet Data as of March 31, 1997 gives effect to the Recent
Acquisitions and the completion of the Offering at an assumed public offering
price of $12.00 per share and the application of the estimated net proceeds
therefrom as if they had occurred as of March 31, 1997.
The pro forma financial data should be read in conjunction with the
Unaudited Pro Forma Consolidated Financial Information of the Company and the
related notes thereto included elsewhere in this Prospectus. Management believes
the assumptions used in the Unaudited Pro Forma Consolidated Financial
Information provide a reasonable basis on which to present the pro forma
financial data. The pro forma financial data are provided for informational
purposes only and should not be construed to be indicative of the Company's
financial position or results of operations had the transactions and events
described in the notes thereto been consummated on the dates assumed and are not
intended to project the Company's financial condition or results of operations
on any future date or for any future period.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
------------------ ---------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Revenues:
Managed care............................................ $ 8,583 $ 2,763
Practice management fees................................ 31,820 8,523
Other revenue........................................... 309 117
-------- --------
Total revenues..................................... 40,712 11,403
-------- --------
Operating expenses:
Medical claims.......................................... 10,269 2,338
Practice management expenses............................ 26,342 7,134
Salaries, wages and benefits............................ 1,927 1,046
Business development.................................... 1,927 --
General and administrative.............................. 1,375 414
Depreciation and amortization........................... 1,345 297
-------- --------
Total operating expenses........................... 43,185 11,229
-------- --------
Income (loss) from operations........................... (2,473) 174
Interest expense........................................ 5 6
-------- --------
Income (loss) before income taxes....................... (2,478) 168
Income taxes............................................ -- --
-------- --------
Net income (loss)....................................... $(2,478) $ 168
======== ========
Net income (loss) per common share...................... $ (0.33) $ 0.02
======== ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
(IN THOUSANDS)
<S> <C> <C>
PRO FORMA BALANCE SHEET DATA:
Working capital........................................... $ 10,774
Total assets.............................................. 38,275
Long-term debt and capital lease obligations,
including current maturities............................ 953
Stockholders' equity...................................... 32,678
</TABLE>
See Notes to the Unaudited Pro Forma Consolidated Financial Information.
22
<PAGE> 24
SELECTED FINANCIAL DATA
The following selected financial data with respect to the Company's
statements of operations for the years ended December 31, 1994, 1995 and 1996,
and the balance sheet data as of December 31, 1995 and 1996 are derived from the
Consolidated Financial Statements of the Company which have been audited by
Ernst & Young LLP, independent certified public accountants. The selected
financial data presented below for the years ended December 31, 1992, 1993 and
for the three months ended March 31, 1996 and 1997, are unaudited and were
prepared by management of the Company on the same basis as the audited
Consolidated Financial Statements included elsewhere herein and, in the opinion
of management of the Company, include all adjustments necessary to present
fairly the information set forth therein. The results for the three months ended
March 31, 1997 are not necessarily indicative of the results to be expected for
the full year ending December 31, 1997 or future periods. The following data
should be read in conjunction with the Consolidated Financial Statements of the
Company and the related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Managed care(1).......................... $ -- $ -- $ 669 $ 2,446 $ 7,315 $ 1,936 $ 2,763
Practice management fees................. 645 653 392 424 1,943 140 4,838
Other revenue............................ 8 6 131 212 306 24 117
-------- -------- -------- -------- -------- -------- --------
Total revenues...................... 653 659 1,192 3,082 9,564 2,100 7,718
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Medical claims........................... -- -- 551 2,934 9,129 2,463 2,338
Practice management expenses............. -- -- -- -- 1,244 -- 3,931
Salaries, wages and benefits............. 494 501 538 904 1,889 299 1,046
Business development..................... -- -- -- -- 1,927 -- --
General and administrative............... 167 168 238 443 1,209 153 414
Depreciation and amortization............ 11 8 13 18 126 8 210
-------- -------- -------- -------- -------- -------- --------
Total operating expenses............ 672 677 1,340 4,299 15,524 2,923 7,939
-------- -------- -------- -------- -------- -------- --------
Loss from operations....................... (19) (18) (148) (1,217) (5,960) (823) (221)
Interest expense........................... 1 5 5 9 160 2 227
-------- -------- -------- -------- -------- -------- --------
Loss before income taxes................... (20) (23) (153) (1,226) (6,120) (825) (448)
Income taxes............................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net loss................................... $ (20) $ (23) $ (153) $ (1,226) $ (6,120) $ (825) $ (448)
======== ======== ======== ======== ======== ======== ========
Net loss per common share(2)............... $ (1.00) $ (0.07)
======== ========
Weighted average number of common shares
outstanding(2)........................... 6,136 6,136
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................ $ 19 $ (5) $ (193) $ (1,499) $ (2,857) $ (6,158)
Total assets............................. 53 67 49 165 15,712 19,990
Long-term debt and capital lease
obligations, including current
maturities............................. 56 89 85 363 7,735 10,509
Stockholders' equity (deficit)........... (16) (38) (191) (1,439) 2,536 3,395
</TABLE>
- ---------------
(1) Revenues related to managed care for 1992 and 1993 are included under other
revenue as managed care revenues were not separately accounted for during
such periods.
(2) See Note 3 to Notes to Consolidated Financial Statements for a description
of the computation of net loss per common share.
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
OVERVIEW
The Company provides a wide range of management and administrative services
to local area delivery systems ("LADS") established by the Company. LADS are
integrated networks of optometrists, ophthalmologists, ASCs and retail optical
centers that are designed to offer the full continuum of eye care services in
local markets. The Company began operations in 1984, providing management
services to seven optometrists practicing at eight clinic locations. The Company
currently provides its services to 11 LADS located in six states through which
660 Affiliated Providers deliver eye care services. Of these Affiliated
Providers, 72 are Managed Providers, consisting of 46 optometrists and 26
ophthalmologists practicing at 48 clinic locations and four ASCs, and 558 are
Contract Providers, consisting of 258 optometrists and 330 ophthalmologists
practicing at 308 clinic locations and 36 ASCs. The Company signed its first
managed care contract in 1988 for 18,000 patient lives serviced through the
Company's network of optometrists practicing within retail optical locations.
The Company's Affiliated Providers, in conjunction with select national retail
optical chains operating over 300 retail optical centers, deliver eye care
services under the Company's 22 managed care contracts and seven discount
fee-for-service plans covering approximately 1.8 million patient lives.
The Company enters into Management Agreements with the Managed Professional
Associations pursuant to which the Company is the sole provider of comprehensive
management, business and administrative services for the non-professional
aspects of the professional practices which obligate the Company to provide
certain facilities and equipment, accounting services, purchasing, assistance in
managed care, contract negotiations, management and clinical personnel,
informational systems, training, and billing and collection services. Each
Managed Provider maintains full authority, control and responsibility over the
provision of professional care and services to its patients. The Company does
not provide professional care to patients nor does the Company employ any of the
ophthalmologists or optometrists, or any other professional health care provider
personnel, of the Managed Professional Association. The Managed Professional
Association is responsible for, among other things, hiring, supervising, and
directing certain of the Managed Professional Association's professional
employees, adopting a peer review/quality assurance program and maintaining
appropriate worker's compensation, professional and comprehensive general
liability insurance. See "Business -- Management Agreements."
The initial term of the Management Agreement is typically 40 years. Under
substantially all of the Company's Management Agreements, the management fee
ranges from 24% to 37% of the Managed Professional Association's gross revenues
after deducting from such revenues all expenses of the clinic other than those
related to shareholders of the Managed Professional Associations. The practice
management fees earned by the Company pursuant to these Management Agreements
fluctuate depending on variances in revenues and expenses of the Managed
Professional Association. Therefore, in connection with the Management
Agreements, the amount of such fees will be significantly affected by the degree
of success of operations of the Managed Professional Association and the
Company's ability to successfully manage the practice. See "Risk
Factors -- Reliance on Affiliated Providers" and "Business -- Management
Agreement."
The Company recognizes as managed care revenue certain fixed payments
received pursuant to its managed care contracts on a capitated or risk-sharing
basis. The Company also recognizes fees received for the provision of certain
financial and administrative services related to its indemnity fee-for-service
plans. The Company manages risk of capitated managed care contracts by
monitoring utilization of each Affiliated Provider and comparing their
utilization to national averages, expected utilization at the time the contract
was bid, utilization of other providers and historical utilization of the
Affiliated Provider. Abnormal utilization of an Affiliated Provider results in a
medical chart review by the Company and further counseling on appropriate
clinical protocols. To further manage the risk of capitated managed care
contracts, the Company, in certain instances, enters into agreements to pay
Affiliated Providers a fixed per member per month fee for eye care services
rendered or a pro rata share of managed care capitated payments received as
determined by the number of eye care procedures performed relative to other
Affiliated Providers. The Company targets these payments at a range of 80% to
90% of total payments received pursuant to the Company's capitated managed
24
<PAGE> 26
care contracts. Pursuant to its capitated managed care contracts, the Company
receives a fixed payment per member per month for a predetermined benefit level
of eye care services, as negotiated between the Company and the payor.
Profitability of the Company's capitated managed care contracts is directly
related to the specific terms negotiated, utilization of eye care services by
member patients and the effectiveness of administering the contracts. The
Company receives a percentage of collected medical billings for administering
indemnity fee-for-service plans for its Affiliated Providers. Although the terms
and conditions of the Company's managed care contracts vary considerably, they
are typically for a one year term. As of March 31, 1997, the Company maintained
16 capitated managed care contracts and administered six indemnity fee-for-
service plans for its Affiliated Providers. See "Risk Factors -- Risks
Associated with Managed Care Contracts and Capitated Fee Arrangements."
In December 1996, the Company completed the 1996 Acquisitions resulting in
the acquisition of the business assets of 22 optometry clinics, nine
ophthalmology clinics, 15 optical dispensaries and one ASC. Business assets
consist of certain non-medical and non-optometric assets, including accounts
receivables, leases, contracts, equipment and other tangible and intangible
assets. Concurrently, the Company entered into Management Agreements with the
related professional associations employing 34 optometrists and 13
ophthalmologists. These acquisitions were accounted for by recording the assets
and liabilities at fair value and allocating the remaining costs to the related
Management Agreements. Additionally, the Company acquired the business assets of
a managed care company servicing four capitated managed care contracts covering
over 100,000 patient lives which was accounted for under the purchase method of
accounting. In connection with the 1996 Acquisitions, the Company provided
aggregate consideration of $11.2 million, consisting of 2.1 million shares of
Common Stock, unsecured promissory notes in the aggregate principal amount of
$1.9 million and $800,000 in assumed debt. Additionally, the Company may be
required to provide additional consideration of up to $316,000, consisting of up
to 79,805 shares of Common Stock, in connection with several of the 1996
Acquisitions which will be transferred out of escrow to certain sellers in the
event they meet certain post-acquisition performance targets. If the 1996
Acquisitions had occurred at the beginning of 1996, they would have added $16.8
million in additional practice management fee revenue for 1996. The Company
recorded a one-time charge of $1.4 million in the fourth quarter of 1996 for
expenses associated with the planned acquisition of the business assets of
certain Contract Providers at the time of the 1996 Acquisitions which the
Company chose not to continue to pursue.
In March 1997, the Company completed the Pinellas Acquisition resulting in
the acquisition of the business assets of one ophthalmology clinic and one
optical dispensary. Concurrently, the Company entered into Management Agreements
with the related professional associations employing one optometrist and six
ophthalmologists. The Pinellas Acquisition was accounted for by recording the
assets and liabilities at fair value and allocating the remaining cost to the
related Management Agreements. In connection with the Pinellas Acquisition, the
Company provided aggregate consideration of $1.1 million, consisting of 128,541
shares of Common Stock. On a pro forma basis had the Pinellas Acquisition
occurred at the beginning of 1996, the Company would have recorded $2.1 million
and $526,000 in practice management fee revenue for 1996 and the three months
ended March 31, 1997, respectively.
Between May 1, 1997 and July 31, 1997, the Company completed the Recent
Acquisitions resulting in the acquisition of the business assets of one
optometry clinic, ten ophthalmology clinics, five optical dispensaries and four
ASCs located in Sierra Vista, Mesa, Phoenix,and Tucson, Arizona, and Fort
Lauderdale, Florida. Concurrently, the Company entered into Management
Agreements with the related professional associations employing five
optometrists and seven ophthalmologists. These acquisitions were accounted for
by recording the assets and liabilities at fair value and allocating the
remaining cost to the related Management Agreements. In connection with the
Recent Acquisitions, the Company provided aggregate consideration of $6.8
million, consisting of 777,118 shares of Common Stock, $19,000 in promissory
notes and $29,000 in cash subject to closing adjustments. On a pro forma basis,
had the Recent Acquisitions occurred at the beginning of 1997, the Company would
have recorded $3.3 million and $11.5 million in practice management fee revenue
for 1996 and the three months ended March 31, 1997, respectively.
Effective October 1996, the Company renegotiated its agreements to pay
certain ophthalmology Contract Providers a per member per month fee for surgical
eye care services provided under the Company's largest
25
<PAGE> 27
capitated managed care contract. In exchange for entering into the renegotiated
agreement, selected ophthalmology Contract Providers obtained dedicated groups
of managed care members and the right to manage the utilization by these
members. The renegotiated capitation agreements improved the Company's medical
claims ratio (medical claims expense divided by managed care revenue) from
136.0% for the third quarter of 1996 to 90.0% for the fourth quarter of 1996 and
84.6% for the first quarter of 1997. On a pro forma basis for 1996, assuming the
renegotiated capitation agreement had been in place for the entire period,
medical claims expense would have been reduced by $2.6 million.
Effective June 1997, the Company renegotiated its agreement to pay the
existing operator of multiple surgical eye care facilities a per member per
month fee for facility services provided at its facilities pursuant to the
Company's largest capitated managed care contract. In exchange for entering into
the renegotiated agreement, the facility operator obtained dedicated groups of
managed care members. On a pro forma basis for the three months ended March 31,
1997, assuming the renegotiated capitation agreement had been in place for the
entire period, medical claims expense would have been reduced by $132,000.
Since December 31, 1996, the Company has expanded two existing capitated
managed care contracts and added five new capitated managed care contracts
covering approximately 323,000 lives. In addition, the Company leveraged its
strategic alliance with a leading optical retailer by adding five internally
developed optometry clinics located in Louisiana and Florida and entering into
Management Agreements with the related professional association employing five
optometrists. As of June 1, 1997, the Company reached a tentative agreement with
the same optical retailer to add at least 20 internally developed optometry
clinics throughout the remainder of 1997. The Company will continue to leverage
its strategic alliances by adding select internally developed optometry clinics
in affiliated optical retail locations.
The Managed Professional Associations currently receive revenues from a
combination of sources, including fees paid by private-pay patients, indemnity
insurance reimbursements, capitation payments from managed care companies and
government funded reimbursements (Medicare and Medicaid). The following table
outlines this payor mix for the Managed Professional Associations for the
periods presented:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Private-pay....................................... 25.5%
Capitated managed care............................ 27.4
Indemnity insurance plans......................... 20.4
Medicare/Medicaid................................. 26.7
------ ------
Total................................... 100.0%
====== ======
</TABLE>
The Managed Professional Associations derive their revenues from fees
received for professional services provided by optometrists and
ophthalmologists, charges for the use of ASCs and sales of optical goods. The
following table indicates the mix of revenues received by the Managed
Professional Associations for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
Optometry fees.................................... 42.0% 40.0%
Ophthalmology fees................................ 41.0 42.0
Optical goods..................................... 14.0 15.0
ASCs.............................................. 3.0 3.0
------ ------
Total................................... 100.0% 100.0%
====== ======
</TABLE>
A change in the future mix of payment sources and services at the Managed
Professional Associations could affect the Company's overall business, revenues,
profitability and cash flows as the Company's management fees in significantly
all of the Company's Management Agreements are directly affected by the
26
<PAGE> 28
revenues and expenses of the Managed Professional Association. Therefore,
certain changes in the mix of payment sources resulting in a change in margins
for services provided by the Managed Professional Association, or a change in
timeliness and success in the collection of fees for services provided by these
practices could affect the operating results of the Company. See "Risk
Factors -- Reliance on Affiliated Providers" and "-- Risks Associated with
Managed Care Contracts and Capitated Fee Arrangements."
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues, certain
items in the Company's statement of operations for the periods indicated. As a
result of the Company's 1996 Acquisitions, the Pinellas Acquisition, the Recent
Acquisitions, the Pending Acquisitions and the Company's entering into capitated
arrangements with its Contract Providers, the Company does not believe that the
historical percentage relationships for 1994, 1995, 1996 and the three months
ended March 31, 1996 and 1997 reflect the Company's expected future operations.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------- --------------
1994 1995 1996 1996 1997
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Managed care..................................... 56.1% 79.4% 76.5% 92.2% 35.8%
Practice management fees......................... 32.9 13.8 20.3 6.7 62.7
Other revenue.................................... 11.0 6.8 3.2 1.1 1.5
----- ----- ----- ----- -----
Total revenues........................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Operating expenses:
Medical claims................................... 46.2 95.2 95.5 117.3 30.3
Practice management expenses..................... 0.0 0.0 13.0 0.0 50.9
Salaries, wages and benefits..................... 45.1 29.3 19.8 14.2 13.6
Business development............................. 0.0 0.0 20.1 -- --
General and administrative....................... 20.0 14.4 12.6 7.3 5.4
Depreciation and amortization.................... 1.1 0.6 1.3 0.4 2.7
----- ----- ----- ----- -----
Total operating expenses................. 112.4 139.5 162.3 139.2 102.9
----- ----- ----- ----- -----
Loss from operations............................... (12.4) (39.5) (62.3) (39.2) (2.9)
Interest expense................................... 0.3 0.3 1.7 0.1 2.9
----- ----- ----- ----- -----
Loss before income taxes........................... (12.7) (39.8) (64.0) (39.3) (5.8)
Income taxes.......................................
----- ----- ----- ----- -----
Net loss........................................... (12.7) (39.8) (64.0) (39.3) (5.8)
===== ===== ===== ===== =====
Medical claims ratio............................... 82.5% 120.0% 124.8% 127.2% 84.6%
===== ===== ===== ===== =====
</TABLE>
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996
Revenues. Revenues increased 267.6% from $2.1 million for the three months
ended March 31, 1996 to $7.7 million for the three months ended March 31, 1997.
This increase was caused primarily by an increase in practice management fees
attributable to the 1996 Acquisitions and the Pinellas Acquisition, which
accounted for $4.8 million of the increase, and a 42.6% increase in managed care
revenues attributable to the addition of one capitated contract and the
expansion of an existing contract, which accounted for $826,000 of the increase.
Medical Claims. Medical claims expense decreased 5.1% from $2.5 million
for the three months ended March 31, 1996 to $2.3 million for the three months
ended March 31, 1997. The Company's medical claims ratio decreased from 127.2%
for the three months ended March 31, 1996 to 84.6% for the three months ended
March 31, 1997. These decreases were caused primarily by the Company's
renegotiated agreement to pay its ophthalmology Contract Providers a per member
per month fee for surgical eye care services provided under the Company's
largest capitated managed care contract. Medical claims expense consists of
payments by the
27
<PAGE> 29
Company to its Affiliated Providers for primary eye care services, medical and
surgical eye care services and facility services. These payments are based on
fixed payments per member per month, a pro rata share of managed care capitated
payments received as determined by the number of eye care procedures performed
relative to other Affiliated providers or negotiated fee-for-service schedules.
Capitated payments and pro rata payments collectively represented 58.5% and
fee-for-service claims represented 41.5%, of total medical claims expense for
the three months ended March 31, 1997. Medical claims for the three months ended
March 31, 1996 were based entirely on negotiated fee-for-service schedules.
Practice Management Expenses. Practice management expenses were $3.9
million for the three months ended March 31, 1997 as a result of the 1996
Acquisitions and the Pinellas Acquisition. Prior to the 1996 Acquisitions, the
Company recognized no practice management expenses related to its management
services. Practice management expenses consist of salaries, wages and benefits
of certain clinic staff, professional fees, medical supplies, advertising,
building and occupancy costs, and other general and administrative costs related
to the operation of clinics and ASCs.
Salaries, Wages and Benefits. Salaries, wages and benefits expense
increased 249.8% from $299,000 for the three months ended March 31, 1996 to $1.0
million for the three months ended March 31, 1997. This increase was caused
primarily by an increase in corporate staff necessary to support the Company's
expanded practice management and managed care business. Salaries, wages and
benefits expense consists of expenses related to management and administrative
staff located at the Company's corporate headquarters and regional offices. As a
percentage of revenues, salaries, wages and benefits decreased from 14.2% for
the three months ended March 31, 1996 to 13.6% for the three months ended March
31, 1997. This decrease was caused primarily by increased economies of scale
resulting from the Company's expanding business.
General and Administrative. General and administrative expenses increased
170.6% from $153,000 for the three months ended March 31, 1996 to $414,000 for
the three months ended March 31, 1997. This increase was caused primarily by
increases in travel expenses, professional fees and occupancy costs. As a
percentage of revenues, general and administrative expenses decreased from 7.3%
for the three months ended March 31, 1996 to 5.4% for the three months ended
March 31, 1997. This decrease was caused primarily by increased economies of
scale resulting from the Company's expanding business.
Depreciation and Amortization. Depreciation and amortization expense
increased from $8,000 for the three months ended March 31, 1996 to $210,000 for
the three months ended March 31, 1997. As a percentage of revenues, depreciation
and amortization expense increased from 0.4% for the three months ended March
31, 1996 to 2.7% for the three months ended March 31, 1997. These increases were
caused primarily by the amortization of intangibles attributable to the 1996
Acquisitions and the Pinellas Acquisition.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Revenues increased 210.3% from $3.1 million for 1995 to $9.6
million for 1996. This increase was caused primarily by a 358.3% increase in
practice management fees attributable to the 1996 Acquisitions, which accounted
for $1.5 million of the increase, and a 199.1% increase in managed care revenues
attributable to the addition of one new capitated contract and the expansion of
the Company's largest managed care contract, which accounted for $4.9 million of
the increase.
Medical Claims. Medical claims expense increased 211.1% from $2.9 million
in 1995 to $9.1 million in 1996. The Company's medical claims ratio increased to
124.8% for 1996 from 120.0% for 1995. These increases were caused primarily by
excess utilization of surgical eye care services and facility services related
to the Company's largest managed care contract, which accounted for $4.8 million
of the increase, and an increase in members covered by the Company's capitated
managed care contracts, which accounted for $1.8 million of the increase.
Capitated payments and pro rata payments represented 11.3% and fee-for-service
payments represented 88.7% of total medical claim expense for 1996. Medical
claims for 1995 were based entirely on negotiated fee-for-service schedules.
Practice Management Expenses. Practice management expenses were $1.2
million for 1996, all of which resulted from the 1996 Acquisitions. Prior to the
1996 Acquisitions, the Company recognized no practice
28
<PAGE> 30
management expenses related to its management services, because the Company was
not liable for expenses of the practices.
Salaries, Wages and Benefits. Salaries, wages and benefits expense
increased 109.0% from $904,000 in 1995 to $1.9 million in 1996. This increase
was caused primarily by an increase in corporate staff necessary to support the
Company's expanded practice management and managed care business. As a
percentage of revenues, salaries, wages and benefits decreased from 29.3% in
1995 to 19.8% in 1996. This decrease was caused primarily by increased economies
of scale resulting from the Company's expanding business.
Business Development. Business development expenses were $1.9 million in
1996. Business development expenses consisted of a one-time charge of $1.4
million related to potential acquisitions that were not completed and $500,000
related to the amortization of deferred compensation charges attributable to
consulting services.
General and Administrative. General and administrative expenses increased
172.9% from $443,000 in 1995 to $1.2 million in 1996. This increase was caused
primarily by increases in travel expenses, professional fees, occupancy costs,
temporary labor and recruitment costs related to the Company's expanding
business. As a percentage of revenues, general and administrative expenses
decreased from 14.4% in 1995 to 12.6% in 1996. This decrease was caused
primarily by increased economies of scale resulting from the Company's expanding
business.
Depreciation and Amortization. Depreciation and amortization expense
increased from $18,000 in 1995 to $126,000 in 1996. As a percentage of revenues,
depreciation and amortization expense increased from 0.6% in 1995 to 1.3% in
1996. This increase was caused primarily by the amortization of intangibles
attributable to the 1996 Acquisitions.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. Revenues increased 158.6% from $1.2 million for 1994 to $3.1
million for 1995. This increase was primarily caused by an increase in managed
care revenues as a result of the Company obtaining its first complete eye care
capitated contract from a leading HMO, which accounted for $1.8 million of the
increase.
Medical Claims. Medical claims expense increased 432.5% from $551,000 for
1994 to $2.9 million for 1995. The Company's medical claims ratio increased to
120.0% for 1995 from 82.5% for 1994. These increases were caused primarily by
excess utilization of surgical eye care services and facility services related
to the Company's largest managed care contract. All medical claims for 1995 and
1994 were based on negotiated fee-for-service schedules.
Practice Management Expenses. The Company incurred no practice management
expenses during 1994 or 1995. Prior to the 1996 Acquisitions, the Company
recognized no practice management expenses related to its management services
because the Company was not liable for the expenses of the practices.
Salaries, Wages and Benefits. Salaries, wages and benefits expense
increased 68.0% from $538,000 in 1994 to $904,000 in 1995. This increase was
caused primarily by an increase in corporate staff necessary to support the
Company's expanded practice management and managed care business. As a
percentage of revenues, salaries, wages and benefits decreased from 45.1% in
1994 to 29.3% in 1995. This decrease was caused primarily by increased economies
of scale resulting from the Company's expanding business.
Business Development. The Company incurred no business development
expenses during 1994 or 1995.
General and Administrative. General and administrative expenses increased
86.1% from $238,000 in 1994 to $443,000 in 1995. This increase was caused
primarily by increases in travel expenses, professional fees, occupancy costs
and temporary labor and recruitment costs. As a percentage of revenues, general
and administrative expenses decreased from 20.0% in 1994 to 14.4% in 1995. This
decrease was caused primarily by increased economies of scale resulting from the
Company's expanding business.
Depreciation and Amortization. Depreciation and amortization expense
increased 38.5% from $13,000 in 1994 to $18,000 in 1995. This increase was
caused primarily by the amortization of intangibles. As a percentage of
revenues, depreciation and amortization expense decreased from 1.1% in 1994 to
0.6% in 1995.
29
<PAGE> 31
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its working capital and capital
expenditure requirements primarily through institutional borrowings and private
debt and equity financings. Net cash provided by operating activities for 1994
was $30,000 and net cash used in operating activities for 1995 and 1996 and the
three months ended March 31, 1997 was $138,000, $4.2 million and $275,000,
respectively. Net cash provided by operating activities for 1994 was caused
primarily by an increase in liabilities more than offsetting a net loss. Net
cash used in operating activities for 1995 and 1996 and the three months ended
March 31, 1997 was caused primarily by net losses offset in part by increases in
medical claims payable, deferred compensation and accrued acquisition expenses.
Net cash used in investing activities for 1994, 1995 and 1996 and the three
months ended March 31, 1997 was $14,000, $88,000, $1.6 million and $1.6 million,
respectively, and was caused primarily by the purchase of furniture and
equipment and payments for capitalized acquisition and offering costs.
Net cash used in financing activities for 1994 was $4,000. Net cash
provided by financing activities for 1995 and 1996 and the three months ended
March 31, 1997 was $256,000, $5.8 million and $2.9 million, respectively. The
amounts for 1996 and for the three months ended March 31, 1997 were attributable
to private debt and equity financings and higher levels of institutional
borrowings to support the Company's internal expansion and acquisition
activities.
In June 1996, the Company borrowed $3.0 million from Peter Fontaine, a
director of the Company, for working capital purposes pursuant to an unsecured
promissory note (the "Fontaine Note"). The Fontaine Note bears interest at 8.0%
per annum and is due upon completion of an initial public offering by the
Company. The Fontaine Note will be repaid by the Company from the net proceeds
of the Offering. In addition, the Company borrowed $200,000 and $500,000 from
Mr. Fontaine in November and December 1996, respectively, for working capital
purposes pursuant to unsecured promissory notes. The unsecured promissory notes
each bear interest at 8.5% per annum and are due in January 1998. See "Certain
Transactions."
In December 1996, the Company completed the 1996 Acquisitions for an
aggregate consideration of $11.0 million, consisting of 2.1 million shares of
Common Stock, unsecured promissory notes in the aggregate principal amount of
$1.9 million and $800,000 in assumed debt. Additionally, the Company has agreed
to aggregate contingent consideration of $316,000, consisting of 79,805 shares
of Common Stock, in connection with several of the 1996 Acquisitions which will
be transferred out of escrow to certain sellers in the event they meet certain
post-acquisition performance targets. The promissory notes bear interest at 8.0%
per annum and are due at the earlier of March 1, 1998 or 15 business days after
the completion of an initial public offering by the Company. These promissory
notes will be repaid by the Company from the net proceeds of the Offering.
In December 1996, the Company borrowed an aggregate of $1.3 million from
certain individuals for working capital purposes pursuant to the issuance of
senior subordinated notes (the "1996 Subordinated Notes"). The 1996 Subordinated
Notes included detachable warrants to purchase an aggregate of 208,333 shares of
Common Stock at exercise prices ranging from $6.00 to $7.11 per share. The 1996
Subordinated Notes bear interest at 10.0% per annum and are due at the earlier
of December 19, 1999 or upon a Liquidation Event, as defined in the 1996
Subordinated Notes. The 1996 Subordinated Notes will be repaid by the Company
from the net proceeds of the Offering.
In February 1997, the Company borrowed an aggregate of $2.0 million from
Piper Jaffray Healthcare Fund II Limited Partnership ("Piper Jaffray") for
working capital purposes pursuant to the issuance of senior subordinated notes
(the "1997 Subordinated Notes"). The 1997 Subordinated Notes included a
detachable warrant to purchase an aggregate of 333,333 shares of Common Stock at
exercise prices ranging from $6.00 to $7.11 per share. The 1997 Subordinated
Notes bear interest at 10.0% per annum and are due at the earlier of December
19, 1999 or upon a Liquidation Event, as defined in the 1997 Subordinated Notes.
The 1997 Subordinated Notes will be repaid by the Company from the net proceeds
of the Offering.
In March 1997, the Company completed the Pinellas Acquisition, and provided
aggregate consideration of $1.1 million, consisting of 128,541 shares of Common
Stock.
30
<PAGE> 32
Between May 1, 1997 and July 31, 1997, the Company completed the Recent
Acquisitions and provided aggregate consideration of $6.8 million, consisting of
777,118 shares of Common Stock, $19,000 in promissory notes and $29,000 in cash
subject to closing adjustments.
In April 1997, the Company entered into a credit facility in the aggregate
amount of $4.7 million with Prudential Securities Group Inc. pursuant to a Note
and Warrant Purchase Agreement amended and restated in June 1997 ("the Amended
and Restated Note and Warrant Purchase Agreement"). The proceeds from the
borrowing were used to repay the Company's existing credit facility with Barnett
Bank N.A. in the principal amount of $2.0 million and for general working
capital purposes. Under the Amended and Restated Note and Warrant Purchase
Agreement, the Company issued a senior note secured by all the Company's assets
(the "Prudential Note"). The Prudential Note bears interest at 10% per annum and
is due at the earlier of January 1, 1998 or upon completion of an initial public
offering. In addition, the Amended and Restated Note and Warrant Purchase
Agreement includes a detachable warrant to purchase an aggregate of 633,333 of
Common Stock at exercise prices ranging from $6.00 per share to 80% of the price
of the Common Stock at an initial public offering. The Prudential Note will be
repaid by the Company from the net proceeds of the Offering. See "Underwriting".
The Amended and Restated Note and Warrant Purchase Agreement contain negative
and affirmative covenants and agreements requiring the maintenance of certain
financial ratios.
The Company has treated as deferred compensation the issuance of shares of
restricted stock in September and October 1996, for future services related to
various business development initiatives and management incentives. In September
1996, the Company entered into a five year services agreement with its Chief
Medical Officer and current director of the Company and issued 108,133 shares of
restricted stock. These shares were valued at $2.77 per share or $300,068. Of
these shares, 40% vested immediately and the Company recorded a business
development charge of $119,984. The remaining 60% of the shares were recorded as
an offset in stockholders' equity as deferred compensation for $180,041. In
October 1996, the Company entered into a five year advisory agreement with an
industry consultant and issued 125,627 shares of restricted stock which vest
over the life of the advisory agreement. These shares were valued at $2.77 per
share or $348,614. The Company recorded the issuance of these shares as an
offset in stockholder's equity as deferred compensation. This deferred
compensation is being amortized as the shares vest on a pro rata basis. See
"Certain Transactions."
Intangible assets consist of the Management Agreements with the Managed
Professional Associations. The Management Agreements have 40-year terms and are
being amortized over their estimated useful lives ranging from 20 to 40 years.
Intangible assets represent 67% of the Company's total assets as of March 31,
1997. In determining the useful life of a Management Agreement, the Company
considers the operating history and other characteristics of each practice. A
principal consideration is the degree to which the practice has demonstrated its
ability to extend its existence indefinitely. The Company will review the
carrying value of its intangible assets at least quarterly on an
entity-by-entity basis to determine if facts and circumstances exist which would
suggest that the intangible assets may be impaired or that amortization periods
need to be modified. Among the factors the Company considers in making the
valuation are changes in the Managed Professional Associations market position,
reputation, profitability, and geographical penetration. See "Risk
Factors -- Risks Related to Amortization of Intangible Value in Management
Agreements" and Note 3 to Notes to Consolidated Financial Statements.
In addition to the business assets purchased, the Company assumes certain
payables and accrued expenses. Generally, the acquired tangible assets exceed
the assumed liabilities. The Company has assumed liabilities of $2.5 million
including $745,000 of long-term debt for acquisitions completed through March
31, 1997.
In addition, pursuant to the ASC Agreement, the Company expects to acquire
the business assets of an ASC. Additionally, the Company expects to enter into a
Management Agreement with the related entity owning the ASC. In connection with
the ASC Agreement, the Company expects to pay an aggregate consideration of
$555,000 consisting of 140,201 shares of Common Stock subject to adjustment at
closing.
Based upon the Company's anticipated capital needs for operation of its
business, general corporate purposes, the acquisition of clinics and ASCs and
repayment of certain indebtedness, management believes
31
<PAGE> 33
that the combination of the funds expected to be provided from the Company's
operations, anticipated future institutional borrowings, seller financing and
the net proceeds received from the Offering will be sufficient to meet the
Company's funding requirements to conduct its operations and for further
implementation of its growth strategy for a period of approximately twelve
months. The Company will continue to offer Common Stock, notes or combinations
thereof as consideration for certain future mergers and acquisitions related to
the growth of its LADS and currently expects for the foreseeable future to
continue to require contractual lock-up agreements and to provide registration
rights consistent with previous transactions for sellers receiving stock in
acquisitions. After the twelve-month period, or in the event the Company's
capital expenditures are greater than currently expected and to the extent
additional capital resources are needed, the Company expects to utilize
supplemental borrowings and/or the proceeds from the offering of debt or equity
securities.
32
<PAGE> 34
BUSINESS
OVERVIEW
The Company provides a wide range of management and administrative services
to local area delivery systems ("LADS") established by the Company. LADS are
integrated networks of optometrists, ophthalmologists, ASCs and retail optical
centers that are designed to offer the full continuum of eye care services in
local markets. The Company began operations in 1984, providing management
services to seven optometrists practicing at eight clinic locations. The Company
currently provides its services to 11 LADS located in six states through which
660 Affiliated Providers deliver eye care services. Of these Affiliated
Providers, 72 are Managed Providers, consisting of 46 optometrists and 26
ophthalmologists practicing at 48 clinic locations and five ASCs, and 588 are
Contract Providers, consisting of 258 optometrists and 337 ophthalmologists
practicing at over 300 clinic locations and 35 ASCs. The Company signed its
first managed care contract in 1988 for 18,000 patient lives serviced through
the Company's network of optometrists practicing within retail optical
locations. The Company's Affiliated Providers, in conjunction with select
national retail optical chains operating over 300 retail optical centers,
deliver eye care services under the Company's 22 managed care contracts and
seven discount fee-for-service plans covering approximately 1.8 million patient
lives.
THE EYE CARE INDUSTRY
The Eye Care Market. According to industry sources, expenditures for all
eye care services in the United States were approximately $31.2 billion in 1995.
Industry sources estimate $19.6 billion of these expenditures was spent on
primary care, including approximately $13.8 billion for optical goods (frames,
lenses and accessories) and $5.8 billion for primary eye care services (routine
eye exams, contact lens fitting and diagnosis/management of eye disease), while
$11.6 billion was spent on secondary and tertiary care, including $6.9 billion
for ophthalmology services (medical and surgical eye care) and $4.7 billion for
facility services (services provided by hospital facilities and ASCs).
The aging of the "baby boom" generation in the United States is expected to
result in increased spending on all eye care services. As individuals age, their
need for eye services at all levels of care -- primary, secondary and
tertiary -- increases with the onset of cataracts, glaucoma and other eye
diseases and disorders. According to the American Academy of Ophthalmology, U.S.
surgeons performed 1.4 million cataract surgeries in 1995, up from 1.2 million
procedures in 1994. Additionally, according to The Journal of the American
Medical Association, cataract surgery is the largest single Medicare
expenditure.
Technological advances and innovations are also expected to contribute to
increased spending on eye care services. Innovative procedures in the area of
refractive surgery, such as Photo Refractive Keratectomy (PRK) procedures,
utilize the excimer laser to surgically correct nearsightedness. Additionally,
enhancements in current technology and micro surgical protocols have allowed for
less invasive and disruptive outpatient ocular procedures utilizing local rather
than general anesthesia. For example, according to industry sources, PRK
procedures alone are expected to increase from 108,000 in 1996 to 945,000 in the
year 2000.
Today's Delivery of Eye Care. Eye care services in the United States are
delivered through a highly fragmented system of local providers which industry
sources estimate consisted of approximately 47,000 practicing eye care
professionals in 1996, including approximately 29,500 optometrists and 17,500
ophthalmologists. A patient's first encounter with an eye care provider
frequently occurs with an optometrist or optical retailer for some form of
primary care. According to the American Optometric Association, approximately 86
million eye exams are performed each year in the U.S., 70% of which are
performed by optometrists. During the eye exam, the optometrist typically issues
prescriptions for corrective eye wear and evaluates the need for secondary
and/or tertiary procedures. As such, the optometrist is in a natural position as
the "gate keeper" for additional eye care services, influencing in excess of
$17.0 billion in domestic eye care expenditures annually.
The Company believes that patients are increasingly seeking convenient and
accessible primary eye care through retail optical centers that typically
feature extended hours of operation, convenient locations, walk-in service, wide
selections of familiar name brand eyeglass frames and contact lenses, prompt
service, lower pricing, extensive advertising and the availability of an
optometrist on the premises. While optometrists have
33
<PAGE> 35
traditionally marketed eye wear in their offices, the proliferation of large
retail optical centers has placed pressure on an optometrist's ability to
compete for patients and has caused optometrists to increasingly affiliate with
retailers by locating within, or in close proximity to, retail optical centers.
Through such affiliations, optometrists attempt to improve their access to
patients. As a result, the Company believes primary eye care services and
products are increasingly being bundled together at the retail level making the
retail optical center an important access point for eye care delivery networks.
While some ophthalmologists provide certain primary eye care services, such
as eye exams, their main focus is on the delivery of secondary care, such as
cataract surgery, and tertiary care, such as emergency eye care services,
predominantly at office-based clinics and ASCs. Because optometrists are an
important source of patients, many ophthalmologists develop informal and
non-binding referral networks in conjunction with optometrists. However, despite
these initiatives, industry sources estimate that only 4.8% of all optometrists
actually provide eye care services within the same practice of an
ophthalmologist.
Eye Care Payors. The number of people covered by managed care and
indemnity eye care insurance plans has increased significantly in recent years
and is expected to continue to increase as health insurers seek to gain a
competitive advantage by offering insurance packages that include primary eye
care coverage. Many of these insurers are HMOs presently focused on the need to
increase revenue and market share by offering a full range of health insurance
options, including coverage for primary eye care, to both commercial and
Medicare patients. According to industry sources, HMO enrollment overall has
increased from 41.0 million members in 1992 to 58.0 million members in 1995,
while HMO Medicare membership increased to approximately 3.6 million in 1995 and
is expected to reach 7.2 million by 1999. It is estimated that in 1995, 65.0% of
commercial HMO plans and 86.0% of Medicare plans offered primary eye care
benefits.
While both private and government funded insurance programs vary widely in
their coverage and benefits, these programs are expected to significantly impact
the structure of the eye care industry. As more people become eligible to
receive eye care benefits, the Company believes there will be increased
utilization of primary eye care services, which will in turn lead to an increase
in the demand for secondary and tertiary eye care services. As such, provider
networks that can deliver and effectively manage all levels of eye care are
becoming increasingly attractive to health insurance companies that are then
able to market comprehensive "carve out" eye care plans covering not only
primary eye care, but also secondary and tertiary eye care. Additionally, health
insurance companies, including HMOs and other managed care companies, are
contracting with eye care provider networks on a capitated basis to provide eye
care services as well as all related administrative and quality assurance
services. In 1995, 45% of HMO contracts with specialty care networks (i.e., eye
care, dentistry and other medical specialties) were capitated, up from 35% in
1994.
Emerging Eye Care Delivery Models. Optometrists and ophthalmologists have
traditionally provided eye care services on a fee-for-service basis, primarily
through independent, office-based practices. The fee-for-service model provides
few incentives for the efficient utilization of resources and, the Company
believes, has contributed to increases in health care costs at rates
significantly higher than inflation. Concerns over the accelerating costs of
health care have resulted in the increasing prominence of managed care,
pressuring eye care providers to deliver care at a lower cost while maintaining
quality. The Company believes that this recent focus on cost containment has
placed independent optometry and ophthalmology practices at a disadvantage.
These practices typically lack the capital to expand, develop information and
billing systems, and purchase new technologies, which often facilitate increased
patient visits and per patient revenue, improve quality of care and reduce
costs. These practices also lack the cost accounting and quality management
systems necessary to allow eye care providers to enter into capitated or
risk-sharing contracts with private third-party payors. Finally, small to
mid-sized eye care provider groups and individual practices often have higher
operating costs because overhead must be spread over a relatively small revenue
base.
In order to remain competitive in the changing eye care service
environment, optometrists and ophthalmologists are increasingly seeking to
affiliate with larger organizations, which offer skilled and experienced
management, improved access to payors and their enrollees, more sophisticated
information systems, greater capital resources and more efficient cost
structures. Much of this consolidation is taking place through the formation of
physician practice management companies ("PPMs"). Eye care PPMs are growing
34
<PAGE> 36
in response to the demand by managed care companies for larger practice groups
which can offer full service, quality eye care over a wide geographic area. This
consolidation is still in the early stages as less than 2% of optometrists and
ophthalmologists have affiliated with a PPM. However, the mere consolidation of
practices and creation of a PPM will most likely not, in itself, be sufficient
to enhance the competitive position of combined eye care professional groups.
Rather, the Company believes that a cost efficient eye care delivery system
integrated within local markets is required to effectively compete in today's
changing eye care industry.
THE VISION TWENTY-ONE LOCAL AREA DELIVERY SYSTEM ("LADS")
The Company's goal is to enable each of its LADS to capture the leading
market share of fee-for-service patients and managed care members. To achieve
its goal, the Company is focused on the following strategies: (i) developing
LADS in order to provide for a complete continuum of easily accessible, high
quality and affordable eye care services, (ii) increasing patient revenue and
cost efficiencies for each LADS through practice development and managed care
initiatives and (iii) expanding into select new markets to create regional
networks of LADS.
Developing Integrated LADS (The LADS Model)
LADS are integrated networks of eye care providers that are designed to
offer the full continuum of eye care services in local markets. This continuum
of eye care services begins with primary eye care services provided by
optometrists practicing at free-standing clinics, optometrists located in retail
optical locations and primary care ophthalmologists. To provide greater access
for patients seeking primary eye care, the Company affiliates with both
optometrists and retail optical centers. To facilitate this patient access, the
Company has strategic affiliations with two major national retail optical
chains, one regional optical chain and numerous smaller, independent retail
optical centers. The Company generally has an affiliated optometrist in or
adjacent to each retail optical center that is located within a LADS.
Once patients have initially accessed a LADS to obtain primary eye care
services, they are well positioned to move within the LADS to the next
appropriate level of eye care. The Company affiliates with general
ophthalmologists and cataract surgeons that provide secondary eye care, with
subspecialty ophthalmologists (including subspecialties such as oculoplastics,
retina/vitreous and cornea) that provide tertiary eye care, and with ASCs that
provide facility services. LADS are especially attractive to managed care
companies because the Company's Affiliated Providers are able to deliver all
levels of eye care to the managed care plan's members.
Each Affiliated Provider generally begins as a fully credentialed Contract
Provider who delivers eye care services to members of the Company's contracted
managed care plans. The Company intends to acquire the business assets, employ
the non-professional personnel of and enter into Management Agreements with
select Contract Providers who then become Managed Providers. To date, the
Company has successfully acquired the business assets of 52 Contract Providers.
In addition, the Company intends to add optometry clinics located within retail
optical centers of leading national retail optical chains. To date, the Company
has added five optometry clinics located within retail optical centers and has
reached a tentative agreement with a leading optical retailer to add at least 20
additional internally developed optometry clinics throughout the remainder of
1997.
The successful integration of optometrists, ophthalmologists and ASCs is a
key component to the development of each LADS. The integration of Affiliated
Providers is accomplished through the implementation of proprietary quality
assurance, management and governance programs (the "V-21 TEAM CARE" program).
The V-21 TEAM CARE quality assurance program is administered by the Company's
Credentialing Committee, Clinical Protocol and Risk Management Committee, Peer
Review Committee, Outcome Assessment and Utilization Review Committee and a
Medical Advisory Board whose members include select Affiliated Providers. The
V-21 TEAM CARE quality assurance program provides for (i) the review and
implementation of technology standards and clinical protocols for the provision
of high quality and cost effective eye care services, and (ii) continuing
assessments as to the quality of facilities, equipment, record keeping,
physician credentials, utilization trends and clinical outcomes. The integration
of Managed Providers
35
<PAGE> 37
is accomplished through the V-21 TEAM CARE management and governance programs.
The V-21 TEAM CARE management program includes (i) development of LADS-specific
and practice-specific strategic plans, (ii) integration of operations,
personnel, facilities and equipment, (iii) consolidation of specialty and
ancillary services and (iv) coordination of marketing initiatives. The V-21 TEAM
CARE governance program establishes an active local governance structure
consisting of Practice Advisory Councils, Local Advisory Councils and a National
Appeals Council. These councils are designed to provide for substantial
involvement and clinical leadership by select Managed Providers in the local
operations, physician relationships and business development plans within each
practice and LADS.
Increasing Patient Revenue and Cost Efficiencies
Managed care initiatives are implemented for each LADS to enable the
Affiliated Providers to gain incremental market share and increased patient
visits. In conjunction with its affiliated retail optical centers and affiliated
optometrists, the Company jointly markets regional primary eye care networks to
managed vision plans. In addition, the Company markets regional networks of
affiliated ophthalmologists and ASCs to managed care plans for the provision of
medical and surgical eye care. More importantly, the Company is able to market
each of its LADS to managed care plans seeking to contract with integrated
networks of optometrists, ophthalmologists, retail optical centers and ASCs that
can offer all primary, secondary and tertiary eye care services pursuant to
comprehensive "carve out" eye care plans.
The Company also seeks to increase patient visits for each LADS through
cooperative marketing initiatives. The Company assists in developing cooperative
marketing campaigns between affiliated optometrists and optical retailers to
attract incremental fee-for-service primary eye care patients. The Company and,
in some cases, managed care companies sponsor extensive free community screening
activities. The Company has also initiated outreach programs through its Managed
Providers, such as providing primary eye care to long-term care facilities and
more complicated tertiary care to rural areas where such care might otherwise
not be available.
The Company also seeks to generate incremental per patient revenue for its
Managed Providers by providing access to new eye care services and products for
its LADS. This may be as a core service for fee-for-service patients or as a
value-added option for managed care patients over and above their insured
benefit. Patients are educated at the primary eye care level on new products and
procedures, including refractive surgery, oculoplastic procedures, pediatric
services, eye wear upgrades, specialty contact lenses and accessories. By
facilitating the addition of new eye care services and products, the Company is
able to leverage existing facilities and equipment to generate incremental per
patient revenue for the Company's Managed Providers. For example, the Company's
Chief Medical Officer, Richard Lindstrom, M.D., a world renowned refractive
surgeon, is assisting in the development of refractive surgery initiatives for
each LADS.
Finally, the Company develops and implements a practice development program
to increase productivity and efficiency thereby reducing costs per patient. The
practice development program includes re-engineering patient flow, establishing
clinical protocols, providing physician development programs and practice
governance, monitoring patient feedback, and improving office design. The
Company has exclusively retained BSM Consulting Group, a highly respected leader
in ophthalmology consulting, to assist the Company in developing these practice
development programs. Additionally, the Company will continue to consolidate the
back office functions of Managed Providers, including payroll, benefit
administration, accounts payable, accounts receivables, purchasing and general
administrative services, to gain further efficiencies for its LADS.
The Company's ability to successfully manage and develop the Managed
Providers will depend on its ability to increase patient revenue and achieve
cost efficiencies for the Managed Professional Associations. The Company's
future results of operation depend on the Company's ability to successfully
manage and develop its Managed Providers as the Company's management fees are
directly related to the revenues and expenses of the Managed Professional
Association. See "Risk Factors -- Reliance on Affiliated Providers",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Management Agreements."
36
<PAGE> 38
Expanding the LADS Model to New Markets
The Company intends to continue expanding its LADS model to new markets.
The Company seeks to enter select markets where (i) the Company has a strategic
affiliation with a leading corporate retail optical provider, (ii) there is an
existing network of optometrists and ophthalmologists that the Company can
affiliate with, and/or (iii) the Company is able to obtain a managed care
contract that provides an initial patient base. Other considerations include an
analysis of the competitive environment, the legal and regulatory environment as
it pertains to delivery of eye care services and the level of managed care
penetration. The Company also intends to leverage existing managed care
relationships to expand into new markets where such managed care providers have
established a significant presence.
The Company's practice acquisition team continuously searches for
Affiliated Providers to develop additional LADS in new markets and to supplement
the eye care services offered by its LADS in existing markets. The Company's
acquisition team meets with selected acquisition candidates within a particular
local market area and evaluates such acquisition candidates on the basis of
their clinical reputation, quality of care, provider credentials, market share,
profitability and mix of payors. The Company's acquisition team also bases its
acquisition decisions on the strengths of the candidate's management team, the
stability of the practice, the existence of an ASC or optical dispensary, the
compatibility of the candidate's work philosophy and values, the potential to
expand the types of eye care services provided and the potential to increase
patient access to the candidate through the Company's managed care and practice
management initiatives. The Company's goal is to affiliate with well-respected
practices and intends to utilize such practices to assist in identifying
additional acquisition candidates for the LADS. In determining the consideration
for each acquisition the Company primarily evaluates the acquisition criteria
along with projected future cash flows for the practice and the projected
management fee to be received.
The Company's ability to successfully expand the LADS model to new markets
will depend on a number of factors including the ability to obtain acceptable
financing to fund expansion, identify and consummate suitable acquisitions,
successfully integrate the acquisitions and effectively expand its managed care
relationships into such local markets. See "Risk Factors -- Risk Associated With
Expansion Strategy."
LADS LOCATIONS
The following table sets forth the location of and certain data regarding
the Company's existing LADS as of June 1, 1997:
<TABLE>
<CAPTION>
AFFILIATED PROVIDERS(1) AFFILIATED MANAGED
------------------------ RETAIL(1) CONTRACT
LOCAL AREA MDS ODS ASCS OPTICAL LOCATIONS LIVES(2)
- ---------- ----- ----- ------ ----------------- ---------
<S> <C> <C> <C> <C> <C>
Tampa Bay.......................... 93 109 17 18 717,000
Miami.............................. 55 64 4 24 394,000
Orlando............................ 20 46 8 12 112,000
Jacksonville....................... 8 16 3 3 139,000
Tallahassee........................ 3 12 1 4 5,000
Chicago............................ 66 17 -- 18 10,000
Phoenix............................ 31 15 4 11 107,000
Tucson............................. 19 9 3 -- 50,000
Minneapolis........................ 4 11 -- -- --
Long Island........................ 57 1 -- 4 225,000
New Orleans........................ -- 4 -- 13 --
--- --- -- --- ---------
Total.................... 356 304 40 107 1,759,000
</TABLE>
- ---------------
(1) Excludes in excess of 700 Contract Providers in select markets where the
Company is beginning to conduct managed care business.
(2) Represents HMO members exclusively contracted to the Company and does not
include the managed care patients directly contracted to the Affiliated
Providers or any fee-for-service patients of Managed Providers.
37
<PAGE> 39
LADS MANAGEMENT AND SUPPORT SERVICES
The Company provides all necessary management and support services to
develop and expand its LADS. The Company employs over 80 team members at its
corporate headquarters and approximately 300 team members located within the
LADS to provide a wide range of management and support services, including
information services, managed care development, practice integration and
development, administration, credentialing, provider relations, outcome
assessment, human resources, financial management, marketing and communications,
member services, and purchasing.
Information Services. The Company's management information system combines
current computer technology with proprietary software developed over the past
ten years that integrates front-end practice management, back-end corporate
management, managed care administration, accounting, and marketing. The Company
utilizes its management information system to coordinate patient flow and
administer patient documentation; track patient inquiries/problems from
inception to resolution; support credentialing of Affiliated Providers;
administer managed care contracts, including billing, collection and claims
processing; and organize marketing initiatives. Furthermore, the Company's
proprietary software allows it to effectively manage sophisticated risk-sharing
arrangements with Affiliated Providers and third-party payors, administer
disease state management initiatives, and track and assess utilization trends.
By electronically integrating all aspects of LADS management, the Company is
able to decrease duplication of efforts, enhance quality control, and maximize
cost efficiencies.
Managed Care Development. The Company assists its Affiliated Providers in
obtaining both fee-for-service and capitated managed care contracts. After
analyzing competitive market demographics and managed care penetration, the
Company identifies potential managed care relationships. The Company's managed
care development team responds to requests for proposals (RFPs) from selected
payors and works with HMOs to develop custom eye care benefit programs and
services for their members.
Practice Integration and Development. The Company assists in developing
the practices of its Managed Providers and the implementation of long-term
strategic initiatives to increase revenue and enhance operating efficiencies.
The Company has entered into exclusive consulting agreements with BSM Consulting
Group, a leading professional practice development consultant, and its chief
executive officer, Bruce S. Maller, to assist with the Company's practice
integration and development efforts. The Company's regional operating personnel
assist with implementing practice integration and development initiatives and
measure improvements achieved through such efforts.
Administrative Services. The Company provides certain administrative
services to its Affiliated Providers, including billing, collections,
eligibility verification and claims processing. The Company handles over 300,000
claims per year, including Medicare and Medicaid. The Company's administrative
services department utilizes sophisticated information systems to provide claims
processing support and submit claims electronically to payors in order to reduce
time for reimbursement.
Credentialing. The Company provides credentialing services according to
national standards as set forth by the National Committee for Quality Assurance
("NCQA") by which all health plans are measured for compliance with quality
assurance initiatives. All Affiliated Providers are fully credentialed. The
credentialing process includes collection of data from Affiliated Providers in
the form of an application; verification of licenses, insurance and education;
review of the Affiliated Provider's file in the National Practitioner Data Bank;
computerized management of all Affiliated Provider credentials and renewals; and
approval by an Affiliated Provider peer group. Several managed care companies
have awarded the Company "Delegated Provider" status. Delegated Provider status
is awarded only after a managed care company has audited credentialing policies
and procedures as well as each health care provider's patient files and has
determined each provider is in compliance with NCQA standards. The Company
re-credentials its Affiliated Providers every two years.
Provider Relations. The Company actively maintains its relationships and
communication with all Affiliated Providers. The Company has established
Provider Relations Representatives who educate, assist and
38
<PAGE> 40
support Affiliated Providers and their clinic staff with respect to all their
managed care needs. Provider Relations Representatives are available 24-hours a
day through a toll-free telephone support number.
Outcome Assessment. The Company provides outcome assessment services to
its Managed Providers, including custom developed protocols and disease state
management. Through the measurement of outcomes, the Managed Providers are able
to evaluate the effectiveness of clinical initiatives. Certain of the Company's
Managed Providers have been selected as a beta site for the implementation of a
study developed by Johns Hopkins University School of Medicine to evaluate the
need for and outcome of cataract surgery. The Company is currently developing
additional disease management modules for laser and glaucoma surgery.
Human Resources. The Company provides human resource services to its
Managed Providers, including recruitment of optometrists, ophthalmologists and
clinic staff as well as administration of payroll, benefits and paid time off
programs. In addition, the Company develops training programs to enhance the
management and administrative skills of the clinic staff employed by the Company
and maintains management and administrative protocols and policies.
Financial Management. The Company provides financial management services
to its Managed Providers, including the development of budgets, implementation
of financial controls, capital budgeting and initiation of cost-containment
measures designed to improve operating and financial performance. The Company
also provides comprehensive financial analysis and cash management, tax and
accounting services.
Marketing and Communications. The Company's marketing department works in
conjunction with an outside advertising agency to create and produce marketing
materials supporting the development initiatives of its LADS and Managed
Providers. The Company's communications department develops and produces
corporate newsletters and works with the Company's Managed Providers and clinic
staff to produce feature news articles, press releases and related promotional
materials.
Member Services. The Company's Member Services Representatives provide
customer service for issues related to the Company's managed care business.
Member Services Representatives expedite the resolution of managed care service
issues and track member service inquiries in a database maintained by the
Company. Statistics are developed and tracked to identify trends in specific
member service issues.
Purchasing. The Company purchases certain clinical and office supplies and
equipment for its Managed Providers. The Company has developed purchasing
arrangements and relationships to facilitate more efficient bulk purchasing and
delivery.
MANAGEMENT AGREEMENTS
The Company intends to continue to acquire the business assets of select
optometry and ophthalmology practices as it establishes and develops LADS and
expands into new markets. In conjunction with acquiring the assets of eye care
practices, the Company has entered, and will continue to enter, into long-term
business management agreements with the professional associations conducting
such practices (the "Managed Professional Associations") to provide management
and administrative services to Managed Professional Associations, as well as
managed care business development and administration. The Company also expects
to acquire ASC facilities.
The Company enters into Management Agreements with the Managed Professional
Associations pursuant to which the Company is the sole provider of comprehensive
management, business and administrative services for the non-professional
aspects of the professional practices. Each Managed Provider maintains full
authority, control and responsibility over the provision of professional care
and services to its patients. The Company does not provide professional care to
patients nor does the Company employ any of the ophthalmologists or
optometrists, or any other professional health care provider personnel, of the
Managed Professional Association. The following is a summary of the typical form
of the Management Agreements the Company enters into with each Managed
Professional Association, and is qualified by reference to the actual Management
Agreements and terms may vary depending upon the particular facts and
circumstances, as well as the different laws and regulations of each state.
39
<PAGE> 41
The Company enters into Management Agreements with professional
associations managed by the Company, the initial term of which is typically 40
years. Under significantly all of the Company's Management Agreements, the
management fee ranges from 24% to 37% of the Managed Professional Associations'
gross revenues after deducting from such revenues all expenses of the clinic
other than those related to shareholders of the Managed Professional
Associations. The practice management fees earned by the Company pursuant to
these Management Agreements fluctuate depending on variances in revenues and
expenses of the Managed Professional Associations.
Under the Management Agreements, the Company is obligated, among other
things, to (i) provide, maintain and repair office and clinical equipment for
the Managed Professional Association, (ii) order and purchase all reasonable
supplies on behalf of the Managed Professional Association, (iii) provide
appropriate support services for the operation of the Managed Professional
Association's offices, (iv) assist the Managed Professional Association in
establishing and implementing quality assessment, risk management and
utilization review programs, (v) employ all management, clinicians,
administrative, clerical, secretarial, bookkeeping, accounting, payroll, billing
and collection personnel, and other nonprofessional personnel as necessary, (vi)
assist the Managed Professional Association in negotiating managed care
contracts, (vii) bill and collect professional and other fees on behalf of the
Managed Professional Association, (viii) establish and administer accounting
procedures, controls and systems for the financial books and records relating to
the business of the Managed Professional Association, (ix) monitor and maintain
the files and records of the Managed Professional Association and (x) provide
such management services as are necessary and appropriate for the day-to-day
administration of the business aspects of the Managed Professional Association.
The Management Agreements provide that the Managed Professional Association
is responsible for, among other things, (i) hiring, supervising, and directing
certain of the Managed Professional Association's professional employees, (ii)
adopting a peer review/quality assurance program and (iii) maintaining
appropriate worker's compensation, professional and comprehensive general
liability insurance.
Pursuant to the Management Agreements, a Practice Advisory Council,
consisting of equal representation for the Company and the Managed Professional
Association, is responsible for (i) reviewing and making recommendations
regarding any renovation and expansion plans and capital equipment expenditures
relating to the Managed Professional Association's facilities, (ii) reviewing
and making recommendations regarding all marketing and public relations
services, (iii) reviewing and making recommendations regarding the fee schedule
and collection policies for the Managed Professional Association, (iv) approving
new non-professional ancillary services provided by the Managed Professional
Association, (v) approving and making recommendations regarding agreements with
institutional care providers and third party payors which are not in accordance
with guidelines established by the applicable Local Advisory Council (described
below), (vi) assisting the Managed Professional Association in developing
long-term strategic planning objectives, (vii) making recommendations regarding
the priority of major capital expenditures, (viii) recommending to the Managed
Professional Association the number and type of health care personnel required
for the efficient operation of the Managed Professional Association, (ix) making
recommendations regarding fee disputes, (x) approving the decision to terminate
higher level non-professional personnel employed by the Company who are
performing services at the Managed Professional Associations's offices, (xi)
approving any office relocation or expansion and the establishment of any new
ASC or optical business of the Managed Professional Association and (xii)
adopting, approving and amending the Managed Professional Association's budget.
Local Advisory Councils consist of Company representatives and delegates
from Managed Professional Associations located in each region. Each Managed
Professional Association is entitled to appoint one delegate to the Local
Advisory Council and the Company is entitled to appoint two delegates who will
have voting power equal to the combined voting power of all delegates appointed
by the Managed Professional Association. The Local Advisory Council makes
recommendations to the Company and the Managed Professional Associations as to
the regional policy and strategy issues within the region and as to (i) the
establishment of private pay fee schedules where permitted by law, (ii) the
establishment of guidelines for agreement with institutional health care
providers and third party payors and (iii) any agreement with an institutional
health care provider or third-party payor which materially differs from
guidelines established by
40
<PAGE> 42
the Local Advisory Council. The Local Advisory Council may also select
commercial carriers for professional, casualty and comprehensive general
liability insurance for the Managed Professional Associations in the region.
Finally, the Local Advisory Council considers and determines any issue upon
which the Practice Advisory Council is deadlocked, except for the determination
of the budget of each Managed Professional Association. Decisions of the Local
Advisory Council may be appealed to the National Appeal Council consisting of
one delegate appointed by each of the Local Advisory Councils and two delegates
appointed by the Company.
Each Managed Professional Association has the sole authority to set its
fees for patients, subject to obligations pursuant to managed care contracts. In
connection with managed care contracts the Managed Professional Associations may
contract directly with third-party payors. Otherwise, the managed care contracts
are entered into by the Company and at the option of the Managed Professional
Association the practice can be part of the provider group offered by the
Company in connection with the contract. See "-- Managed Care Contracts."
In accordance with its standard Management Agreement entered into with each
Managed Professional Association, the Company is responsible for, and authorized
to bill, in the Managed Professional Association's name, patients, third-party
payors and other fiscal intermediaries for all billable health care services
rendered by the practice. The Company is responsible for collecting and
receiving all payments for such health care services. Collections from
receivables are deposited by the Company into a cash collateral account from
which all amounts for the payment of expenses and other obligations are drawn.
In the event that any payments for billable services are received by the Managed
Professional Association or its employed professionals, such entities and
individuals are obligated to transfer such funds to the cash collateral account.
The Company has been provided a security interest in the cash collateral account
whereupon the Company is permitted, except where specifically limited by the
Management Agreement, to borrow against the account as well as against
receivables of the practice. The Company has the power to endorse checks payable
to the Managed Professional Association. The Company continuously monitors
outstanding accounts receivable and is authorized to take certain collection
actions, including extending the time for payment of accounts, and jointly
decides with the Managed Professional Association concerning any decision to
undertake extraordinary collection efforts. The Company has the obligation to
provide shortages in the account as necessary to pay practice management
expenses which must be paid as they became due. The Company reconciles the
results of its billing and collection efforts for its Managed Professional
Associations on a quarterly basis.
The Management Agreements are terminable by either party if the other party
materially defaults in the performance of any of its obligations under the
Management Agreement and such default continues for a certain period of time
after notice, if the other party files a petition for bankruptcy or upon the
occurrence of other similar events. The Management Agreements may also be
terminated by mutual agreement in writing.
During the term of the Management Agreement, the Company and the Managed
Professional Association agree not to compete with each other in the business of
providing management services to professional associations and agree not to
disclose certain confidential and proprietary information regarding the other.
The Management Agreements require the Company and the Managed Professional
Associations to indemnify and hold harmless the other party against claims
resulting from negligent or intentional acts or omissions.
The Managed Professional Association is required under each Management
Agreement to enter into written employment agreements with each of its
professional employees containing covenants not to compete with the Managed
Professional Association in a specified geographic area for a specified period
of time after termination of the employment agreement. The employment agreements
also require the payments of significant liquidated damages in the event of a
default by shareholders of the Managed Professional Associations and certain
employees of the Managed Professional Associations, early termination by such
shareholders and key non-shareholder professionals, or a breach of the covenant
not to compete.
Upon the expiration of the term of the Management Agreement, or in the
event that the Managed Professional Association breaches the Management
Agreement, and to the extent permitted by law, the Managed Professional
Association is obligated to purchase the related assets owned by the Company
(including the unamortized portion of the Management Agreement) at book value
and assume all related
41
<PAGE> 43
liabilities. For a period of five years from the date of the Management
Agreement, the shareholders of the Managed Professional Association are required
to personally guarantee any note provided in connection with the repurchase. If
the Company breaches the Management Agreement, the Managed Professional
Association has the option to purchase the related assets owned by the Company
pursuant to terms described in the Management Agreement.
STRATEGIC AFFILIATIONS WITH RETAIL OPTICAL COMPANIES
The Company has considered it important to enter into affiliations with
retail optical companies based on their market position, name recognition,
quality of service, accessibility through extended hours, geographic
distribution, and compatibility of management and facilities with the Company's
primary eye care objectives. The Company currently has contractual affiliations
with ECCA Managed Vision Care, Inc. and For Eyes Managed Care, Inc. which have a
combined total of over 300 retail locations in 48 cities in the United States.
Under the Company's strategic relationship with ECCA, the Company makes
available its LADS to provide the full continuum of high quality, cost effective
eye care services to customers at ECCA retail optical locations (Eyemasters,
Binyons and VisionWorks) in close proximity to the LADS. Further, the Company
seeks to expand revenues at ECCA through increasing managed care business which
require easy accessibility to optical products. In return, the Company believes
its strategic affiliations with retail optical companies will assist the LADS in
increasing their managed care market share. The Company believes most HMOs
strongly prefer a recognized retail optical company as the contracted vendor for
eye wear. By "bundling" retail optical services with LADS that provides
comprehensive eye care services at the primary, secondary and tertiary levels,
the Company believes it significantly improves its joint opportunity with ECCA
to obtain managed care business. The Company expects its retail optical
affiliates to serve increasingly as an important access point to its LADS for
fee-for-service and primary care patients. Further, the Company's relationship
with ECCA has resulted in the addition of five internally developed Managed
Provider optometry clinics adjacent to five ECCA retail optical locations, along
with a tentative agreement to add at least an additional 20 similar clinics
throughout the remainder of 1997. These arrangements are expected to further
increase the above described benefits sought by both parties in connection with
their affiliation.
The Company is a joint venture partner in a general partnership called
"Vision 21 Plus" in which the Company and For Eyes each have a 50% interest. The
objective of the joint venture is to maximize opportunities for the Company in
managed eye care by securing contracts and providing comprehensive, fully
integrated eye care products and services to health care organizations and
self-funded employer groups. The general benefits to For Eyes in its
relationship with the Company are similar to that derived by ECCA. Under the
joint venture agreement, Vision 21 Plus is to enter into, perform and carry out
contracts and agreements related to the development of managed eye care business
and to explore opportunities to develop certain ancillary eye care businesses.
MANAGED CARE CONTRACTS
As an increasing percentage of the population is covered by managed care
organizations, the Company believes that its success will be, in part, dependent
upon its ability to negotiate managed care contracts with HMOs, health insurance
companies and other third-party payors pursuant to which services will be
provided on a risk-sharing or capitated basis. The Company also has contracts
for the provision of certain financial and administrative services related to
its indemnity insurance and fee-for-service plans. Managed care contracts are
typically for one year terms that renew automatically and the contracts are
terminable by either party on sixty days notice.
The Company's typical contracts with third-party health benefits payors
(insurance companies and HMOs) provide that the Company will arrange and pay for
eye care services that are needed by the payor's members in exchange for a fixed
amount per patient per month or a percentage of the premiums paid on behalf of
the patient, without regard to the volume of services that the patient requires.
Under these arrangements, the Company accepts the risk that the cost and
utilization of services may exceed expectations
42
<PAGE> 44
in exchange for its ability to profit if cost and utilization are kept below
expected levels. The Company can directly benefit by effectively managing costs
and utilizing its relationships with its Affiliated Providers. Because the
Company assures the credentials of the providers, establishes quality and
utilization control systems and implements payment arrangements with the
providers, third-party payors are able to use their limited resources in other
areas where they have greater expertise.
As of March 31, 1997, the Company maintained 16 capitated managed care
contracts and administered 13 indemnity fee-for-service plans. While the Company
contracts with a number of third-party health benefit payors, most of the
Company's largest managed care contracts are with certain affiliates of Humana.
Revenues derived from these contractual arrangements with certain Humana
affiliates accounted for 60.3% and 16.7% of the Company's revenues for the year
ended December 31, 1996 and the three months ended March 31, 1997, respectively.
On a pro forma basis, revenues derived from the Humana contracts would have
accounted for 17.3% and 14.2% of the Company's revenues for the year ended
December 31, 1996 and the three months ended March 31, 1997, respectively.
RECENT TRANSACTIONS
The Company was incorporated on May 9, 1996. The principal operating
subsidiaries of the Company are Vision 21 Physician Practice Management Company,
Inc., ("Vision 21 PPMC") and Vision 21 Managed Eye Care of Tampa Bay, Inc.
("Vision 21 MCO") both of which merged with the Company in November 1996. In the
merger, all of the outstanding shares of stock of Vision 21 PPMC and Vision 21
MCO were exchanged for an aggregate of 2,685,318 shares of Common Stock of the
Company. The previous shareholders of these two entities consisted of certain
executive officers and directors of the Company. See "Certain Transactions."
In December 1996, the Company completed the 1996 Acquisitions resulting in
the acquisition of the business assets of 22 optometry clinics, nine
ophthalmology clinics, 15 optical dispensaries and one ASC. Business assets
consist of certain non-medical and non-optometric assets, including accounts
receivables, leases, contracts, equipment and other tangible and intangible
assets. Concurrently, the Company entered into Management Agreements with the
related professional associations employing 34 optometrists and 13
ophthalmologists. These acquisitions were accounted for by recording the assets
and liabilities at fair value and allocating the remaining cost to the related
Management Agreements. Additionally, the Company acquired the business assets of
a managed care company servicing four capitated managed care contracts covering
over 100,000 patient lives which was accounted for under the purchase method of
accounting. In connection with the 1996 Acquisitions, the Company provided
aggregate consideration of $11.2 million, consisting of 2.1 million shares of
Common Stock, unsecured promissory notes in the aggregate principal amount of
$1.9 million and $800,000 in assumed debt. Additionally the Company may be
required to provide additional consideration of up to $316,000, consisting of up
to 79,805 shares of Common Stock, in connection with several of the 1996
Acquisitions, which will be transferred out of escrow to certain sellers in the
event they meet certain post-acquisition performance targets. See "Certain
Transactions."
In March 1997, the Company completed the Pinellas Acquisition resulting in
the acquisition of the business assets of one ophthalmology clinic and one
optical dispensary located in Pinellas County, Florida. Concurrently, the
Company entered into Management Agreements with the related professional
associations employing one optometrist and six ophthalmologist. In connection
with the Pinellas Acquisition, the Company provided aggregate consideration of
$1.1 million, consisting of 128,541 shares of Common Stock.
Between May 1, 1997 and July 31, 1997, the Company completed the Recent
Acquisitions resulting in the acquisition of the business assets of one
optometry clinic, ten ophthalmology clinics, five optical dispensaries and four
ASC located in Sierra Vista, Mesa, Phoenix and Tucson, Arizona and Fort
Lauderdale, Florida. Concurrently, the Company entered into Management
Agreements with the related professional associations employing five
optometrists and seven ophthalmologists. In connection with the Recent
Acquisitions, the Company provided aggregate consideration of $6.8 million,
consisting of 777,118 shares of Common Stock, $19,000 in promissory notes and
$29,000 in cash, subject to closing adjustments.
43
<PAGE> 45
GOVERNMENTAL REGULATIONS
General Overview
The health care industry is highly regulated, and there can be no assurance
that the regulatory environment in which the Company operates will not change
significantly and adversely in the future. In general, regulation of health care
providers and companies is increasing.
There are currently several federal and state initiatives designed to amend
regulations relating to the provision of health care services, the access to
health care, the costs of health care and the manner in which health care
providers are reimbursed for their services. However, it is not possible to
predict whether any such initiatives will be enacted as legislation or, if
enacted, what their form, effective dates or impact on the Company will be.
Every state imposes licensing requirements on ophthalmologists,
optometrists and opticians ("Practitioners") and on their facilities and
services. In addition, many states require regulatory approval, including
certificates of need, before establishing certain types of health care
facilities, offering certain services or making expenditures in excess of
statutory thresholds for health care equipment, facilities or programs. The
execution of a management agreement with a Practitioner group currently does not
require any health care regulatory approval on the part of the Company or the
Practitioner group. However, in connection with the expansion of existing
operations and the entry into new markets, the Company and its associated
Practitioner groups may become subject to additional regulation.
Much of the revenue of the Affiliated Providers is derived from payments
made by government sponsored health care programs (principally Medicare). These
programs are subject to substantial regulation. Any change in reimbursement
regulations, policies, practices, interpretations or statutes that places
material limitations on reimbursement amounts or practices could adversely
affect the operations of the Company. Increasing budgetary pressures at both the
federal and state level and the rapidly escalating costs of health care and
reimbursement programs have led, and may continue to lead, to significant
reductions in government reimbursements for certain medical charges and
elimination of coverage for certain individuals under these programs. Federal
legislation could result in a reduction of Medicare funding. The agency that
administers the Medicare program is required by law to institute a
resource-based method for paying for physician practice overhead costs by
January 1, 1998. The initial proposal to implement this mandate would result in
a redistribution of Medicare funds from specialists and surgeons to primary care
physicians. There are two options currently being considered. The first would
increase optometrists' Medicare revenue by 11% and decrease ophthalmologists'
revenue by 6%. The second would increase optometrists' Medicare revenue by 11%
and decrease ophthalmologists' revenue by 15%. Medicare budget legislation
currently under consideration calls for a delay in implementation of the
resource-based method of paying for physician practice expenses until 1999. The
pending legislation also calls for a phase in that would be complete in 2002.
The Company cannot predict at this time whether or when any of such proposals
will be adopted or, if adopted and implemented, what effect such proposals would
have on the Company. There can be no assurance that payments under governmental
programs will remain at levels comparable to present levels. In addition, funds
received under these programs are subject to audit with respect to the proper
billing for physician services and accordingly, retroactive adjustments of
revenue from these programs may occur. See "Risk Factors -- Government
Regulations."
Health Care Regulations
Business arrangements between business associations that provide practice
management services and ophthalmologists and optometrists are regulated
extensively at the state and federal levels, including regulation in the
following areas:
Corporate Practice of Optometry and Ophthalmology. The laws of many
states prohibit corporations that are not owned entirely by eye care
professionals from employing eye care professionals, having control over
clinical decision-making, or engaging in other activities that are deemed
to constitute the practice of optometry and ophthalmology. The Company
contracts with professional associations (which
44
<PAGE> 46
are owned by one or more licensed optometrists or ophthalmologists), which
in turn employ or contract with other licensed optometrists or
ophthalmologists to provide professional services. The Company performs
only non-professional services, does not represent to the public or its
customers that it provides professional eye care services, and is not
exercising influence or control over the practices of the eye care
practitioners employed by the professional associations. Furthermore, the
Management Agreements between the Company and the Professional Associations
specifically provide that all decisions required by law to be made by
professionals shall be made by the professionals. While certain
shareholders of such Managed Professional Associations which perform the
practice of medicine or optometry are also involved in Company management,
they act independently when making decisions on behalf of their
professional corporations and the Company has no right (and does not
attempt to exercise any right) to control those decisions.
Fee-Splitting and Anti-kickback Laws.
State Law. Many states prohibit "fee-splitting" by eye care
professionals with any party except other professionals in the same
professional corporation or practice association. In most cases, these laws
have been construed as applying to the paying of a portion of a fee to
another person for referring a patient or otherwise generating business,
and not to prohibit payment of reasonable compensation for facilities and
services (other than the generation of referrals), even if the payment is
based on a percentage of the practice's revenues. In addition, most states
have laws prohibiting paying or receiving any remuneration, direct or
indirect, that is intended to induce referrals for health care products or
services. For example, the Florida fee-splitting law prohibits paying or
receiving any commission, bonus, kickback, or rebate, or engaging in any
split-fee arrangement in any form for patient referrals to providers of
health care goods or services. According to a Florida court of appeals
decision interpreting this law, it does not prohibit a management fee that
is based on a percentage of gross income of a professional practice if the
manager does not refer patients to the practice. Similarly, the Arizona law
prohibits "dividing a professional fee" only if it is done "for patient
referrals." Other states, such as Illinois and New York, have fee-splitting
statutes that have been interpreted to prohibit any compensation
arrangements that are based on a percentage of physician's revenue, and
such laws preclude the Company from using its typical management
arrangement in those states.
Federal Law. Federal law prohibits the offer, payment, solicitation
or receipt of any form of remuneration in return for the referral of
patients covered by federally funded health care programs such as Medicare
and Medicaid, or in return for purchasing, leasing, ordering or arranging
for the purchase, lease or order of any item or service that is covered by
a federal program. For this reason, the Management Agreements provide that
the Company will not engage in direct marketing to potential sources of
business, but will only assist the practices' personnel in these endeavors
by providing training, marketing materials and technical assistance.
Advertising Restrictions. Many states, prohibit eye care
professionals from using advertising which includes any name other than
their own, or from advertising in any manner that is likely to lead a
person to believe that a non eye care professional is engaged in the
delivery of eye care services. The Management Agreements provide that all
advertising shall conform to these requirements.
In addition, the Company's managed care arrangements with health care
service payors on the one hand, and its network of Affiliated Providers on the
other, are subject to federal and state regulations, including the following:
Insurance Licensure. Most states impose strict licensure requirements
on health insurance companies, HMOs, and other companies that engage in the
business of insurance. In most states, these laws do not apply to
discounted fee-for-service arrangements or networks that are paid on a
"capitated" basis, i.e. based on the number of covered persons the network
is required to serve without regard to the cost of service actually
rendered, unless the association with which the network provider is
contracting is not a licensed health insurer or HMO. There are exceptions
to these rules in some states. For example, certain states require a
license for a capitated arrangement with any party unless the risk-bearing
association is a professional corporation that employs the eye care
professionals. In the event that the Company is
45
<PAGE> 47
required to become licensed under these laws, the licensure process can be
lengthy and time consuming and, unless the regulatory authority permits the
Company to continue to operate while the licensure process is progressing,
the Company could experience a material adverse change in its business
while the licensure process is pending. In addition, many of the licensing
requirements mandate strict financial and other requirements which the
Company may not immediately be able to meet. Once licensed, the Company
would be subject to continuing oversight by and reporting to the respective
regulatory agency.
Limited Health Service Plans. Some states permit managed care
networks that assume insurance risk, but only as to a limited class of
health services, to be licensed as limited health service plans, and
thereby avoid the need to be licensed as an insurer or HMO even if its
arrangements are with individual subscribers or self-insured employers. The
Company intends to seek such licensure in those states where it is
available for eye care networks. However, the Company may not be able to
meet such requirements in all cases.
Physician Incentive Plans. Medicare regulations impose certain
disclosure requirements on managed care networks that compensate eye care
providers in a manner that is related to the volume of services provided to
Medicare patients (other than services personally provided by the
provider). If such incentive payments exceed 25 percent of the provider's
potential payments, the network is also required to show that the providers
have certain "stop loss" financial projections and to conduct certain
Medicare enrollee surveys.
"Any Willing Provider" Laws. Some states have adopted, and others are
considering, legislation that requires managed care networks to include any
provider who is willing to abide by the terms of the network's contracts
and/or prohibit termination of providers without cause. Such laws would
limit the ability of the Company to develop effective managed care networks
in such states.
The Company and its affiliated professional associations are subject to a
range of antitrust laws that prohibit anti-competitive conduct, including price
fixing, concerted refusals to deal and divisions of markets. Among other things,
these laws limit the ability of the Company to enter into Management Agreements
with separate practice groups that compete with one another in the same
geographic market. This does not apply to professionals within the same practice
group. In addition, these laws prevent acquisitions of business assets that
would be integrated into existing professional associations if such acquisitions
substantially lessen competition or tend to create a monopoly.
The several laws described above have civil and criminal penalties and have
been subject to limited judicial and regulatory interpretation. They are
enforced by regulatory agencies that are vested with broad discretion in
interpreting their meaning. The Company's agreements and activities have not
been examined by federal or state authorities under these laws and regulations.
For these reasons, there can be no assurance that review of the Company's
business arrangements will not result in determinations that adversely affect
the Company's operations or that certain agreements between the Company and eye
care providers or third party payors will not be held invalid and unenforceable.
In addition, these laws and their interpretation vary from state to state. The
regulatory framework of certain jurisdictions may limit the Company's expansion
into, or ability to continue operations within, such jurisdictions if the
Company is unable to modify its operational structure to conform with such
regulatory framework. Any limitation on the Company's ability to expand could
have an adverse effect on the Company. See "Business -- Governmental
Regulations."
COMPETITION
The health care industry is highly competitive and subject to continual
changes in the method in which services are provided and the manner in which
health care providers are selected and compensated. The Company believes that
private and public reforms in the health care industry emphasizing cost
containment and accountability will result in an increasing shift of eye care
from highly fragmented, individual or small practice providers to larger group
practices or other eye care delivery services. Companies in other health care
industry segments, such as managers of other hospital-based specialties or
currently expanding large group practices, some of which have financial and
other resources greater than those of the Company, may become competitors in
providing management to providers of eye care services. Increased competition
could have a
46
<PAGE> 48
material adverse effect on the Company's financial condition and results of
operations. The basis for competition in the practice management area includes
service, pricing, strength of the Company's delivery network (where applicable),
strength of operational systems, the degree of cost efficiencies and synergies,
marketing strength, managed care expertise, patient access and quality
assessments and assurances programs. The Company also competes with other
providers of eye care services for managed care contracts, many of which have
greater financial and other resources than the Company. These include HMOs, PPOs
and private insurers. The basis for competition in the managed care organization
area includes administrative strength, size and quality of network, marketing
abilities, informational systems and operating efficiencies. The future success
of the Company will be directly related to its ability to expand the managed eye
care delivery network geographically, attract reputable providers, expand the
scope of services offered by associated practices (i.e. not only optical and
optometric, but also ophthalmological), and dedicate resources to an active
sales team focused exclusively on the Company's sales effort.
EMPLOYEES
In most circumstances, at the time of its integration into the Company's
managed operations, each Managed Provider enters into an employment agreement
with his or her respective professional association. The employment agreements
with shareholder professionals are for an initial term of five years and for
non-shareholder professionals are for an initial term of two years. Shareholder
professionals are obligated to work for the full five-year term unless the
professional employment is terminated for reasons such as the professional's
death or disability or the occurrence of certain events outside the
professional's control. The professional employment agreements provide that the
employed professionals will not compete with the professional association during
the term of the agreement and following the termination of the agreement for a
term of two years for a shareholder professional and one year for a
non-shareholder professional in a specified geographical area. At June 30, 1997,
the Company had 421 employees, of which approximately 86 were employed at the
Company's headquarters and 335 were employed by the Company at Managed Provider
practices. The Company believes that its relationship with its employees is
good. At June 30, 1997, the professional associations employed 72 Managed
Providers, of which 26 were ophthalmologists and 46 were optometrists.
INSURANCE
The Company's business entails an inherent risk of claims of liability. The
optometrists and ophthalmologists with which the Company associates and certain
employees of the Company are involved in the delivery of health care services to
the public and, therefore, are exposed to the risk of professional liability
claims. Claims of this nature, if successful, could result in substantial damage
awards to the claimants that may exceed the limits of any applicable insurance
coverage. Insurance against losses related to claims of this type can be
expensive and varies widely from state to state. The Company is indemnified
under its service agreements for claims against the its Managed Providers
practices and maintains a blanket liability insurance policy for itself.
Successful malpractice claims asserted against the Managed Practices, however,
could have an adverse effect on the Company's profitability. The Company
maintains umbrella general liability insurance on a claims-made basis in the
amounts of $5,000,000 million per incident, and $5,000,000 million in the
aggregate per annum. While the Company believes it has adequate liability
insurance coverage, there can be no assurance that a pending or future claim or
claims will not be successful or, if successful, will not exceed the limits of
available insurance coverage or that such coverage will continue to be available
at acceptable costs and on favorable terms.
LITIGATION
There are no material pending legal proceedings other than routine
litigation arising in the ordinary course of business. The Company does not
believe that the results of such litigation, even if the outcome were
unfavorable to the Company, would have a material adverse effect on its
financial position.
47
<PAGE> 49
SERVICE MARKS
The Company has applied for registration of "Vision 21," "Eye Care for the
21st Century," "A Different Point of View," "LADS," and the Company's design
logo with the United States Patent and Trademark Office in 1997, which
applications are all currently pending.
PROPERTIES
The Company leases 9,902 square feet of office space in Largo, Florida, for
its corporate headquarters. The lease is for a term through September 1998, and
the Company believes that the facility is adequate for its current needs.
The Company leases or subleases the clinic locations it manages pursuant to
the Management Agreements with the Managed Professional Associations. The
Company anticipates that expanded facilities will be needed as the Managed
Professional Associations grow. The Company also expects to enter into leases
and subleases in the future as it acquires the allowable assets of Contract
Providers and enters into Management Agreements.
The Company also leases and subleases the ASC facilities it manages. The
Company does not expect that the current ASCs will need to be expanded. However,
the Company does anticipate that it will enter into leases and subleases as it
acquires additional ASC facilities.
48
<PAGE> 50
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the Company's
directors and executive officers, and positions they hold with the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Theodore N. Gillette, O.D................. 43 Chairman of the Board, Chief Executive Officer,
President and Director
Richard L. Sanchez........................ 44 Chief Development Officer, Secretary and Director
Richard T. Welch.......................... 46 Chief Financial Officer, Treasurer and Director
Richard L. Lindstrom, M.D................. 49 Chief Medical Officer and Director
Peter J. Fontaine......................... 43 Director
Herbert U. Pegues, II, M.D................ 47 Director
Bruce S. Maller........................... 43 Director
Jeffrey I. Katz, M.D...................... 51 Director
</TABLE>
THEODORE N. GILLETTE, O.D., CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,
PRESIDENT AND DIRECTOR. Dr. Gillette has served as Chairman of the Board, Chief
Executive Officer, President, and director of the Company since its inception.
Dr. Gillette has served as President and director of the Company's wholly-owned
subsidiaries, Vision 21 Physician Practice Management Company and Vision 21
Managed Eyecare of Tampa Bay, Inc. since 1984 and 1993, respectively. He
obtained his Doctorate of Optometry from Southern California College of
Optometry in 1979 and his Bachelor of Science from Florida State University in
1975.
RICHARD L. SANCHEZ, CHIEF DEVELOPMENT OFFICER, SECRETARY AND DIRECTOR. Mr.
Sanchez has served as Chief Development Officer, Secretary and director of the
Company since its inception. From 1993 until assuming his positions with the
Company, Mr. Sanchez was Vice President of Marketing and Administration of the
Company's wholly-owned subsidiary, Vision 21 Managed Eyecare of Tampa Bay, Inc.
Prior to November 1992, Mr. Sanchez worked for Exxon Corporation for over 18
years in various management positions including divisional management
responsibility for over 300 employees and $600 million in revenues. Mr. Sanchez
obtained his Bachelor of Science in Chemistry from Florida State University in
1975.
RICHARD T. WELCH, CHIEF FINANCIAL OFFICER, TREASURER AND DIRECTOR. Mr.
Welch has served as Chief Financial Officer, Treasurer and director of the
Company since August 1996. Prior to joining the Company, Mr. Welch served as
Executive Vice President of Finance and Administration and as Vice Chairman of
the Board of Directors of Sports & Recreation, Inc., a public company engaged in
the business of retail sporting goods and equipment sales generating over $500
million in annual revenue, from December 1994 to March 1996. He served as its
Chief Financial Officer and a Director from January 1992 to December 1994. Mr.
Welch is a certified public accountant and he graduated from Louisiana State
University in 1973 with a Bachelor of Science in Management and Accounting.
RICHARD L. LINDSTROM, M.D., CHIEF MEDICAL OFFICER AND DIRECTOR. Dr.
Lindstrom has served as Chief Medical Officer of the Company since September
1996 and has served as a director since January 1997. Since October 1989, Dr.
Lindstrom has maintained a private practice adjacent to the Phillips Eye
Institute in Minneapolis where he serves as the Medical Director for Research
and Teaching. Dr. Lindstrom holds 22 patents in ophthalmology and has given
numerous presentations throughout the world including 13 named lectures. He is
active on multiple educational and advisory boards including chief medical
editor of Ocular Surgery News. He has co-authored two books, published 50
chapters in other books and published over 300 articles in refereed journals.
Dr. Lindstrom graduated from the University of Minnesota Medical School in 1972
followed by a research residency and cornea fellowship at the University of
Minnesota, an Anterior Segment fellowship at Mary Shields Eye Hospital in Dallas
and a third fellowship in Glaucoma/Anterior Segment at University Hospitals in
Salt Lake City.
PETER J. FONTAINE, DIRECTOR. Mr. Fontaine has served as a director of the
Company since July 1996. Mr. Fontaine is currently the Chairman of the Board of
Directors and Chief Executive Officer of Discount Auto
49
<PAGE> 51
Parts, Inc., a public company engaged in the business of retail automotive parts
sales, and he has been employed by Discount Auto Parts, Inc. in various
capacities since 1977. Mr. Fontaine has served on the Board of Directors of
Discount Auto Parts, Inc. since 1996 and as its Chief Executive Officer since
1994. From 1994 to January 1997, Mr. Fontaine also served as its President.
HERBERT U. PEGUES, II, M.D., DIRECTOR. Dr. Pegues has served as a director
of the Company since November 1996. He is currently Medical Director for managed
care at the Miami Children's Hospital, Miami, Florida and administers its
physician hospital organization. He has been the Vice President/Medical Director
for Memorial Sisters of Charity Health Network in Houston, Texas from 1995 to
1996. From 1988 to 1992, Dr. Pegues was the Associate Executive Director of
Medical Affairs for Humana Healthcare Plans in Tampa, Florida and Assistant
Clinical Professor of the Department of Family Medicine at the University of
South Florida College of Medicine. Dr. Pegues graduated from the University of
Illinois College of Medicine in 1975. He received his B.A. from Grinnell College
in Grinnell, Iowa and is a Diplomate, Certified by the American Board of Family
Practice and National Board of Medical Examiners. Dr. Pegues is also a Fellow of
the American Academy of Family Physicians, and is licensed to practice medicine
in Florida.
BRUCE S. MALLER, DIRECTOR. Mr. Maller has served as a director of Vision
Twenty-One since November 1996 and is an ophthalmology practice management
consultant to the Company. He is the founder of, and has been the President of,
the BSM Consulting Group of Incline Village, Nevada since 1978. BSM provides
consulting services predominantly in the fields of ophthalmology and cardiology
to individual physicians and corporate clients such as Allergan, Inc., Boston
Scientific, Columbia/HCA Healthcare, Inc. and Vision Twenty-One. Mr. Maller has
served as a Vice-President of Summit Medical Systems, Inc., the parent company
of BSM since October 1995. Mr. Maller is a frequent lecturer for various medical
societies, including the American Academy of Ophthalmology and the American
Society of Cataract and Refractive Surgery. Mr. Maller also heads BSM Healthcare
Publications, which produces works related to the field of medical practice
management. Mr. Maller received his Bachelor of Arts degree from the University
of Colorado in 1975.
JEFFREY I. KATZ, M.D., DIRECTOR. Dr. Katz has served as a director of the
Company since January 1997. Dr. Katz has operated an ophthalmology practice at
the Eye Institute of Southern Arizona in Tucson since 1984. He also serves as a
clinical associate professor in the Department of Ophthalmology at the
University of Arizona in Tucson and is the past president of the Tucson
Ophthalmologic Society. Dr. Katz graduated from George Washington University
Medical School in 1972. He was chief of ophthalmic surgery at El Dorado Hospital
in Tucson and has served as the Medical Director for the Tucson Laboratory of
the Arizona Lions eye Bank since 1978.
Pursuant to the terms of the Company's Articles of Incorporation and
Bylaws, the Board of Directors has the power to set the number of directors. The
number of directors is presently set at eight members. The directors are divided
into three classes. Each director in a particular class is elected to serve a
three-year term or until his or her successor is duly elected and qualified. The
classes are staggered so that their terms expire in successive years resulting
in the election of only one class of directors each year. The Class I directors
are Mr. Welch and Drs. Pegues and Katz, the Class II directors are Messrs.
Sanchez and Fontaine, and the Class III directors are Drs. Gillette and
Lindstrom and Mr. Maller. The initial terms of the current Class I, Class II and
Class III directors will expire at the annual meeting of the stockholders of the
Company in 1998, 1999 and 2000, respectively. Officers of the Company are
appointed by the Board of Directors and hold office until the first meeting of
directors following the annual meeting of stockholders and until their
successors are appointed, subject to earlier removal by the Board of Directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation (the "Articles") provide that a
Director will not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except: (i) for any
breach of duty of loyalty; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violations of laws; (iii) for
liability under the Florida Business Corporation Act (relating to certain
unlawful dividends, stock repurchases or stock redemptions); or (iv) for any
transaction from which the director derived any improper personal benefit. The
Company's Bylaws provides
50
<PAGE> 52
that the Company will indemnify each director and such of the Company's
officers, employees and agents as the Board of Directors shall determine from
time to time to the fullest extent provided by the Florida Business Corporation
Act.
The Company has entered into indemnification agreements (the
"Indemnification Agreements") with all of its directors and certain of its
officers. Similar Indemnification Agreements may from time to time be entered
into with additional officers of the Company or certain other employees or
agents of the Company. At present, there is no material pending litigation or
proceeding involving a director, officer, employee or agent of the Company where
indemnification is required or permitted, nor is the Company aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification. The Company is also empowered under its Articles to purchase
and maintain insurance or furnish similar protection on behalf of any person who
it is required or permitted to indemnify and the Company has acquired such
insurance in connection with such individuals that the Company believes is
warranted.
DIRECTORS' COMPENSATION
Directors are reimbursed for expenses in connection with attendance at
Board of Director and Committee meetings. Directors who are not officers of the
Company or affiliates of major stockholders are paid $500 per meeting plus
expenses, which will be increased to $1,000 per meeting plus expenses upon the
conclusion of the Offering. In addition, non-employee directors may be awarded
options under the Company's Stock Option Plans. See "-- Stock Option Plans."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors will establish, effective upon consummation of this
Offering, an Audit Committee, a Compensation Committee, and an Executive
Committee. The members of each Committee are expected to be determined at the
first meeting of the Board of Directors following the completion of this
Offering. At least a majority of the members of the Audit Committee and
Compensation Committee will be non-employee directors.
The functions of the Audit Committee will be to recommend annually to the
Board of Directors the appointment of the independent public accountants of the
Company, discuss and review the scope and the fees of the prospective annual
audit, to review the results thereof with the independent public accountants,
review and approve non-audit services of the independent public accountants,
review compliance with existing major accounting and financial policies of the
Company, review the adequacy of the financial organization of the Company,
review management's procedures and policies relative to the adequacy of the
Company's internal accounting control, and compliance with federal and state
laws relating to accounting practices and review and approve (with the
concurrence of a majority of the disinterested Directors of the Company)
transactions, if any, with affiliated parties.
The functions of the Compensation Committee will be to review and approve
annual salaries and bonuses for all officers, review, approve and recommend to
the Board of Directors the terms and conditions of all employee benefit plans or
changes thereto, to administer the Company's stock option plans, and to carry
out the responsibilities required by rules of the Securities and Exchange
Commission.
The Executive Committee, to the fullest extent allowed by Florida law, and
subject to the powers and authority delegated to the Audit Committee and the
Compensation Committee, will have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Company during intervals between meetings of the Board of Directors.
51
<PAGE> 53
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all compensation
paid or accrued in the fiscal year ended December 31, 1996, for services
rendered in all capacities to the Company by the Chief Executive Officer and the
one other executive officer of the Company who earned in excess of $100,000 in
salary and bonus for 1996. For the year ended December 31, 1996, no officer of
the Company other than Theodore N. Gillette, Chief Executive Officer and Richard
L. Sanchez, Chief Development Officer, received compensation in excess of
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------
NAME AND PRINCIPAL POSITION YEAR SALARY
- --------------------------- ---- ---------
<S> <C> <C>
Theodore N. Gillette, O.D., Chief Executive Officer......... 1996 $189,072
Richard L. Sanchez, Chief Development Officer............... 1996 143,984
</TABLE>
EMPLOYMENT AGREEMENTS
Theodore N. Gillette, O.D. and Richard L. Sanchez have each entered into
Employment Agreements with the Company (the "Employment Agreements"), pursuant
to which they have agreed to serve as the Company's Chief Executive Officer and
Chief Development Officer, respectively. Each Employment Agreement is for a term
of five years ending on September 30, 2001, and is renewable for subsequent
one-year terms by mutual agreement of the parties. Dr. Gillette and Mr. Sanchez
will receive annual base salaries of not less than $220,000 and $180,000,
respectively, which are subject to review by the Compensation Committee of the
Board of Directors at annual intervals and may be adjusted from time to time as
the Compensation Committee deems to be appropriate. Under the Employment
Agreements, Dr. Gillette and Mr. Sanchez have agreed to devote their best
efforts and substantially all of their business time and services to the
business and affairs of the Company. Dr. Gillette and Mr. Sanchez will each be
eligible for annual incentive bonuses, up to 50% of their annual base salary, in
an amount to be determined by the Compensation Committee to the extent that the
Company achieves certain performance measures set by the Committee. Dr. Gillette
and Mr. Sanchez are also entitled to receive stock options or other stock awards
under the Company's Stock Incentive Plan to the extent that the Compensation
Committee determines such awards to be appropriate. Each Employment Agreement
provides that in the event that employment is terminated by the Company other
than (i) for cause, (ii) upon death or disability, or (iii) upon voluntary
termination by the employee, such employee will be entitled to receive from the
Company monthly payments equal to one-twelfth of the employee's annual base
salary for each month during the remaining term of such Employment Agreement,
but not less than twenty-four months. In the event of a change in control (as
defined in the Employment Agreements), each Employment Agreement provides that
if such employee's employment is terminated other than for cause within twelve
months following a change of control of the Company, the Company shall pay such
employee thirty-six monthly payments of one-twelfth of the sum of such
employee's base salary plus his previous year's bonus. Each Employment Agreement
also contains a covenant not to compete with the Company for a period of
twenty-four months following termination of employment.
The Company and Richard T. Welch are parties to an Employment Agreement
(the "Employment Agreement"), pursuant to which Mr. Welch has agreed to serve as
Chief Financial Officer of the Company. The term of the Employment Agreement is
for two years ending on August 31, 1998, and is renewable for subsequent
one-year terms by mutual agreement of the parties. Under the Employment
Agreement, Mr. Welch will receive an annual base salary of not less than
$150,000 which is subject to review by the Compensation Committee of the Board
of Directors at annual intervals and may be adjusted from time to time as the
Compensation Committee deems to be appropriate. Under the Employment Agreement,
Mr. Welch has agreed to devote his best efforts and substantially all of his
business time and services to the business and affairs of the Company. Mr. Welch
will be eligible for annual incentive bonuses, up to 50% of his annual base
salary, in an amount to be determined by the Compensation Committee of the Board
of Directors to the extent that the Company achieves certain performance
measures set by the Committee. Under the Employment
52
<PAGE> 54
Agreement, Mr. Welch received non-statutory stock options to purchase 80,000
shares of Common Stock pursuant to the Company's Stock Incentive Plan. The
options are exercisable at a price of $3.11 per share and vest pro rata on an
equal basis over a four-year period, except that in the event of an initial
public offering by the Company, Mr. Welch will be permitted to exercise options
as to 64,000 of the shares at such time. Additionally, in June 1997 Mr. Welch
received non-statutory stock options to purchase 20,000 shares of Common Stock
pursuant to the Company's Stock Incentive Plan. The options are exercisable at
the initial offering price and vest equally on April 1, 1999 and April 1, 2000.
Mr. Welch is also entitled to receive such additional stock options or other
stock awards under the Company's Stock Incentive Plan to the extent the
Compensation Committee determines such awards to be appropriate. The Employment
Agreement provides that in the event that employment is terminated by the
Company other than (i) for cause, (ii) upon death or disability, or (iii) upon
voluntary termination by the employee, such employee shall be entitled to
receive from the Company a series of monthly payments equal to one-twelfth of
the employee's annual base salary for each month during the remaining term of
such Employment Agreement, but not less than twelve months. In the event of a
change in control (as defined in the Employment Agreement), the Employment
Agreement provides that if such employee's employment is terminated other than
for cause within twelve months following a change of control of the Company, the
Company shall pay such employee a series of twelve monthly payments of
one-twelfth of the sum of such employee's base salary plus his previous year's
bonus. The Employment Agreement also contains a covenant not to compete with the
Company for a period of twelve months following termination of employment.
STOCK OPTION PLANS
In July 1996, the Board of Directors adopted, and the stockholders of the
Company approved, the 1996 Stock Incentive Plan (the "Incentive Plan") and the
1996 Affiliated Professionals Stock Plan (the "Professionals Plan," and together
with the Incentive Plan, the "Plans"). The purpose of the Plans is to provide
non-employee directors, officers, key employees, advisors and medical
professionals employed by Affiliated Practices with additional incentives by
increasing their proprietary interest in the Company or tying a portion of their
compensation to increases in the price of the Company's Common Stock. The
aggregate number of shares of Common Stock subject to the Plans is 1,600,000
shares.
The Incentive Plan permits the Company to grant incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonqualified stock options ("Nonqualified Options"), stock
appreciation rights ("SARs"), restricted shares of Common Stock ("Restricted
Shares") and performance shares of Common Stock (individually, an "Award" and
collectively, "Awards") to directors, officers, key employees and consultants of
the Company. The Professionals Plan permits the Company to grant Awards of
Nonqualified Stock Options, SARs and Restricted Shares to medical professionals
employed by Affiliated Practices. The various types of Awards are described in
more detail below.
The Incentive Plan is intended to qualify for favorable treatment under
Section 16 of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder
("Rule 16b-3") and Awards under the Incentive Plan are intended to qualify for
treatment as "performance-based compensation" under Section 162(m) of the
Internal Revenue Code ("Section 162(m)"). Following the consummation of this
Offering, the Plans will be administered by the Compensation Committee, which
will be comprised of two or more non-employee directors who are "disinterested"
within the meaning of Rule 16b-3 and Section 162(m) (the "Committee"). The
Committee will have, subject to the terms of the Plans, the sole authority to
grant Awards under the Plans, to construe and interpret the Plans and to make
all other determinations and take any and all actions necessary or advisable for
the administration of the Plans. Prior to the consummation of this Offering, the
Plans have been administered by the Company's full Board of Directors.
Options. Options for the purchase of shares of the Common Stock may be
granted under both Plans. The exercise price for the ISOs granted under the
Incentive Plan may be no less than the fair market value of the Common Stock on
the date of grant (or 110% in the case of ISOs granted to employees owning more
than 10% of the Common Stock). Only employees of the Company are eligible to
receive ISOs. The exercise price for Nonqualified Options granted under the
Plans will generally be the fair market value of the Common
53
<PAGE> 55
Stock on the date of grant; however, the Compensation Committee may set an
exercise price at less than fair market value if it determines that special
circumstances warrant a lower price. Options will be exercisable during the
period specified in each option agreement and will generally be exercisable in
installments pursuant to a vesting schedule to be designated by the Committee.
No Option will remain exercisable later than ten years after the date of grant
(or five years from the date of grant in the case of ISOs granted to holders of
more than 10% of the Common Stock).
SARs. Stock appreciation rights may be granted under both Plans in tandem
with Options. An SAR represents the right to receive from the Company the
difference (the "Spread"), or a percentage thereof not in excess of 100 percent,
between the exercise price of the related Option and the market value of the
Common Stock on the date of exercise of the SAR. SARs may only be exercised at a
time when the related Option is exercisable and the Spread is positive, and the
exercise requires the surrender of the related Option for cancellation. The
amount payable by the Company upon exercise may be paid in cash, Common Stock or
a combination thereof, as determined by the Committee.
Restricted Shares. Restricted Shares may be granted under both Plans. An
award of Restricted Shares involves the immediate issuance by the Company to a
participating employee of ownership of a specific number of shares of Common
Stock in consideration of the performance of services. The employee is entitled
immediately to voting, dividend and other ownership rights in the shares. The
issuance may be made without additional consideration, or for payment of an
amount that is less than the market value of the shares on the date of grant, as
the Committee may determine. Restricted Shares must be subject to a "substantial
risk of forfeiture" for a period to be determined by the Committee. An example
of such forfeiture would be a provision that the employee's Restricted Shares
would be forfeited if he or she ceased to serve the Company as an officer at any
time before the end of a specified period of years. In order to enforce these
forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in a manner and to the extent prescribed by the
Committee for the period during which the forfeiture provisions are to continue.
The Committee may also condition the vesting of the Restricted Shares on the
achievement of specified performance objectives ("Management Objectives").
Performance Shares. Performance Shares may be granted under the Incentive
Plan. A Performance Share is the equivalent of one share of Common Stock. An
Incentive Plan participant may be granted any number of Performance Shares. The
participant will be given one or more Management Objectives to meet within a
specified period (the "Performance Period"). Maximum or minimum level of
acceptable achievement for each Management Objective will be established by the
Committee. If, by the end of the Performance Period, the specified Management
Objectives have been satisfied, the participant will be deemed to have fully
earned the Performance Shares. If the Management Objectives have not been
satisfied in full but predetermined minimum level of acceptable achievement has
been attained or exceeded, the participant will be deemed to have partly earned
the Performance Shares in accordance with a predetermined formula. To the extent
earned, the Performance Shares will be paid to the participant at the time and
in the manner determined by the Committee in cash or in shares of Common Stock
or any combination thereof.
Management Objectives may be described in terms of either Company-wide
objectives or objectives that are related to the performance of a department or
function within the Company or with respect to which the participant provides
services. The Committee may adjust any Management Objectives and the related
minimum level of acceptable achievement if, in its judgment, transactions or
events have occurred after the date of grant that are unrelated to the
participant's performance and result in distortion of the Management Objectives
or the related minimum level of acceptable achievement.
Notwithstanding the provisions of any agreement relating to an Award, in
the event of a change or threatened "change in control" (as defined in the
Plans) of the Company and in the event of certain mergers and reorganizations of
the Company, the Committee will have the discretion to (i) declare all Options
immediately exercisable, (ii) determine that all or any portion of conditions
associated with a Restricted Share or Performance Share award have been met,
(iii) grant SARs or cash bonus awards to holders of outstanding Options, (iv)
pay cash in exchange for the cancellation of Nonqualified Options, SARs,
54
<PAGE> 56
Performance Share Awards or Restricted Shares, or (v) make other adjustments or
amendments to the Plans and outstanding Awards and/or substitute new Awards.
The Company anticipates that prior to or upon the consummation of this
Offering it will have outstanding options to purchase a total of approximately
682,667 shares of Common Stock which are generally exercisable for a period of
ten years from the date of grant, are subject to three to five year vesting, and
have an exercise price equal to fair market value on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
To date executive compensation has been determined by the Company's chief
executive officer. Shortly after completion of the Offering, the Company intends
to establish a Compensation Committee of the Board of Directors, a majority of
whom will be independent directors.
55
<PAGE> 57
CERTAIN TRANSACTIONS
The information set forth herein briefly describes transactions over the
past three years between the Company and its directors, officers and 5%
stockholders. These transactions have been approved by the Company's Board of
Directors. Future transactions after the Offering, if any, with affiliated
parties will be approved by a majority of the Company's independent directors
and will be on terms no less favorable to the Company than those that could be
obtained from unaffiliated parties.
As part of a reorganization of the Company in November 1996, the Company
completed an acquisition of all the outstanding stock of Vision 21 Managed
Eyecare of Tampa Bay, Inc. in exchange for a certain number of shares of Common
Stock of the Company. In addition, in November 1996, the Company completed an
acquisition of all of the outstanding stock of Dr. Gillette & Associates, Inc.
(renamed Vision 21 Physician Practice Management Company). The shareholders of
these entities acquired by the Company were Theodore Gillette, Richard Sanchez
and Peter Fontaine. Dr. Gillette and Mr. Sanchez are executive officers and
directors of the Company and Mr. Fontaine is a director of the Company. In
connection with these transactions, Gillette, Sanchez and Fontaine received an
aggregate of 1,724,574, 600,302 and 360,442 shares of Common Stock,
respectively.
Effective December 1, 1996 the Company acquired all the business assets of
Gillette, Beiler & Associates, #6965 P.A. ("G&A"), a Florida professional
association owned in part by Theodore Gillette, an executive officer and
director of the Company, with nine optometry offices located in Tampa, Port
Richey, Clearwater, St. Petersburg, Palm Harbor, and Seminole, Florida. As
consideration for the acquisition, G&A received 373,971 shares of Common Stock,
of which Dr. Gillette is the beneficial owner of 196,064 shares, and a
promissory note in the amount of $416,103, which bears interest at 8% per annum.
The promissory note will be paid in full from the net proceeds of the Offering.
The Company has an agreement to provide practice management services to
G&A, pursuant to which G&A made payments of $392,206, $423,890 and $538,982 in
1994, 1995 and 1996, respectively. In December 1996, the Company and G&A entered
into a new Management Agreement pursuant to which the Company provides practice
management services for a management fee equal to 27% of the gross revenue of
G&A's eye care practice. Payments earned by the Company under the new Management
Agreement in the three months ended March 31, 1997 were $292,895.
The Company entered into an Agreement with Bruce S. Maller, a director of
the Company, dated May 10, 1996, pursuant to which the Company issued to Maller
144,705 shares of Common Stock for services previously rendered by Mr. Maller to
the Company. In October 1996, the Company finalized a five-year Advisory
Agreement with Mr. Maller (the "Advisory Agreement"), pursuant to which Mr.
Maller agreed to render certain advisory services to the Company, including the
identification and integration of ophthalmology practices and the provision of
assistance to the Company with its strategic planning, growth and development.
In consideration for such services, the Company issued to Mr. Maller 135,165
shares of Common Stock. A decreasing percentage of such shares are subject to
forfeiture in the event the Advisory Agreement is terminated "for cause" prior
to January 1, 2000. The shares issued to Mr. Maller pursuant to the Advisory
Agreement are subject to certain piggyback and demand registration rights. See
"Description of Capital Stock -- Registration Rights."
The Company entered into a Services Agreement with the BSM Consulting Group
("BSM"), a consulting company which employs Mr. Maller, dated as of March 10,
1996 (the "Services Agreement"), pursuant to which BSM agreed to provide
substantial consulting services to assist the Company with its operational and
management development. The Services Agreement is for a term of five years and
the fees payable to BSM for such services are approximately $40,000 per month.
Payments earned by BSM under the Services Agreement were $332,128 and $120,912
in 1996 and the three months ended March 31, 1997, respectively.
The Company borrowed $3.0 million from Mr. Fontaine pursuant to a
Promissory Note dated June 1996 (the "Fontaine Note"). The Fontaine Note accrues
interest at 8% per annum and is due in full upon completion of the Company's
initial public offering, and will be repaid in full from the proceeds of the
initial
56
<PAGE> 58
public offering. In addition, the Company borrowed $200,000 and $500,000 from
Mr. Fontaine in November and December 1996, respectively, for working capital
pursuant to unsecured promissory notes. The unsecured promissory notes each bear
interest at 8.5% per annum and are due in January 1998.
Effective September 9, 1996, the Company entered into a Services Agreement
(the "Services Agreement") with Dr. Richard L. Lindstrom, a director of the
Company, who pursuant to the Services Agreement provides certain consulting and
advisory services primarily related to assisting the Company in the
identification and integration of Affiliated Providers into the Company's
managed eye care delivery network and assistance in the development of
Affiliated Provider practices. In consideration for his services, Dr. Lindstrom
is paid an annual base salary of $60,000 and received 108,132 shares of Common
Stock, of which 40% is non-forfeitable and the remaining 60% is subject to
forfeiture in various amounts if the Services Agreement is terminated by the
Company for cause or by Dr. Lindstrom prior to August 31, 2000. The shares
issued to Dr. Lindstrom pursuant to the Services Agreement are subject to
certain piggyback and demand registration rights. See "Description of Capital
Stock -- Registration Rights."
Effective December 1, 1996, the Company acquired all the business assets of
Lindstrom, Samuelson and Hardten Ophthalmology Associates, P.A. ("Lindstrom
P.A."), in which Dr. Lindstrom owns a majority interest, at a purchase price of
247,108 shares of Common Stock of the Company, of which Lindstrom received
151,732 shares, and a promissory note in the amount of $460,416. The shares are
subject to certain registration rights. See "Description of Capital
Stock -- Registration Rights." In connection with the acquisition, Lindstrom
P.A. and the Company entered into a Management Agreement which provides for a
management fee of 30% of the amounts remaining after certain expenses are paid
as set forth in the Management Agreement. The Company earned fees of $63,283
under the Management Agreement in the three months ended March 31, 1997. The
promissory note bears interest at 8% per annum will be paid in full from the net
proceeds of this Offering.
The Company acquired all of the stock of Midwest Eye Care Alliance, Inc.
("M.E.C.A."), a corporation in which Dr. Lindstrom owned an 8% interest, for a
total purchase price of $700,000, which is payable upon completion of the
Company's initial public offering. The Company also entered into Regional
Services Agreements with the shareholders of M.E.C.A., including Dr. Lindstrom
(collectively the "Coordinators"), effective at the time of an initial public
offering of the Company (collectively the "Regional Agreements"). The Regional
Agreements provide for the Coordinators to render advisory services to the
Company in connection with identifying potential ophthalmology and optometry
practices in the Midwestern region of the United States for acquisition or
affiliation and assisting the Company in negotiating agreements with such
practices in exchange for specific cash compensation that varies among the
Regional Agreements. Dr. Lindstrom will receive a total of $40,000 per year for
each of three years for his advisory services.
Effective December 1, 1996, the Company acquired all the business assets of
Eye Institute of Southern Arizona, P.C. ("Eye Institute"), an Arizona
professional corporation located in Tucson, Arizona and engaged in the provision
of ophthalmology services. Jeffrey I. Katz, M.D., a director of the Company,
owns a 50% interest in Eye Institute. The acquisition was accomplished by a
merger of Eye Institute into the Company's wholly-owned subsidiary, Vision 21 of
Southern Arizona, Inc. As consideration for the acquisition, Dr. Katz received
198,306 shares Common Stock. The shares are subject to certain registration
rights. See "Description of Capital Stock -- Registration Rights." As a result
of the merger of Eye Institute with and into Vision 21 of Southern Arizona,
Inc., Vision 21 of Southern Arizona, Inc. assumed Eye Institute's role as
business manager under a Management Agreement between Eye Institute and Vital
Sight, P.C., a newly-formed Arizona professional corporation to which Eye
Institute had transferred its medical assets prior to the merger. The Management
Agreement provides for a management fee of 35% of the amounts remaining after
certain expenses are paid as set forth in the Management Agreement. The Company
earned fees of $150,937 under the Management Agreement in the three months ended
March 31, 1997. Upon satisfaction of certain conditions in the future, the
Company and the shareholders of Eye Institute will transfer certain ASC assets
from such shareholders' wholly-owned corporation to a new, wholly-owned
corporation which is currently subject to a Management Agreement with Vision
Twenty-One of Southern Arizona, Inc. The parties have agreed to use their best
efforts to satisfy the conditions. Income associated with such ASC line of
business would thereafter become subject to the business management fee. The
obligation to transfer the ASC business
57
<PAGE> 59
shall terminate if the conditions of closing are not met within eighteen months
of the closing date of the merger of Eye Institute into Vision Twenty-One of
Southern Arizona, Inc. As consideration for this transaction, the shareholders
of Eye Institute are entitled, subject to post-closing adjustments, to receive
140,271 shares of Common Stock.
Effective December 1, 1996, the Company acquired all the business assets of
(i) Dr. Smith & Associates, #6950 P.A. ("Smith #6950"), a Florida professional
association, (ii) Dr. Smith & Associates, #6958 P.A. ("Smith #6958"), a Florida
professional association, and (iii) Dr. Smith & Associates, #6966 P.A. ("Smith
#6966"), a Florida professional association. Dr. Paul R. Smith, a Selling
Shareholder, is the sole shareholder of all such professional associations. The
acquisitions were accomplished by the merger of Smith #6950 into the Company and
a sale of the business assets of Smith #6958 and Smith #6966 to the Company. As
consideration for the acquisitions, (i) Dr. Smith, the sole shareholder of Smith
#6950 received 32,808 shares of Common Stock, (ii) Smith #6958 received 68,758
shares of Common Stock and a promissory note in the amount of $72,421 which
bears interest at 8% per annum, and (iii) Smith #6966 received 68,759 shares of
Common Stock and a promissory note in the amount of $72,421 which bears interest
at 8% per annum. The shares are subject to certain registration rights. See
"Description of Capital Stock -- Registration Rights." The Company has agreed to
provide practice management services to Smith #6950, #6958 and #6966. In
December 1996, the Company and Smith #6958 and #6966 entered into new Management
Agreements, and the Company assumed Smith #6950's role as business manager of a
new Management Agreement between Smith #6950 and Smith #6952 (a newly formed
professional association to which Smith #6958 had transferred its optometric
assets prior to the merger), pursuant to which the Company provides practice
management services. Payments earned by the Company pursuant to the new
Management Agreements were $80,736 for the three months ended March 31, 1997.
Effective December 1, 1996, the Company acquired (i) all the business
assets of Daniel B. Feller, M.D., P.C. ("Feller"), an Arizona professional
corporation with two offices in Phoenix, Arizona and one office in Scottsdale,
Arizona, engaged in the provision of ophthalmology services, (ii) all the
business assets of Eye Specialists of Arizona Network, P.C. ("Network"), an
Arizona professional corporation located in Scottsdale, Arizona and engaged in a
managed care business, and (iii) all the business assets of Sharona Optical,
Inc. ("Sharona"), an Arizona corporation located in Scottsdale, Arizona and
engaged in a retail optical business. Dr. Daniel B. Feller, an executive officer
of the Company, is the sole shareholder of Feller, Network and Sharona. Such
acquisitions were accomplished by a merger of Feller into the Company and a sale
of the assets of Network and Sharona to the Company. Sharona also transferred
all of its optical assets to Feller in connection with the acquisitions. As
consideration for the acquisitions, (i) Dr. Feller as the sole shareholder of
Feller received 144,869 shares of Common Stock, (ii) Network received 71,670
shares of Common Stock and a promissory note in the amount of $88,614 which
bears interest at 8% per annum, and (iii) Sharona received 63,983 shares of
Common Stock and a promissory note in the amount of $61,837 which bears interest
at 8% per annum. The shares are subject to certain registration rights. See
"Description of Capital Stock -- Registration Rights." As a result of the merger
of Feller with and into the Company, the Company assumed Feller's role as
Business Manager under a Management Agreement between Feller and Millennium
Vision, P.C., a newly-formed Arizona professional corporation to which Feller
had transferred its medical assets prior to the merger. The Management Agreement
provides for a management fee of 36.7% of the amounts remaining after certain
expenses are paid as set forth in the Management Agreement. The Company earned
fees of $203,360 under the Management Agreement in the three months ended March
31, 1997.
Effective May 1, 1997, the Company acquired all the medical assets of Drs.
Smith, Porter & Associates, P.A. ("Smith P.A."). Dr. Paul R. Smith is the sole
shareholder of Smith P.A and a Selling Shareholder. The acquisition was
accomplished by a sale of the business assets of Smith P.A. by the Company. As
consideration for the acquisition, Smith P.A. received 11,411 shares of Common
Stock, $29,065 in cash and a promissory note in the amount of $18,865. The
shares are subject to certain registration rights. In May 1997, the Company and
Smith P.A. entered into a Management Agreement pursuant to which the Company
will provide practice management services.
58
<PAGE> 60
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Company's outstanding Common Stock as of June 1, 1997 and as
adjusted to reflect the sale of the Common Stock offered hereby by (i) each
person or entity known by the Company to be the beneficial owners of more than
5% of the outstanding shares of Common Stock, (ii) each director or executive
officer of the Company who beneficially owns any shares of Common Stock, (iii)
each Selling Stockholder and (iv) all directors and executive officers of the
Company as a group. Except as otherwise indicated, the persons listed below have
sole voting and investment power with respect to all shares of Common Stock
owned by them, except to the extent such power may be shared with a spouse. The
table assumes that the underwriters' over-allotment option is exercised in full.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER OFFERING
SHARES BENEFICIALLY IF OVER-ALLOTMENT
OWNED PRIOR TO PERCENT BENEFICIALLY OPTIONS ARE
THE OFFERING(2) OWNED AFTER OFFERING IF NUMBER OF SHARES EXERCISED IN FULL(2)
NAME AND ADDRESS ------------------------ OVER-ALLOTMENT OPTIONS SUBJECT TO ------------------------
OF BENEFICIAL OWNER(1) NUMBER PERCENT ARE NOT EXERCISED OVER-ALLOTMENT OPTIONS(3) NUMBER PERCENT
- ---------------------- --------------- ------- ------------------------- ------------------------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND
EXECUTIVE OFFICERS
Gillette Family
Limited
Partnership(4)...... 1,702,494 27.9% 20.7% -- 1,702,494 20.2%
Theodore N. Gillette,
O.D.(5)............. 1,898,558 31.1 23.1 1,898,558 22.5
Sanchez Family Limited
Partnership(6)...... 593,329 9.7 7.2 593,329 7.0
Richard L.
Sanchez(7).......... 593,329 9.7 7.2 -- 593,329 7.0
Peter J. Fontaine..... 360,422 5.9 4.4 -- 360,422 4.3
Richard L. Lindstrom,
M.D.(8)............. 231,686 3.8 2.8 11,590 220,096 2.6
Bruce S. Maller(9).... 161,355 2.6 2.0 13,523 147,832 1.8
BSM Investments
Ltd................. 108,976 1.8 1.3 -- 108,976 1.3
Jeffrey I. Katz,
M.D................. 198,306 3.2 2.4 -- 198,306 2.4
Richard T.
Welch(10)........... 64,000 1.0 * -- 64,000 *
All directors and
executive officers
as a group (8
persons)............ 3,511,868 56.9 42.4 25,113 3,486,755 41.0
OTHER 5% STOCKHOLDERS
Prudential Securities
Group Inc.(11)...... 533,333 8.0 6.1 -- 533,333 6.0
Piper Jaffray
Healthcare Fund II
Limited
Partnership(12)..... 333,333 5.2 3.9 -- 333,333 3.8
OTHER SELLING
STOCKHOLDERS
Robert Kennedy,
O.D.(13)............ 76,895 1.3 * 3,847 73,048 *
Thomas Samuelson,
M.D.(8)............. 41,185 * * 2,060 39,125 *
David R. Hardten,
M.D.(8)............. 82,369 1.3 1.0 4,121 78,248 *
Gregory W. Kraupa,
O.D................. 31,572 * * 1,579 29,993 *
Bradley D. Richter,
O.D................. 31,572 * * 1,579 29,993 *
Jerald Turner,
M.D.(14)............ 129,398 2.1 1.6 6,473 122,925 1.5
William J. Fishkind,
M.D................. 163,858 2.7 2.0 8,197 155,661 1.9
Brock K. Bakewell,
M.D................. 163,858 2.7 2.0 8,197 155,661 1.9
Paul R. Smith, O.D.... 181,736 3.0 2.2 8,521 173,215 2.1
Mark Beiler, O.D...... 36,312 * * 1,817 34,495 *
Mark Salta, O.D....... 23,971 * * 1,199 22,772 *
Daniel Palmisano,
O.D................. 21,054 * * 1,053 20,001 *
Richard L. Short,
D.O................. 128,541 2.1 1.6 6,430 122,111 1.5
ACFS Limited
Partnership(15)..... 29,053 * * 15,511 13,542 *
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 7209 Bryan Dairy Road, Largo, Florida 34647. See
"Management -- Directors and Executive Officers," "Management -- Employment
Agreements" and "Certain Transactions" for discussion of any material
relationship which any Selling Stockholder has had with the Company within
the past three years.
(2) Based on 6,112,681 shares of Common Stock outstanding prior to this
Offering (excluding 79,805 shares held in escrow in conjunction with
certain acquisitions, the "Contingent Shares") and 8,212,681 shares
59
<PAGE> 61
of Common Stock to be outstanding immediately after the Offering excluding
Contingent Shares (8,431,984 shares to be outstanding if the Company's and
the Selling Shareholder's over-allotment options to purchase from the
Company and the Selling Shareholders up to an additional 315,000 shares of
Common Stock granted to the several underwriters are exercised in full,
excluding Contingent Shares). Pursuant to the rules of the Securities and
Exchange Commission (the "Commission"), certain shares of Common Stock
which a person has the right to acquire within 60 days of the date hereof
pursuant to the exercise of stock options are deemed to be outstanding for
the purpose of computing the percentage ownership of such person but are
not deemed outstanding for the purpose of computing the percentage
ownership of any other person.
(3) Excludes 219,303 shares covered by over-allotment options granted to the
several underwriters by the Company.
(4) Shares are owned by the Gillette Family Limited Partnership, a Nevada
Limited Partnership, in which Dr. Theodore Gillette exercises voting
control.
(5) Represents (a) 1,702,494 shares owned by the Gillette Family Limited
Partnership over which Dr. Theodore Gillette has voting control as the sole
shareholder of the corporate general partners (b) 9,077 shares owned by
Gillette, Beiler & Associates, P.A. and (c) 186,987 shares owned
individually. See "Certain Transactions."
(6) Shares are owned by the Sanchez Family Limited Partnership, a Nevada
Limited Partnership in which Richard L. Sanchez exercises voting control.
(7) Represents 593,329 shares owned by the Sanchez Family Limited Partnership
over which Richard L. Sanchez has voting control.
(8) Excludes an aggregate of 56,356 shares held in escrow in connection with
the Company's acquisition of the business assets of Lindstrom, Samuelson,
Hardten Ophthalmology, P.A., for Messrs. Lindstrom, Samuelson and Hardten
of 28,178, 9,393 and 18,785 respectively.
(9) Includes 108,976 owned by BSM Investment, Ltd., over which Bruce Maller has
voting control.
(10) Represents shares issuable pursuant to options to purchase an aggregate of
80,000 shares, of which 64,000 shares vest and are fully exercisable at the
time of the Offering.
(11) Represents shares issuable to Prudential Securities Group, Inc., One
Seaport Plaza, 27th Floor, New York, New York 10292 pursuant to currently
exercisable warrants.
(12) Represents shares issuable to Piper Jaffray Healthcare Fund II Limited
Partnership, c/o Piper Jaffray Ventures, Inc. Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, Minnesota 55401 pursuant to warrants
exercisable at the time of completion of the Offering.
(13) Excludes 6,209 shares held in escrow in connection with the Company's
acquisition of the business assets of J&R Kennedy, O.D., P.A.
(14) Excludes 17,240 shares held in escrow in connection with the Company's
acquisition of the business assets of Jerald B. Turner, M.D., P.A.
(15) ACFS Limited Partnership, c/o Advent International, 101 Federal Street,
Boston, Massachusetts 02110.
60
<PAGE> 62
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, $.001 par value per share (the "Common Stock"), and (ii)
10,000,000 shares of preferred stock, $.001 par value per share (the "Preferred
Stock"). As of June 1, 1997, an aggregate of 8,212,681 shares of Common Stock
were outstanding and held of record by 28 stockholders and no shares of
Preferred Stock were outstanding. Copies of the Articles of Incorporation and
Bylaws have been filed as exhibits to the Registration Statement and are
incorporated by reference herein.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to the prior rights of the
holders of Preferred Stock, holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors from funds legally
available therefor, and to share ratably in the assets of the Company legally
available for distribution to the stockholders in the event of liquidation or
dissolution. The Common Stock has no preemptive rights and no subscription or
redemption privileges. The Common Stock does not have cumulative voting rights,
which means the holder or holders of more than half of the shares voting for the
election of directors can elect all the directors then being elected. See
"Principal and Selling Shareholders." All the outstanding shares of Common Stock
are, and the shares being offered hereby will be, when issued and paid for,
fully paid and not liable for further call or assessment.
WARRANTS
In December 1996, the Company issued to certain unrelated parties warrants
exchangeable for an aggregate maximum of 208,333 shares of Common Stock at an
exchange price ranging from $6.00 to $7.11 per share, or in a cashless exchange
for a reduced number of shares pursuant to a formula. The warrants are
exchangeable at any time up through the earlier of December 19, 2003 or five
years from the date of any initial public offering by the Company.
In February 1997, the Company issued to Piper Jaffray Healthcare Fund II
Limited Partnership ("Piper Jaffray") a warrant exchangeable for an aggregate
maximum of 333,333 shares of Common Stock at an exchange price ranging from
$6.00 to $7.11, or in a cashless exchange for a reduced number of shares
pursuant to a formula. The warrants are exchangeable at any time up through the
earlier of December 19, 2003 or five years from the date of any initial public
offering by the Company.
In April 1997, the Company entered into a credit facility in the aggregate
amount of $5.0 million with Prudential Securities Group Inc. ("Prudential"),
pursuant to a Note and Warrant Purchase Agreement amended in June 1997 (the
"Amended and Restated Note and Warrant Purchase Agreement"), the Company issued
to Prudential a warrant (the "Warrant") exchangeable for up to an aggregate of
633,333 shares of Common Stock in three separate tranches as follows: (Tranche
A) up to 533,333 shares at any time during the period from the earlier to occur
of (i) an event of default (as defined in the Amended Agreement), (ii) an
initial public offering by the Company or (iii) October 10, 1997 to October 10,
2002, at an exercise price per share equal to 80% of the Market Price (as
defined in the Amended and Restated Note and Warrant Purchase Agreement),
provided however, the exercise price shall be reduced to the greater of 50% of
the Market Price and $6.00 per share, if an initial public offering shall not
have occurred by January 1, 1998 or an Event of Default or Note Termination Date
shall have occurred, provided further however, that in no event shall the
exercise price be greater than $7.11 per share; (Tranche B) up to 50,000 shares,
if and only if the principal amount of the outstanding note payable by the
Company to Prudential (the "Prudential Note"), together with accrued interest
thereon and all other amounts payable under the Amended and Restated Note and
Warrant Purchase Agreement in respect of the Prudential Note, shall not have
been paid in full on or prior to October 10, 1997, in which case such Warrant
may be exercised during the period from January 1, 1998 until October 10, 2002
at an exercise price equal to the greater of $6.00 per share and 50% of the
Market
61
<PAGE> 63
Price; and (Tranche C) up to 50,000 shares, if and only if the principal amount
of the outstanding note, together with accrued interest thereon and all other
amounts payable under the Amended and Restated Note and Warrant Purchase
Agreement in respect of the outstanding note shall not have been paid in full on
or prior to January 10, 1998, in which case such Warrant may be exercised during
the period from January 10, 1998 until January 10, 2003 at an exercise price
equal to the higher of $6.00 per share and 50% of the Market Price. See
"Underwriting." See "Underwriting," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 11 to Notes to
Consolidated Financial Statements.
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred Stock.
The Preferred Stock may be issued from time to time in one or more series, and
the Board of Directors is authorized to fix the dividend rights, dividend rates,
any conversion or exchange rights, any voting rights, rights and terms of
redemption (including sinking fund provisions), the redemption price or prices,
the liquidation preferences and any other rights, preferences, privileges and
restrictions of any series of Preferred Stock and the number of shares
constituting such series and the designation thereof. The Company has no present
plans to issue any shares of Preferred Stock.
Depending upon the rights of such Preferred Stock, the issuance of
Preferred Stock could have an adverse effect on holders of Common Stock by
delaying or preventing a change in control of the Company, making removal of the
present management of the Company more difficult or resulting in restrictions
upon the payment of dividends and other distributions to the holders of Common
Stock.
CERTAIN FLORIDA LEGISLATION
The Company is subject to (i) the Florida Control Share Act, which
generally provides that shares acquired in excess of certain specified
thresholds will not possess any voting rights unless such voting rights are
approved by a majority vote of the corporation's disinterested shareholders, and
(ii) the Florida Fair Price Act, which generally requires supermajority approval
by disinterested directors or shareholders of certain specified transactions
between a corporation and holders of more than 10% of the outstanding shares of
the corporation (or their affiliates).
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
AND BYLAWS
Certain provisions of the Articles of Incorporation and the Bylaws of the
Company could have an anti-takeover effect. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
Board of Directors of the Company and in the policies formulated by the Board of
Directors and to discourage certain types of transactions, described below,
which may involve an actual or threatened change of control of the Company. The
provisions are designed to reduce the vulnerability of the Company to an
unsolicited proposal for a takeover of the Company that does not contemplate the
acquisition of all of its outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of the Company. The provisions are also
intended to discourage certain tactics that may be used in proxy fights. The
Board of Directors believes that, as a general rule, such takeover proposals
would not be in the best interests of the Company and its stockholders.
Classified Board of Directors. The Articles of Incorporation provide for
the Board of Directors to be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the Board of
Directors will be elected each year.
The Board of Directors believes that a classified Board of Directors will
help to assure the continuity and stability of the Board of Directors and the
business strategies and policies of the Company as determined by the Board of
Directors, because the likelihood of continuity and stability in the composition
of the Company's Board of Directors and in the policies formulated by the Board
will be enhanced by staggered three-year terms.
62
<PAGE> 64
The classified board provision could have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of the Company, even though such an attempt might be beneficial to the Company
and its stockholders. In addition, the classified board provision could delay
stockholders who do not agree with the policies of the Board of Directors from
removing a majority of the Board for two years, unless they can show cause and
obtain the requisite vote. See "Number of Directors; Removal" below.
Special Meetings of Stockholders. The Articles of Incorporation provide
that no business may be brought up by a stockholder at a meeting of stockholders
except in accordance with certain provisions set forth in the Articles. Such
provisions require a minimum amount of notice to the Company of any such
business and certain disclosures relating to the business intended to be brought
up.
Amendment of Certain Provisions of the Articles of Incorporation. The
Articles of Incorporation requires the affirmative vote of the holders of at
least 80% of the votes entitled to be cast by the holders of all then
outstanding shares of voting stock in order to amend the Articles' provisions
relating to (i) the classified board, (ii) the method of bringing up business at
stockholders' meetings, (iii) the limitation on the liability of directors, (iv)
indemnification of officers and directors, and (v) the required vote to amend
the foregoing provisions. These voting requirements will make it more difficult
for stockholders to make changes in the Articles which would be designed to
facilitate the exercise of control over the Company. In addition, the
requirement for approval by at least an 80% stockholder vote will enable the
holders of a minority of the voting securities of the Company to prevent the
holders of a majority or more of such securities from amending such provisions
of the Articles.
Number of Directors; Removal. The Articles of Incorporation provide that
the Board of Directors will consist of between two and fifteen members, the
exact number to be fixed from time to time by resolution adopted by a majority
of the directors then in office. The Company currently has eight directors and
no vacancies. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, the Articles provide that directors of the Company may
be removed only for cause and only by the affirmative vote of holders of a
majority of the outstanding shares of voting stock. This provision will preclude
a stockholder from removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling the vacancies created by
such removal with its own nominees.
REGISTRATION RIGHTS
The Company has granted holders of 3,048,903 shares of Common Stock
received in connection with the Company's acquisitions of the allowable assets
of certain optometric and ophthalmology practices certain piggyback and demand
registration rights pursuant to registration rights agreements. In general, each
holder has piggyback registration rights with respect to a maximum of 60% (30%
of which may be registered pursuant to an initial public offering) of such
holder's shares in the event the Company proposes to file a registration
statement under the Securities Act of 1933 for the purposes of effecting an
underwritten public offering of shares of the Company's Common Stock. Each
holder also has demand registration rights, which are effective one year after
completion of an initial public offering, to obligate the Company to file up to
two registration statements covering shares that were not registered in a prior
registration statement up to the 60% maximum. These rights expire two years from
the date of completion of an initial public offering and are subject to certain
conditions and limitations, including the right of the Company to limit the
number of shares included in the registration statement to the amount
recommended by the managing underwriter. The Company is obligated to pay all
costs and expenses of the registration statement except for underwriting
discounts, fees and commissions.
The Company has granted certain piggyback and demand registration rights to
Bruce Maller and Richard Lindstrom with respect to a total of 378,463 shares of
Common Stock. Following an initial public offering of Common Stock of the
Company, in the event the Company proposes to file a registration statement
under the Securities Act for purposes of effecting a public offering of the
Company's Common Stock, Maller and Lindstrom will be entitled to include up to
20% of their shares in the registration statement. If Maller and Lindstrom are
unable to sell 20% of their shares pursuant to such piggyback registration
rights, they may
63
<PAGE> 65
require the Company, on one occasion, to file a registration statement under the
Securities Act registering such number of shares as is necessary to permit them
to sell the full 20%. These rights expire upon the expiration of their
respective advisory and services agreements with the Company and are subject to
certain conditions and limitations, including the right of the Company to limit
the number of shares included in the registration statement to the amount
recommended by the managing underwriter. The Company is obligated to pay all
costs and expenses of the registration statement except for underwriting
discounts, fees and commissions.
The Company has granted certain piggyback and demand registration rights to
Prudential, Piper Jaffray and certain unrelated parties (the "Warrant Holders")
with respect to a maximum total of 1,175,000 shares of Common Stock underlying
the warrants issued to the Warrant Holders. In the event the warrants are
exchanged for shares, the Warrant Holders have piggyback registration rights
with respect to the shares in the event the Company proposes to file a
registration statement under the Securities Act for purposes of effecting a
public offering of shares of the Common Stock. Each of the Warrant Holders also
have demand registration rights to obligate the Company at any time after six
months from the date of any public offering, on one occasion, to use its best
efforts to file a registration statement covering any or all shares not
registered in a prior registration statement. These rights are subject to
certain conditions and limitations, including the right of the Company to limit
the number of shares in the registration to the amount recommended by the
managing underwriter. The Company is obligated to pay all costs and expenses of
the registration statement except for underwriting discounts, fees and
commissions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
64
<PAGE> 66
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 8,212,681 shares of
Common Stock outstanding. Of these shares, the 2,100,000 shares offered hereby
will be freely tradeable without restriction or further registration under the
Securities Act (2,415,000 if the Underwriters' over-allotment options are
exercised in full) unless purchased by "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act. The remaining 6,112,681 shares
outstanding are "Restricted Securities" as that term is defined in Rule 144 and
fall into three categories: (i) 2,830,023 shares held by "affiliates" who have
already held their shares for more than one year, (ii) 1,223,479 shares held by
affiliates who have not held their shares for more than one year and (iii)
2,059,179 shares held by non-affiliates who have not held their shares for more
than one year. In addition, 1,600,000 shares of Common Stock are reserved under
the Plans for exercise of stock options granted by the Company, of which options
to purchase approximately 682,667 shares have been granted (the "Option
Shares"). See "Management -- Stock Option Plans." Finally, 1,175,000 shares of
Common Stock are reserved for issuance in the event the warrants issued to
Prudential, Piper Jaffray and certain unrelated parties are exercised (the
"Warrant Shares"). See "Description of Capital Stock -- Warrants" and
"Underwriting."
The Restricted Securities may not be sold unless they are registered under
the Securities Act or are sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144. Rule 144 imposes certain restrictions and
limitations on resale. In general, under Rule 144 as currently in effect, any
affiliate of the Company or any person (or persons whose shares are aggregated
in accordance with the Rule), who has beneficially owned Restricted Securities
for at least one year would be entitled to sell, within any three-month period a
number of such shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 76,161 shares after the
Offering), or the reported average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain manner of sale restrictions and notice requirements and
to the availability of current public information concerning the Company. A
person (or persons whose shares are aggregated) who is not an "affiliate" of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned such shares for at least two years, is currently entitled to
sell such shares under Rule 144(k) without regard to the availability of current
public information, volume limitations, manner of sales provisions or notice
requirements. Beginning 90 days after the date of this Prospectus, 2,820,484
Restricted Securities held by affiliates will be eligible for sale in the public
market pursuant to Rule 144, but are subject to certain "lock-up" agreements
described below and beginning September 9, 1997; December 31, 1997; January 15,
1998; and May 1, 1998, respectively, 43,252; 375,983; 592,788; and 11,411
Restricted Securities held by affiliates will be eligible for sale in the public
market pursuant to Rule 144 unless otherwise registered pursuant to certain
registration rights agreements, but are subject to certain lock-up and other
contractual arrangements described below. Beginning on December 31, 1997;
January 15, 1998; April 1, 1998; and May 1, 1998, respectively, 275,860;
898,610; 128,541; and 169,150 Restricted Securities held by non-affiliates will
be eligible for sale on the public market pursuant to Rule 144 unless otherwise
registered pursuant to certain registration rights agreements, but are subject
to certain lock-up and other contractual agreements related to Rule 144
described below.
The Company and certain of its officers and directors which include
affiliates and the Selling Stockholders holding 4,653,242 Restricted Securities
(3,511,868 Restricted Securities in the event the over-allotment option is not
exercised), have executed agreements pursuant to which each has agreed that they
will not, directly or indirectly, offer, sell, offer to sell, contract to sell,
pledge, grant any option to purchase or otherwise sell or dispose (or announce
any offer, sale, offer of sale, contract of sale, pledge, grant of any option to
purchase or other sale or disposition) of any shares of Common Stock or any
other securities convertible into, or exercisable or exchangeable for, Common
Stock or other capital stock of the Company or any right to purchase or acquire
Common Stock or other capital stock of the Company, for a period of 180 days
after the date of this Prospectus, without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, except for
bona fide gifts or transfers effected by such stockholders other than on any
securities exchange or in the over-the-counter market to donees or transferees
that agree to be bound by similar agreements and except for sales made by the
Selling Stockholders pursuant to options granted to the
65
<PAGE> 67
Underwriters to purchase an additional 315,000 shares to cover over-allotment
options, if any. Prudential Securities Incorporated may, in its sole discretion,
at any time and without notice, release all or any portion of the shares of
Common Stock subject to such agreements. In addition, certain non-affiliates of
the Company holding 1,472,161 Restricted Securities have entered into
contractual 180-day lock-up agreements with the Company similar to the above
agreements which prohibit the direct or indirect disposition of shares without
the prior written consent of the Company. Such non-affiliates have also
contractually agreed with the Company to be bound by the same Rule 144
restrictions placed on affiliates of the Company.
The Option Shares are subject to all the limitations on resale imposed by
Rule 701. In general, shares subject to Rule 701 are subject to the resale
restrictions of Rule 144. However, with respect to resales by non-affiliates, 90
days after the date of this Prospectus, the Option Shares may be resold without
conformance with Rule 144 except for its manner of sale limitation. With respect
to resale of Option Shares by affiliates, 90 days after the date of this
Prospectus, all Rule 144 limitations continue to apply except the one-year
holding period. Additionally, the Company intends to file one or more
registration statements under the Securities Act to register all shares of
Common Stock subject to then outstanding stock options and Common Stock issuable
pursuant to the Plans. The Company expects to file these registration statements
promptly following the closing of the Offering, and such registration statements
are expected to become effective upon filing. Shares covered by these
registration statements will thereupon be eligible for sale in the public
markets, subject to lock-up agreements, to the extent applicable. See
"Management." The Warrant Shares are also subject to registration rights
agreements requiring the Company to register such shares under certain
circumstances and otherwise will be eligible for resale subject to all of the
limitations on resale imposed by Rule 144.
66
<PAGE> 68
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, and Wheat, First Securities, Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase from
the Company the number of shares of Common Stock set forth below opposite their
respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Prudential Securities Incorporated..........................
Wheat, First Securities, Inc................................
---------
Total................................................ 2,100,000
=========
</TABLE>
The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all the shares of Common Stock offered
hereby if any are purchased.
The Underwriters, through their Representatives, have advised the Company
and the Selling Stockholders that they propose to offer the Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of
$ per share to certain other dealers. After the initial public
offering, the offering price and the concessions may be changed by the
Representatives.
The Company and the Selling Stockholders have granted the Underwriters
options, exercisable for 30 days from the date of this Prospectus, to purchase
up to 315,000 additional shares of Common Stock at the initial public offering
price, less underwriting discounts and commissions, as set forth on the cover
page of this Prospectus. The Underwriters may exercise such options solely for
the purpose of covering over-allotments incurred in the sale of the shares of
Common Stock offered hereby. To the extent such options are exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to
.
The Company's officers and directors, who in the aggregate will
beneficially own approximately 3,515,000 shares of Common Stock upon the
completion of the Offering (assuming the Underwriters' over-allotment options
are exercised in full) and the Company, the Selling Stockholders and certain
other stockholders of the Company, have agreed not to, directly or indirectly,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or other capital stock or any
securities convertible into, or exercisable or exchangeable for, any share of
Common Stock or other capital stock of the Company or any right to purchase or
acquire Common Stock or other capital stock of the Company, for a period of 180
days after the date of this Prospectus without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, other than
pursuant to, stock issued by the Company in connection with acquisitions the
exercise of currently outstanding stock options and except for bona fide gifts
or transfers effected by such stockholders other than on any securities exchange
or in the over-the-counter market to donees or transferees that agree to execute
and be bound by such agreements except for sales made by the Selling
Stockholders pursuant to options granted to the Underwriters to purchase an
additional 315,000 shares to cover over-allotments, if any. Prudential
Securities Incorporated may, in its sole discretion, at any time and without
prior notice, release all or any portion of the shares of Common Stock subject
to such agreement.
67
<PAGE> 69
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.
The Representatives have informed the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined through negotiations among the Company and the
Representatives. Among the factors to be considered in making such determination
will be prevailing market conditions, the Company's financial and operating
history and condition, its prospects and the prospects of the industry in
general, the management of the Company, and the market prices of securities for
companies in businesses similar to that of the Company.
In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M under the Securities Exchange Act of 1934,
pursuant to which such persons may bid for or purchase Common Stock for the
purpose of stabilizing its market price. The Underwriters also may create a
short position for the account of the Underwriters by selling more Common Stock
in connection with the Offering than they are committed to purchase from the
Company and in such case may purchase Common Stock in the open market following
completion of the Offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
315,000 shares of Common Stock, by exercising the Underwriters' over-allotment
options referred to above. In addition, Prudential Securities Incorporated, on
behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements with the Underwriters whereby it may reclaim from an Underwriter
(or any selling group member participating in the Offering) for the account of
the other Underwriters, the selling concession with respect to Common stock that
is distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph are required, and, if they are
undertaken, they may be discontinued at any time.
In June 1997, an affiliate of Prudential Securities Incorporated, loaned an
aggregate of $4.7 million to the Company. The loan is represented by a senior
secured note that bears interest at 10% per annum, payable monthly, and is due
at the earlier of January 1, 1998 or upon completion of an initial public
offering. In connection with the loan, Prudential Securities Group Inc. received
a detachable warrant to purchase an aggregate of 633,333 shares of Common Stock
at an exercise price ranging from $6.00 per share to 80% of the price of the
Common Stock in an initial public offering. See "Description of Capital
Stock -- Warrants."
Under the Conduct Rules of the National Association of Securities Dealers,
Inc. ("NASD"), because more than ten percent of the net proceeds from the
Offering are intended to be used to repay the loan made by Prudential, the
public offering price can be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with the
requirement, Wheat, First Securities, Inc. will serve in such role and will
recommend a price in compliance with the requirements of the NASD Conduct Rules.
Wheat, First Securities, Inc., in its role as qualified independent underwriter,
will perform a due diligence investigation and has reviewed and participated in
the preparation of this Prospectus and the registration statement of which this
Prospectus forms a part. In accordance with the NASD Conduct Rules, no NASD
member participating in the distribution is permitted to confirm sales to
accounts over which it exercises discretionary authority without prior specific
written consent.
68
<PAGE> 70
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of Common
Stock offered hereby will be passed upon for the Company and certain of the
Selling Stockholders by Shumaker, Loop & Kendrick, LLP, Tampa, Florida and for
the Underwriters by King & Spalding, Atlanta, Georgia.
EXPERTS
The financial statements of the following entities, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent certified public accountants, to the extent indicated in their
reports thereon also appearing elsewhere herein and the Registration Statement:
- Vision Twenty-One, Inc. and Subsidiaries
- Northwest Eye Specialists, P.L.L.C.
- Cambridge Eye Clinic, P.A. -- John W. Lahr, Optometrist, P.A. and
Eyeglass Express Optical Lab, Inc.
- J & R Kennedy, O.D., P.A. and Roseville Opticians, Inc.
- Lindstrom, Samuelson & Hardten Ophthalmology Associates, P.A. and Vision
Correction Centers, Inc.
- Jerald B. Turner, M.D., P.A.
- Eye Institute of Southern Arizona, P.C.
- Optometric Eye Care Centers, P.A.
- Dr. Smith and Associates, P.A. #6950, Dr. Smith and Associates, P.A.
#6958, and Dr. Smith and Associates, P.A. #6966
- Daniel B. Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists; Eye
Specialists of Arizona Network, P.C.; and Sharona Optical, Inc.
- Gillette, Beiler & Associates, P.A.
Such financial statements have been included herein in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1, together with all exhibits and schedules thereto, the "Registration
Statement," including amendments thereto, under the Securities Act with respect
to the Common Stock offered hereby. This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and related exhibits and schedules for
further information with respect to the Company and the Common Stock offered
hereby. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and in each such instance reference is
made to the copy of such document filed as an exhibit to the Registration
Statement. Each such statement is qualified in its entirety by such reference.
The Registration Statement and the exhibits and schedules forming a part thereof
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, DC 20549, and
should also be available for inspection and copying at the following regional
offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Registration Statement may also be obtained
through the Commission's Internet address at "http://www.sec.gov".
The Company intends to furnish to its stockholders annual reports,
containing audited financial statements and a report thereon by the Company's
independent public accountants, and quarterly reports for the first three fiscal
quarters of each fiscal year, containing certain unaudited interim financial
information.
69
<PAGE> 71
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Basis of Presentation....................................... F-4
Unaudited Pro Forma Consolidated Statements of
Operations -- Year Ended December 31, 1996................ F-5
Unaudited Pro Forma Consolidated Statements of
Operations -- Three-Month Period Ended March 31, 1997..... F-6
Unaudited Pro Forma Consolidated Balance Sheet as of March
31, 1997.................................................. F-7
Notes to Unaudited Pro Forma Consolidated Financial
Information............................................... F-8
FINANCIAL STATEMENTS OF VISION TWENTY-ONE, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants.......... F-11
Consolidated Balance Sheets as of December 31, 1995 and 1996
and March 31, 1997 (Unaudited)............................ F-12
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996 and the Three-Month
Periods Ended March 31, 1996 and 1997 (Unaudited)......... F-13
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1994, 1995 and 1996 and
the Three-Month Period Ended March 31, 1997 (Unaudited)... F-14
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 and the Three-Month
Periods Ended March 31, 1996 and 1997 (Unaudited)......... F-15
Notes to Consolidated Financial Statements.................. F-17
FINANCIAL STATEMENTS OF EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
Report of Independent Certified Public Accountants.......... F-30
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-31
Statements of Operations for the Year Ended December 31,
1995 and Eleven-Month Period Ended November 30, 1996...... F-32
Statements of Stockholders' Equity (Deficit) for the Year
Ended December 31, 1995 and Eleven-Month Period Ended
November 30, 1996......................................... F-33
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-34
Notes to Financial Statements............................... F-35
</TABLE>
F-1
<PAGE> 72
FINANCIAL STATEMENTS OF
DANIEL B. FELLER, M.D., P.C., D/B/A
PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......... F-39
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-40
Combined Statements of Income for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-41
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and the Eleven-Month Period Ended
November 30, 1996......................................... F-42
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-43
Notes to Combined Financial Statements...................... F-44
FINANCIAL STATEMENTS OF NORTHWEST EYE SPECIALISTS, P.L.L.C.
Report of Independent Certified Public Accountants.......... F-50
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-51
Statements of Income for the Year Ended December 31, 1995
and for the Eleven-Month Period Ended November 30, 1996... F-52
Statements of Partners' Equity for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-53
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-54
Notes to Financial Statements............................... F-55
FINANCIAL STATEMENTS OF LINDSTROM, SAMUELSON & HARDTEN
OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.
Report of Independent Certified Public Accountants.......... F-59
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-60
Combined Statements of Operations for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-61
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended November 30, 1996................................... F-62
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-63
Notes to Combined Financial Statements...................... F-64
FINANCIAL STATEMENTS OF CAMBRIDGE EYE CLINIC, P.A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
Report of Independent Certified Public Accountants.......... F-69
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-70
Combined Statements of Operations for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-71
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended December 31, 1996................................... F-72
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-73
Notes to Combined Financial Statements...................... F-74
FINANCIAL STATEMENTS OF OPTOMETRIC EYE CARE CENTERS, P.A.
Report of Independent Certified Public Accountants.......... F-80
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-81
Statements of Income for the Year Ended December 31, 1995
and for the Eleven-Month Period Ended November 30, 1996... F-82
</TABLE>
F-2
<PAGE> 73
Statements of Stockholders' Equity for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-83
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-84
Notes to Financial Statements............................... F-85
FINANCIAL STATEMENTS OF JERALD B. TURNER, M.D., P.A.
Report of Independent Certified Public Accountants.......... F-89
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-90
Statements of Income for the Year Ended December 31, 1995
and for the Eleven-Month Period Ended November 30, 1996... F-91
Statements of Stockholder's Equity for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-92
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-93
Notes to Financial Statements............................... F-94
FINANCIAL STATEMENTS OF GILLETTE, BEILER & ASSOCIATES, P.A.
Report of Independent Certified Public Accountants.......... F-97
Balance Sheets as of December 31, 1995 and November 30,
1996...................................................... F-98
Statements of Operations for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-99
Statements of Stockholders' Deficit for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-100
Statements of Cash Flows for the Year Ended December 31,
1995 and for the Eleven-Month Period Ended November 30,
1996...................................................... F-101
Notes to Financial Statements............................... F-102
FINANCIAL STATEMENTS OF J&R KENNEDY, O.D., P.A.
AND ROSEVILLE OPTICIANS, INC.
Report of Independent Certified Public Accountants.......... F-106
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-107
Combined Statements of Income for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-108
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended November 30, 1996................................... F-109
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-110
Notes to Combined Financial Statements...................... F-111
FINANCIAL STATEMENTS OF DR. SMITH AND ASSOCIATES, P.A.
#6950, DR. SMITH AND ASSOCIATES,
P.A. #6958, AND DR. SMITH AND
ASSOCIATES P.A. #6966
Report of Independent Certified Public Accountants.......... F-116
Combined Balance Sheets as of December 31, 1995 and November
30, 1996.................................................. F-117
Combined Statements of Income for the Year Ended December
31, 1995 and for the Eleven-Month Period Ended November
30, 1996.................................................. F-118
Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and for the Eleven-Month Period
Ended November 30, 1996................................... F-119
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Eleven-Month Period Ended
November 30, 1996......................................... F-120
Notes to Combined Financial Statements...................... F-121
F-3
<PAGE> 74
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
Effective December 1, 1996, Vision Twenty-One, Inc. (the "Company")
acquired substantially all of the assets, primarily consisting of accounts
receivable, leases, contracts, equipment and other tangible and intangible
assets (the "business assets") and assumed certain liabilities of 10
ophthalmology and optometry practices located in Minnesota, Arizona and Florida
(the "1996 Acquisitions"). In conjunction with the 1996 Acquisitions, the
Company entered into various business management agreements (the "Management
Agreements") with the professional associations operating those practices. In
March 1997, the Company acquired the business assets of an ophthalmology
practice located in Florida (the "Pinellas Acquisition"). In conjunction with
the Pinellas Acquisition, the Company entered into a Management Agreement with
the professional association operating that practice. Between May 1, 1997 and
July 31, 1997, the Company acquired the business assets of four eye care
practices and an ASC located in Arizona and Florida and entered into a
Management Agreement with each of the four professional associations operating
the practices and the entity operating the ASC (the "Recent Acquisitions"). The
1996 Acquisitions, the Pinellas Acquisition and the Recent Acquisitions, are
collectively referred to as the "Acquisitions." Each of the Acquisitions has
been accounted for by recording the assets and liabilities at fair value and
allocating the remaining cost to the related management agreements.
The following unaudited pro forma consolidated financial statements are
based on the historical consolidated financial statements of the Company,
adjusted to give effect to the transactions described below. The unaudited pro
forma consolidated statements of operations of the Company for the year ended
December 31, 1996 give effect to the following transactions as if they had
occurred on January 1, 1996: (i) the 1996 Acquisitions, (ii) the Pinellas
Acquisition, (iii) the Recent Acquisitions, and (iv) the Offering and the
application of the estimated net proceeds therefrom. The unaudited pro forma
consolidated statements of operations of the Company for the three-month period
ended March 31, 1997 give effect to the following transactions as if they had
occurred on January 1, 1997: (i) the Pinellas Acquisition (ii) the Recent
Acquisitions, and (iii) the Offering and the application of the estimated net
proceeds therefrom. The unaudited pro forma consolidated balance sheet of the
Company as of March 31, 1997 gives effect to the Recent Acquisitions at that
date and the consummation of the Offering and the application of the estimated
net proceeds therefrom, as described under "Use of Proceeds."
The unaudited pro forma consolidated financial statements are based on the
historical financial statements of the Company and the professional entities
which owned the business assets which were the subject of the Acquisitions and
give effect to the Acquisitions and the Offering and the assumptions and
adjustments described in the notes thereto. The unaudited pro forma consolidated
financial information does not purport to indicate what the results of
operations or financial conditions would have been if the Acquisitions and the
Offering had been effected on the dates indicated or to project future results
of operations or financial condition of the Company. Such pro forma financial
information should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto.
F-4
<PAGE> 75
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACQUISITION PRO FORMA OFFERING CONSOLIDATED
COMPANY ADJUSTMENTS CONSOLIDATED ADJUSTMENTS AFTER OFFERING
----------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Managed care............. $ 7,315,196 $ 1,268,000(1) $ 8,583,196 $ 8,583,196
Practice management
fees.................. 1,942,843 29,877,000(2) 31,819,843 31,819,843
Other revenue............ 305,654 3,000(1) 308,654 308,654
----------- ----------- ----------- -----------
9,563,693 31,148,000 40,711,693 40,711,693
Operating expenses:
Medical claims........... 9,128,659 1,140,000(1) 10,268,659 10,268,659
Practice management
expenses.............. 1,244,173 25,098,000(2) 26,342,173 26,342,173
Salaries, wages and
benefits.............. 1,889,395 38,000(1) 1,927,395 1,927,395
Business development..... 1,926,895 -- 1,926,895 1,926,895
General and
administrative........ 1,208,678 166,000(1) 1,374,678 1,374,678
Depreciation and
amortization.......... 126,046 1,219,000(3) 1,345,046 1,345,046
----------- ----------- ----------- -----------
15,523,846 27,661,000 43,184,846 43,184,846
----------- ----------- ----------- -----------
Income (loss) from
operations............... (5,960,153) 3,487,000 (2,473,153) (2,473,153)
Interest expense........... 159,484 204,000(4) 363,484 $(359,000)(5) 4,484
----------- ----------- ----------- --------- -----------
Income (loss) before income
taxes.................... (6,119,637) 3,283,000 (2,836,637) (359,000) (2,477,637)
Income taxes............... -- -- -- -- --
----------- ----------- ----------- --------- -----------
Net income (loss).......... $(6,119,637) $ 3,283,000 $(2,836,637) $(359,000) $(2,477,637)
=========== =========== =========== ========= ===========
Net loss per common
share.................... $ (1.00) $ (0.42) $ (0.33)(6)
=========== =========== ===========
Weighted average number of
common shares
outstanding.............. 6,136,210 6,732,767 7,529,107(6)
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
information.
F-5
<PAGE> 76
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
THREE-MONTH PERIOD ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACQUISITION PRO FORMA OFFERING CONSOLIDATED
COMPANY ADJUSTMENTS CONSOLIDATED ADJUSTMENTS AFTER OFFERING
---------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues:
Managed care............. $2,762,978 $ -- $ 2,762,978 $2,762,978
Practice management
fees.................. 4,838,478 3,685,000(2) 8,523,478 8,523,478
Other revenue............ 116,889 -- 116,889 116,889
---------- ---------- ----------- ----------
7,718,345 3,685,000 11,403,345 11,403,345
Operating expenses:
Medical claims........... 2,338,071 -- 2,338,071 2,338,071
Practice management
expenses.............. 3,931,452 3,203,000(2) 7,134,452 7,134,452
Salaries, wages and
benefits.............. 1,045,535 -- 1,045,535 1,045,535
General and
administrative........ 413,897 -- 413,897 413,897
Depreciation and
amortization.......... 210,041 87,000(3) 297,041 297,041
---------- ---------- ----------- ----------
7,938,996 3,290,000 11,228,996 11,228,996
---------- ---------- ----------- ----------
Income (loss) from
operations............... (220,651) 395,000 174,349 174,349
Interest expense........... 227,107 -- 227,107 $(221,000)(5) 6,107
---------- ---------- ----------- --------- ----------
Income (loss) before income
taxes.................... (447,758) 395,000 (52,758) (221,000) 168,242
Income taxes............... -- -- -- -- --
---------- ---------- ----------- --------- ----------
Net income (loss).......... $ (447,758) $ 395,000 $ (52,758) $(221,000) $ 168,242
========== ========== =========== ========= ==========
Net income (loss) per
common share............. $ (0.07) $ (0.01) $ 0.02(6)
========== =========== ==========
Weighted average number of
common shares
outstanding.............. 6,136,210 6,732,767 7,529,107(6)
========== =========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
information.
F-6
<PAGE> 77
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED
HISTORICAL ACQUISITION PRO FORMA OFFERING AFTER
COMPANY ADJUSTMENT CONSOLIDATED ADJUSTMENTS OFFERING
----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.... $ 1,072,275 $ -- $ 1,072,275 $11,870,869(8) $12,943,144
Accounts receivable.......... 2,052,738 -- 2,052,738 2,052,738
Other receivables............ 748,293 -- 748,293 748,293
Prepaid expenses and other
current assets............. 192,385 -- 192,385 192,385
----------- ---------- ----------- ----------- -----------
Total current
assets............. 4,065,691 -- 4,065,691 11,870,869 15,936,560
Fixed assets, net.............. 2,130,420 -- 2,130,420 2,130,420
Intangible assets.............. 13,361,977 6,747,000(7) 20,108,977 20,108,977
Deferred offering costs........ 332,792 -- 332,792 (332,792)(8) --
Other assets................... 98,762 -- 98,762 98,762
----------- ---------- ----------- ----------- -----------
Total assets.......... $19,989,642 $6,747,000 $26,736,642 $11,538,077 $38,274,719
=========== ========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable............. $ 308,015 $ -- $ 308,015 $ 308,015
Accrued expenses............. 1,417,929 -- 1,417,929 1,417,929
Accrued acquisition
expenses................... 1,441,849 -- 1,441,849 $(1,441,849)(8) --
Accrued compensation......... 938,414 -- 938,414 938,414
Due to Managed Professional
Associations............... 276,346 -- 276,346 276,346
Current portion of long-term
debt....................... 4,361,577 -- 4,361,577 (3,619,290)(8) 742,287
Current portion of
obligations under capital
leases..................... 53,838 -- 53,838 53,838
Medical claims payable....... 1,425,962 -- 1,425,962 1,425,962
----------- ---------- ----------- ----------- -----------
Total current
liabilities........ 10,223,930 -- 10,223,930 (5,061,139) 5,162,791
Deferred rent payable.......... 277,079 -- 277,079 277,079
Obligations under capital
leases....................... 100,321 -- 100,321 100,321
Long-term debt, less current
portion...................... 5,993,510 -- 5,993,510 (5,936,784)(8) 56,726
Stockholders' equity:
Common stock................. 5,336 777(7) 6,113 2,100(8) 8,213
Additional paid-in capital... 11,920,467 6,746,223(7) 18,666,690 22,533,900(8) 41,200,590
Deferred compensation........ (489,960) -- (489,960) (489,960)
Accumulated deficit.......... (8,041,041) -- (8,041,041) (8,041,041)
----------- ---------- ----------- ----------- -----------
Total stockholders'
equity............. 3,394,802 6,747,000 10,141,802 22,536,000 32,677,802
----------- ---------- ----------- ----------- -----------
Total liabilities and
stockholders'
equity............. $19,989,642 $6,747,000 $26,736,642 $11,538,077 $38,274,719
=========== ========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial
information.
F-7
<PAGE> 78
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(1) These adjustments to managed care revenue, medical claims and salaries,
wages and benefits, and general and administrative expenses reflect the results
of the managed care business of one of the managed professional entities
included in the 1996 Acquisitions, as follows:
<TABLE>
<CAPTION>
ELEVEN-MONTH
PERIOD ENDED
11/30/96
------------
<S> <C>
Revenue.....................................................
Managed care.............................................. $1,268,000
----------
Other..................................................... 3,000
----------
1,271,000
----------
Expenses:
Medical claims............................................ 1,140,000
Salaries, wages and benefits.............................. 38,000
General and administrative................................ 166,000
----------
1,344,000
----------
Net loss.................................................... $ (73,000)
==========
</TABLE>
The unaudited pro forma consolidated statement of operations for the
three-month period ended March 31, 1997 did not include any acquisition
adjustments for managed care since the 1997 acquisitions did not include any
managed care companies.
(2) The practice management fees and practice management expenses for the
year ended December 31, 1996 reflect the pro forma additional practice
management fee revenue that would have been earned through the management of the
related managed professional entities under the Management Agreements if the
1996 Acquisitions (which were effective on December 1, 1996), the Pinellas
Acquisition and the Recent Acquisitions had occurred on January 1, 1996, less
approximately $479,000 earned by the Company on a historical basis through a
management agreement with managed professional entities included in the 1996
Acquisitions. The practice management fees and practice management expenses for
the three-month period ended March 31, 1997 reflect the pro forma additional
practice management fee revenue that would have been earned through the
management of the related managed professional entities under the Management
Agreements if the Pinellas Acquisition and the Recent Acquisitions had occurred
on January 1, 1997. This revenue represents reimbursement of practice management
expenses incurred by the Company, including depreciation of fixed assets. In
addition, the Company receives a percentage (ranging from 24 to 37 percent) of
the related managed professional entities net earnings before interest, taxes
and shareholder physician expenses, as determined under the related Management
Agreements.
F-8
<PAGE> 79
The following analysis summarizes the adjustment related to practice
management fees:
<TABLE>
<CAPTION>
ACQUISITION ADJUSTMENTS
---------------------------
ELEVEN-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
11/30/96 3/31/97
------------ ------------
<S> <C> <C>
Practice management fee summary:
Reimbursement of Practice management expenses:
Practice management expenses.............................. $25,098,000 $3,203,000
Depreciation and Amortization............................. 1,219,000 87,000
----------- ----------
26,317,000 3,290,000
Share of Managed Professional Associations' net earnings.... 4,039,000 395,000
----------- ----------
30,356,000 3,685,000
Less management fee earned by the Company through a
management agreement with a Managed Professional Entity
for the eleven-month period ended November 30, 1996....... (479,000) --
----------- ----------
Practice management fee revenue............................. $29,877,000 $3,685,000
=========== ==========
</TABLE>
The pro forma adjustments for practice management fees and practice
management expenses are based on the actual results of operations of the
individual practices, as adjusted for the terms of the Management Agreements.
While the Company expects the operations of the practices to improve under its
management, there can be no assurance that operations will not deteriorate.
However, the Company believes this information is the best available objective
information to evaluate the performance of the practices.
(3) Depreciation and amortization reflect depreciation of the related
managed professional entities' fixed assets acquired over their estimated useful
life and amortization of intangible assets over a weighted average of 31 years
for the periods presented as follows:
<TABLE>
<CAPTION>
ACQUISITION ADJUSTMENTS
---------------------------
ELEVEN-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
11/30/96 3/31/97
------------ ------------
<S> <C> <C>
Fixed assets(a)............................................. $ 615,000 $ 23,000
Intangible assets(b)........................................ 604,000 64,000
----------- ----------
$ 1,219,000 $ 87,000
=========== ==========
</TABLE>
(a) Depreciation on fixed assets is calculated using the straight-line
method over the estimated useful lives of the various classes of assets, which
range from three to seven years.
(b) Amortization of intangible assets is calculated using the straight-line
method over their estimated useful lives ranging from 20 to 40 years, with a
weighted average life of 31 years at December 31, 1996.
(4) The adjustment to interest expense reflects the additional interest on
the notes issued and the debt assumed in conjunction with the 1996 Acquisitions
as if the 1996 Acquisitions occurred on January 1, 1996, as follows:
<TABLE>
<CAPTION>
CARRYING
AMOUNT INTEREST INTEREST
DESCRIPTION 12/31/96 RATE PERIOD EXPENSE
- ----------- ---------- -------- ----------------- --------
<S> <C> <C> <C> <C>
Unsecured notes payable issued to
stockholders of the Managed
Professional Associations on
12/1/96............................ $1,924,959 8.00% 1/1/96 -- 11/30/96 $141,000
Certain notes payable and capital
lease obligations assumed of the
Managed Professional Associations
on 12/1/96......................... 744,481 9.25% 1/1/96 -- 11/30/96 63,000
--------
$204,000
========
</TABLE>
F-9
<PAGE> 80
(5) The adjustment reflects the savings on interest expense due to the
repayment of debt discussed in note 8 as follows:
<TABLE>
<CAPTION>
ELEVEN-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
11/30/96 3/31/97
------------ ------------
<S> <C> <C>
Unsecured notes payable, 8%................................. $ 274,000 $ 99,000
Senior subordinated note, 10%............................... 1,300 41,000
Senior subordinated note, 10%............................... -- 22,000
Certain notes payable and capital lease obligations,
9.25%..................................................... 83,700 --
Revolving line of credit, 9.50%............................. 59,000
----------- ----------
$ 359,000 $ 221,000
=========== ==========
</TABLE>
(6) To reflect the pro forma net income (loss) per common share assuming an
increase in the weighted average number of outstanding shares to the extent
necessary to repay the existing indebtedness as shown in pro forma adjustment
(8), representing an increase of 796,340 shares.
(7) The adjustment reflects the Recent Acquisitions. The fair value of the
net assets and Management Agreements associated with the Recent Acquisitions is
expected to approximate $6,747,000 and will be financed through the issuance of
777,118 shares of the Company's common stock valued at $3.96 to $9.00 per share.
The acquisition adjustment assumes the fair value of the net business assets is
immaterial and, accordingly, allocates the entire fair value of $6,747,000 to
intangible assets, principally representing the fair value of the Management
Agreements.
(8) The adjustments reflect the net proceeds from the sale of 2,100,000
shares of Common Stock in the Offering at an assumed initial public offering
price of $12.00 per share, estimated to be approximately $22.5 million (after
deducting underwriting discounts and commissions and estimated offering
expenses) and the repayment of an aggregate of $9.6 million of outstanding
indebtedness. This adjustment excludes $4.0 million of additional indebtedness
incurred by the Company after March 31, 1997. See "Use of Proceeds".
F-10
<PAGE> 81
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Vision Twenty-One, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Vision
Twenty-One, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1996. These consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Vision Twenty-One, Inc. and subsidiaries at December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Tampa, Florida
March 22, 1997,
except for Note 11, as to which the date is
June 6, 1997
ERNST & YOUNG LLP
F-11
<PAGE> 82
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 42,272 $ 67,353 $ 1,072,275
Accounts receivable, net of allowance for doubtful
accounts of $685,000 and $714,000 in 1996 and 1997,
respectively....................................... -- 1,968,587 2,052,738
Other receivables..................................... -- 185,263 748,293
Prepaid expenses and other current assets............. 999 192,789 192,385
----------- ----------- -----------
Total current assets.......................... 43,271 2,413,992 4,065,691
Fixed assets, net....................................... 98,726 1,941,259 2,130,420
Intangible assets, net of accumulated amortization of
$29,125 and $118,976 in 1996 and 1997, respectively... -- 11,022,396 13,361,977
Deferred offering costs................................. -- 287,792 332,792
Other assets............................................ 23,222 46,792 98,762
----------- ----------- -----------
Total assets.................................. $ 165,219 $15,712,231 $19,989,642
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable...................................... $ 99,931 $ 529,427 $ 308,015
Accrued expenses...................................... 1,617 946,519 1,417,929
Accrued acquisition expenses.......................... -- 1,362,012 1,441,849
Accrued compensation.................................. 55,872 546,740 938,414
Due to Managed Professional Associations.............. 27,741 -- 276,346
Note payable to related party......................... 250,000 -- --
Current portion of long-term debt ($2,624,959 to
related parties in 1997)........................... 51,127 48,249 4,361,577
Current portion of obligations under capital leases... -- 43,849 53,838
Medical claims payable................................ 1,056,141 1,793,861 1,425,962
----------- ----------- -----------
Total current liabilities..................... 1,542,429 5,270,657 10,223,930
Deferred rent payable................................... -- 263,006 277,079
Obligations under capital leases........................ -- 71,870 100,321
Long-term debt, less current portion ($9,288, $5,983,098
and $3,000,000 to related parties in 1995, 1996 and
1997, respectively)................................... 61,840 7,570,974 5,993,510
Stockholders' equity (deficit):
Preferred stock, $.001 par value; no shares authorized
in 1995 and 10,000,000 shares authorized in 1996
and 1997; no shares issued......................... -- -- --
Common stock, $.001 par value; 50,000,000 shares
authorized; 2,324,876 (1995), 3,715,625 (1996) and
5,335,563 (1997) shares issued and outstanding..... 2,325 3,716 5,336
Additional paid-in capital............................ 32,271 4,736,361 11,920,467
Common stock to be issued (1,491,397 shares in
1996).............................................. -- 5,905,965 --
Deferred compensation................................. -- (517,035) (489,960)
Accumulated deficit................................... (1,473,646) (7,593,283) (8,041,041)
----------- ----------- -----------
Total stockholders' equity (deficit).......... (1,439,050) 2,535,724 3,394,802
----------- ----------- -----------
Total liabilities and stockholders' equity
(deficit)................................... $ 165,219 $15,712,231 $19,989,642
=========== =========== ===========
</TABLE>
See accompanying notes.
F-12
<PAGE> 83
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------- -----------------------
1994 1995 1996 1996 1997
---------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Managed care..................... $ 668,590 $ 2,446,010 $ 7,315,196 $1,936,590 $2,762,978
Practice management fees
($392,206, $423,890 and
$479,004 from a related party
in 1994, 1995 and 1996,
respectively)................. 392,206 423,890 1,942,843 139,729 4,838,478
Other revenue.................... 131,098 211,746 305,654 24,015 116,889
---------- ----------- ----------- ---------- ----------
1,191,894 3,081,646 9,563,693 2,100,334 7,718,345
Operating expenses:
Medical claims................... 551,408 2,934,180 9,128,659 2,462,602 2,338,071
Practice management expenses..... -- -- 1,244,173 -- 3,931,452
Salaries, wages and benefits..... 537,864 903,966 1,889,395 299,571 1,045,535
Business development............. -- -- 1,926,895 -- --
General and administrative
(including $53,000 to related
parties for rent in 1996)..... 237,702 443,374 1,208,678 152,989 413,897
Depreciation and amortization.... 13,052 18,005 126,046 7,679 210,041
---------- ----------- ----------- ---------- ----------
1,340,026 4,299,525 15,523,846 2,922,841 7,938,996
---------- ----------- ----------- ---------- ----------
Loss from operations............... (148,132) (1,217,879) (5,960,153) (822,507) (220,651)
Interest expense................... 4,444 8,557 159,484 2,291 227,107
---------- ----------- ----------- ---------- ----------
Loss before income taxes........... (152,576) (1,226,436) (6,119,637) (824,798) (447,758)
Income taxes....................... -- -- -- -- --
---------- ----------- ----------- ---------- ----------
Net loss........................... $ (152,576) $(1,226,436) $(6,119,637) $ (824,798) $ (447,758)
========== =========== =========== ========== ==========
Net loss per common share.......... $ (0.02) $ (0.20) $ (1.00) (0.13) (0.07)
========== =========== =========== ========== ==========
Weighted average number of common
shares outstanding............... 6,136,210 6,136,210 6,136,210 6,136,210 6,136,210
========== =========== =========== ========== ==========
</TABLE>
See accompanying notes.
F-13
<PAGE> 84
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON TOTAL
COMMON STOCK ADDITIONAL STOCK STOCKHOLDERS'
------------------ PAID-IN TO BE DEFERRED ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL ISSUED COMPENSATION DEFICIT (DEFICIT)
--------- ------ ----------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994........... 2,324,876 $2,325 $ 54,185 -- $ -- $ (94,634) $ (38,124)
Net loss........................... -- -- -- -- -- (152,576) (152,576)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT DECEMBER 31, 1994......... 2,324,876 2,325 54,185 -- -- (247,210) (190,700)
Net loss........................... -- -- -- -- -- (1,226,436) (1,226,436)
Capital distribution............... -- -- (21,914) -- -- -- (21,914)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT DECEMBER 31, 1995......... 2,324,876 2,325 32,271 -- -- (1,473,646) (1,439,050)
Sale of common stock............... 360,442 360 999,640 -- -- -- 1,000,000
Issuance of shares of common stock
for 1996 Acquisitions consummated
effective December 1, 1996....... 651,842 652 2,580,645 -- -- -- 2,581,297
1,491,397 shares of common stock to
be issued in 1997 for 1996
Acquisitions consummated
effective December 1, 1996....... -- -- -- 5,905,965 -- -- 5,905,965
Issuance of detachable stock
purchase warrants................ -- -- 125,000 -- -- -- 125,000
Issuance of shares of common stock
for prior service................ 144,705 145 401,410 -- -- -- 401,555
Issuance of shares of common stock
for advisory agreement........... 125,627 126 348,488 -- (348,614) -- --
Issuance of shares of common stock
for services agreement........... 108,133 108 299,960 -- (180,041) -- 120,027
Amortization of deferred
compensation..................... -- -- -- -- 11,620 -- 11,620
Net loss........................... -- -- -- -- -- (6,119,637) (6,119,637)
Capital distribution............... -- -- (51,053) -- -- -- (51,053)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT DECEMBER 31, 1996......... 3,715,625 3,716 4,736,361 5,905,965 (517,035) (7,593,283) 2,535,724
Unaudited:
Issuance of shares of common stock
for business combinations........ 1,619,938 1,620 6,960,956 (5,905,965) -- -- 1,056,611
Issuance of detachable stock
purchase warrants................ -- -- 203,500 -- -- -- 203,500
Compensatory stock options
accounted for under SFAS 123..... -- -- 19,650 -- -- -- 19,650
Amortization of deferred
compensation..................... -- -- -- -- 27,075 -- 27,075
Net loss........................... -- -- -- -- -- (447,758) (447,758)
--------- ------ ----------- ---------- --------- ----------- -----------
BALANCE AT MARCH 31, 1997
(Unaudited)........................ 5,335,563 $5,336 $11,920,467 -- $(489,960) $(8,041,041) $ 3,394,802
========= ====== =========== ========== ========= =========== ===========
</TABLE>
See accompanying notes.
F-14
<PAGE> 85
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- ----------- ----------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............................. $(152,576) $(1,226,436) $(6,119,637) $(824,798) $ (447,758)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization....... 13,052 18,005 126,046 7,679 210,041
Noncash compensation expense........ -- -- 521,582 -- 19,650
Amortization of deferred
compensation...................... -- -- 11,620 -- 27,075
Interest accretion.................. -- -- -- -- 15,284
Changes in operating assets and
liabilities, net of effects from
business combinations:
Accounts receivable, net.......... 13,827 -- (298,328) -- 208,596
Other receivables................. -- -- (185,263) -- (556,767)
Prepaid expenses and other current
assets.......................... 308 516 (22,766) 999 9,881
Other assets...................... -- -- (32,984) -- (51,970)
Accounts payable.................. 5 87,141 429,496 (39,399) (312,091)
Accrued expenses.................. 170 614 119,955 21,039 485,483
Accrued acquisition expenses...... -- -- 522,963 -- (58,223)
Accrued compensation.............. 10,525 43,138 48,342 28,198 267,465
Medical claims payable............ 127,539 928,602 737,720 839,971 (367,899)
Due to Managed Professional
Associations.................... 17,557 10,184 (27,741) 34,081 276,346
--------- ----------- ----------- --------- ----------
Net cash provided by (used
in) operating activities... 30,407 (138,236) (4,168,995) 67,770 (274,887)
INVESTING ACTIVITIES
Purchases of furniture and equipment,
net................................. (13,783) (68,138) (443,577) (23,575) (210,939)
Payments for capitalized acquisition
and offering costs.................. -- (20,240) (1,138,829) -- (1,423,129)
--------- ----------- ----------- --------- ----------
Net cash used in investing
activities................. (13,783) (88,378) (1,582,406) (23,575) (1,634,068)
FINANCING ACTIVITIES
Proceeds from notes payable........... -- 270,737 3,700,000 -- --
Payments on notes payable............. -- (5,183) -- -- --
Net proceeds from issuance of senior
notes and warrants.................. -- -- 1,250,000 -- 2,000,000
Proceeds from bank loan............... 11,700 44,859 -- 100,891 --
Borrowings on line of credit.......... -- -- 1,489,707 -- 1,694,331
Repayments on line of credit.......... -- -- (1,305,443) -- --
Payments on long-term debt and lease
obligations......................... (15,451) (32,694) (56,729) (9,661) (780,454)
Proceeds from sale of common stock.... -- -- 750,000 -- --
Capital distribution.................. -- (21,914) (51,053) -- --
--------- ----------- ----------- --------- ----------
Net cash provided by (used
in) financing activities... (3,751) 255,805 5,776,482 91,230 2,913,877
--------- ----------- ----------- --------- ----------
</TABLE>
F-15
<PAGE> 86
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- ----------- ----------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase in cash...................... $ 12,873 $ 29,191 $ 25,081 $ 135,425 $1,004,922
Cash and cash equivalents at beginning
of year............................. 208 13,081 42,272 42,272 67,353
--------- ----------- ----------- --------- ----------
Cash and cash equivalents at end of
year................................ $ 13,081 $ 42,272 $ 67,353 $ 177,697 $1,072,275
========= =========== =========== ========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for
interest............................ $ 4,000 $ 9,000 $ 17,000 $ 4,900 $ 48,000
========= =========== =========== ========= ==========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Common stock issued upon conversion of
a note payable...................... $ -- $ -- $ 250,000 $ -- $ --
========= =========== =========== ========= ==========
</TABLE>
See Note 2 regarding affiliations with practices financed through the issuance
of common stock and notes payable.
See accompanying notes.
F-16
<PAGE> 87
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. DESCRIPTION OF BUSINESS
Vision Twenty-One, Inc. and Subsidiaries (Vision Twenty-One or the Company)
is a Florida corporation formed in May 1996 as a holding company. The Company's
principal subsidiaries include Vision 21 Physician Practice Management Company
(MSO) and Vision 21 Managed Eyecare of Tampa Bay, Inc. (MCO). The MSO provides
business management services for eye care professionals and related businesses.
The MCO is a managed care organization which contracts with third-party health
benefits payors to provide eye care services through a network of associated
optometry and ophthalmology practices, retail optical companies and ambulatory
surgical centers. Most of the managed care contracts are for one year terms
which automatically renew and the contracts are terminable by either party on
sixty days notice. Revenues from one payor constituted approximately 95%, 94%
and 79% of managed care revenues and 53%, 75% and 60% of total revenues for the
years ended December 31, 1994, 1995 and 1996, respectively. Any adverse
development in the Company's relationship with this payor would have a material
adverse effect on the Company's results of operations and financial condition.
Vision Twenty-One was formed to be a holding company to own the MSO and
MCO. The MSO and MCO were owned in identical proportions by two senior
executives and an outside member of the Board of Directors. During 1996, the
Company acquired the MSO and MCO through an exchange of 2,685,318 of the
Company's shares for all of the outstanding shares of the MSO and MCO. There was
no other consideration. This transaction was accounted for as a reorganization
of companies under common control in a manner similar to that used in a pooling
of interests transaction. As a result, the accompanying financial statements
have been prepared to reflect the accounts of the Company as if the
reorganization had occurred as of the beginning of the earliest period
presented.
2. AFFILIATIONS WITH PRACTICES
Effective December 1, 1996, the Company acquired substantially all of the
assets and assumed certain liabilities of 10 ophthalmology and optometry
practices (the Managed Professional Associations) located in Minnesota, Arizona
and Florida. The 1996 Acquisitions were accounted for by recording the assets
and liabilities at fair value and allocating the remaining cost to the related
Management Agreements. In conjunction with these acquisitions, the Company
entered into various business management agreements (Management Agreements) with
the Managed Professional Associations and the Managed Professional Associations'
stockholders (collectively referred to as the 1996 Acquisitions). Under the
Management Agreements, the Company provides management, marketing and
administrative services to the Managed Professional Associations in return for a
management fee. The Management Agreements have a 40-year life and are cancelable
only for breach of its provisions or insolvency. The Managed Professional
Associations employ ophthalmologists and optometrists and provide all eye care
services to patients.
F-17
<PAGE> 88
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the 1996 Acquisitions and a preliminary allocation of the
purchase price, which is subject to revision on further investigation, are as
follows:
<TABLE>
<S> <C>
Net assets acquired:
Current and other assets.................................. $ 1,850,108
Furniture and equipment................................... 1,495,877
Business management agreements............................ 11,051,521
Liabilities assumed....................................... (2,274,959)
-----------
Net assets acquired............................... $12,122,547
===========
Consideration for net assets acquired:
Capitalized acquisition costs............................. $ 1,710,326
Long-term notes payable issued............................ 1,924,959
Common stock issued and to be issued...................... 8,487,262
-----------
Total consideration............................... $12,122,547
===========
</TABLE>
Vision Twenty-One issued 651,842 shares in 1996 and 1,491,397 shares in
1997. The shares which were issued in 1997 were reported as common stock to be
issued as of December 31, 1996, in connection with the 1996 Acquisitions. All
2,143,239 shares were valued at $3.96 per share at a minority level based on an
independent valuation. An additional 79,805 shares of common stock are held in
escrow. The shares held in escrow will be due the owners of the Managed
Professional Associations if various financial goals are met in the future. The
shares have been accounted for as contingent considerations and, accordingly,
have not been included in the purchase price allocation.
As part of the purchase price allocation, no consideration has been
allocated to employment and noncompete agreements between the Company and the
Managed Professional Associations' stockholders because the Company believes
these agreements have no material value.
During 1996, the Company incurred $1,710,326 of acquisition costs which
were capitalized and allocated to the assets acquired and Management Agreements
entered into, including $839,049 which is included in accrued acquisition
expenses in the accompanying consolidated balance sheets.
The following unaudited pro forma information presents the Company's
results of operations with pro forma adjustments for 1995 as if the 1996
Acquisitions had been consummated as of January 1, 1995; for 1996 as if the 1996
Acquisitions and an acquisition completed on March 1, 1997 (Note 11) had been
consummated as of January 1, 1996; and for the three-month period ended March
31, 1997 as if the March 1, 1997 acquisition had been consummated as of January
1, 1997. This pro forma information does not purport to be indicative of what
would have occurred had the acquisitions been made as of those dates or of
results which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, THREE-MONTH
------------------------- PERIOD ENDED
1995 1996 MARCH 31, 1997
----------- ----------- --------------
<S> <C> <C> <C>
Pro forma information (unaudited):
Total revenues....................................... $18,983,325 $29,258,689 $8,169,260
Net income (loss).................................... $ 947,374 $(4,087,641) $ (413,758)
Net income (loss) per common share................... $ 0.15 $ (0.67) $ (0.07)
</TABLE>
F-18
<PAGE> 89
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated. The Company does not own any interests in or control the activities
of the Managed Professional Associations. Accordingly, the financial statements
of the Managed Professional Associations are not consolidated with those of the
Company.
UNAUDITED QUARTERLY FINANCIAL STATEMENTS
The quarterly financial statements as of March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 do not provide all disclosures
included in the annual financial statements. These quarterly statements should
be read in conjunction with the annual audited financial statements and the
footnotes thereto. Results for the 1997 quarterly period are not necessarily
indicative of the results for the year ending December 31, 1997. However, the
accompanying quarterly financial statements reflect all adjustments which are,
in the opinion of management, of a normal and recurring nature necessary for a
fair presentation of the financial position and results of operations of the
Company.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Managed Care
Managed care revenues are derived from monthly capitation payments from
health benefits payors which contract with the Company for the delivery of eye
care services. The Company records this revenue at contractually agreed-upon
rates.
Practice Management Fees
Prior to December 1, 1996, practice management fee revenue was earned
through contractual arrangements between the Company and several optometry
practices under common control. This revenue totaled $392,206, $423,890 and
$479,004 for the years ended December 31, 1994, 1995 and 1996, respectively.
Subsequent to December 1, 1996, practice management fee revenue was earned
through management of the Managed Professional Associations under the Management
Agreements. This revenue represents reimbursement of practice management
expenses incurred by the Company, including depreciation and amortization
expense of $54,164 for the year ended December 31, 1996. In addition, the
Company receives a percentage (ranging from 24 to 37 percent) of the Managed
Professional Associations' net earnings before interest, taxes, and shareholder
F-19
<PAGE> 90
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
physician expenses, as determined under the related Management Agreements. For
the year ended December 31, 1996 and the three-month period ended March 31,
1997, this revenue was as follows:
<TABLE>
<CAPTION>
THREE-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
Medical service revenues of Managed Professional
Associations.......................................... $1,667,025 $5,782,475
Less amounts retained by physician shareholders of
Managed Professional Associations..................... (203,186) (943,997)
---------- ----------
Management fees under Management Agreements with Managed
Professional Associations............................. $1,463,839 $4,838,478
========== ==========
</TABLE>
Included in net management fees are amounts representing reimbursement of
expenses for practice management expenses and a portion of depreciation and
amortization. These amounts were $1,298,337 for the year ended December 31, 1996
and $4,018,794 for the three month period ended March 31, 1997.
Other Revenues
Other revenues consist of fees earned through consulting and other
contractual arrangements.
MEDICAL CLAIMS PAYABLE
In accordance with the capitation contracts entered into with certain
health benefits payors, the MCO is responsible for payment of providers' claims.
Medical claims payable represent provider claims reported to the MCO and an
estimate of provider claims incurred but not reported (IBNR).
The Company and its actuary estimate the amount of IBNR using standard
actuarial methodologies based upon the average interval between the date
services are rendered and the date claims are reported and other factors
considered relevant by the Company.
Prior to December 1, 1996, certain medical claims were paid to several
optometry practices under common control. Expense related to these transactions
totaled approximately $81,000, $299,000 and $249,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of all current assets and current liabilities
approximates their fair value because of their short-term nature. The fair value
of long-term debt approximates its carrying value based on current rates offered
to the Company for debt of similar maturities.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable represent amounts due from the Managed Professional
Associations.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the various classes of
assets, which range from three to seven years. Leasehold improvements are
amortized using the straight-line method over the shorter of the term of lease
or the
F-20
<PAGE> 91
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimated useful life of the improvements. Routine maintenance and repairs are
charged to expense as incurred, while betterments and renewals are capitalized.
DEFERRED OFFERING COSTS
Deferred offering costs consist primarily of costs deferred in connection
with the Company's anticipated initial public offering. These costs will be
charged against the offering proceeds upon successful completion. If the
offering is not successfully completed, these deferred costs will be charged to
expense.
TRANSACTIONS AND BUSINESS DEVELOPMENT COSTS
Direct, external legal, accounting and other costs associated with
successful acquisitions are capitalized as part of the related purchase price
allocation. External costs associated with unsuccessful acquisitions, including
start-up consulting services (Note 10) are expensed and are shown as business
development expense in the accompanying consolidated statements of operations.
All internal costs associated with acquisitions are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets consist of the Management Agreements with the Managed
Professional Associations. The Management Agreements have 40-year terms and are
being amortized over their estimated useful lives ranging from 20 to 40 years,
with a weighted average life of 31 years at December 31, 1996. In determining
the useful life of a Management Agreement, the Company considers the operating
history and other characteristics of each practice. The primary consideration is
the degree to which a practice has demonstrated its ability to extend its
existence indefinitely. In making this determination, the Company considers (i)
the number of physicians recruited into the practice, (ii) the number of staff
including physicians, (iii) the number of locations, and (iv) the complexity of
the procedures being performed, including disease treatment and control.
The Company anticipates that the Emerging Issues Task Force of the
Financial Accounting Standards Board will be evaluating certain matters relating
to the physician practice management industry, which the Company expects to
include a review of accounting for business combinations. The Company is unable
to predict the impact, if any, that this review may have on the Company's
acquisition strategy, allocation of purchase price related to acquisitions, and
amortization life assigned to intangible assets.
Amortization expense with respect to intangible assets was $29,125 and
$89,851 (unaudited) for the year ended December 31, 1996 and the three-month
period ended March 31, 1997, respectively.
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of (SFAS 121). In accordance with SFAS 121, the
Company reviews the carrying value of its intangible assets at least quarterly
on an entity-by-entity basis to determine if facts and circumstances exist which
would suggest that the intangible assets may be impaired or that the
amortization period needs to be modified. Among the factors the Company
considers in making the evaluation are changes in the Managed Professional
Associations' market position, reputation, profitability and geographical
penetration. If indicators are present which may indicate impairments, the
Company will prepare a projection of the undiscounted cash flows of the specific
practice and determine if the intangible assets are recoverable based on these
undiscounted cash flows. If impairment is indicated, then an adjustment will be
made to reduce the carrying amount of the intangible assets to fair value.
CONCENTRATIONS OF CREDIT RISK
The Company does not believe that there are any credit risks associated
with receivables due from governmental agencies. Any concentration of credit
risk from other payors of the Managed Professional Associations is limited by
the number of patients and payors. The Company and the Managed Professional
Associations do not require any form of collateral from their patients or
third-party payors.
F-21
<PAGE> 92
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company places cash and cash equivalents with high-quality financial
institutions. At times, the Company maintains cash balances in excess of amounts
insured by the Federal Deposit Insurance Corporation (FDIC).
NET LOSS PER COMMON SHARE
Net loss per common share amounts in the consolidated statements of
operations are based upon the weighted average number of common shares
outstanding in each period and the guidance in a Staff Accounting Bulletin (SAB)
of the Securities and Exchange Commission. According to the SAB, stock, options
and warrants issued within a one-year period prior to the filing of an initial
public offering and at prices less than the proposed public offering price must
be reflected as outstanding for all reported periods.
In February 1997, the FASB issued Statement No. 128 (SFAS 128), Earnings
Per Share, which establishes new standards for computing and presenting earnings
per share. SFAS 128 is effective for financial statements issued for periods
after December 15, 1997, including interim periods. Management has not yet
determined whether the implementation of SFAS 128 will have any impact on the
Company's per share amounts.
COMMON STOCK TO BE ISSUED
Common stock to be issued represents stock to be issued in connection with
certain of the 1996 Acquisitions consummated on December 1, 1996. The stock was
issued in January 1997.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25). In 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), which is effective for fiscal years
beginning after December 15, 1995. Under SFAS 123, the Company may elect to
recognize stock-based compensation expense based on the fair value of the awards
or continue to account for stock-based compensation under APB 25, and disclose
in the financial statements the effects of SFAS 123 as if the recognition
provisions were adopted.
The Company accounts for any stock-based compensation arrangements not
specifically addressed by APB 25 under the fair value provisions of SFAS 123,
including options granted to non-employees and professionals employed by the
Managed Professional Associations. The amounts for 1995 and 1996 are immaterial.
The pro forma disclosures required by SFAS 123 are provided for all stock-based
compensation which are accounted for under APB 25 (Note 10).
INCOME TAXES
The Company has applied the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109), which requires an
asset and liability approach for financial accounting and reporting. Deferred
income tax assets and liabilities are determined based upon differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and lives that will be in effect when the
differences are expected to reverse.
F-22
<PAGE> 93
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
DESCRIPTION 1995 1996
- ----------- -------- ----------
<S> <C> <C>
Office furniture and equipment.............................. $189,973 $1,828,855
Leased equipment............................................ -- 119,825
Leasehold improvements...................................... 6,264 169,335
-------- ----------
196,237 2,118,015
Less accumulated depreciation and amortization.............. (97,511) (176,756)
-------- ----------
$ 98,726 $1,941,259
======== ==========
</TABLE>
Depreciation and amortization of fixed assets totaled approximately
$13,000, $18,000 and $97,000 in 1994, 1995 and 1996, respectively.
5. NOTE PAYABLE TO RELATED PARTY
Note payable to related party consists of the following as of December 31:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Note payable to a stockholder, due October 1, 1996, with
interest at 10% per annum. In 1996, the note was exchanged
for shares of the Company's common stock.................. $250,000 $ --
======== ========
</TABLE>
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured notes payable to a stockholder, interest
and principal due on January 1, 1998, with
interest at 8.5% per annum....................... $ -- $ 700,000 $ 700,000
Notes payable under $300,000 line of credit, due on
demand, bearing interest at prime plus 1% (9.5%
at December 31, 1995 and 9.25% at December 31,
1996). Interest due monthly. The notes are
collateralized by accounts receivable and were
refinanced with a bank in 1997 (Note 11)......... -- 252,124 --
Unsecured note payable to a stockholder, due on
demand, with interest at 9% per annum. Interest
due monthly. The note was refinanced with a bank
in 1997 (Note 11)................................ -- 293,262 --
Unsecured note payable to a stockholder with
interest at 8% per annum. Interest and principal
due upon completion of an initial public
offering......................................... -- 3,000,000 3,000,000
</TABLE>
F-23
<PAGE> 94
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured notes payable to stockholders, interest
at 8%. Principal and interest due the earlier of
15 business days after closing of an initial
public offering or March 1, 1998................. $ -- $1,924,959 $1,924,959
Notes payable to a stockholder due in monthly
installments through 1999, with interest at 9.75%
The notes are collateralized by equipment, and
were refinanced with a bank in 1997 (Note 11).... 9,288 64,877 --
10% senior subordinated notes, interest due
semiannually at an effective rate of 13.5%. The
notes are unsecured and mature on the earlier of
a first liquidity event (initial public offering)
or December 19, 1999 (Notes 10 and 11)........... -- 1,125,000 2,936,784
Notes payable to a bank under $2 million revolving
line of credit, due on demand, bearing interest
at prime plus 1%. Interest due monthly. The notes
are collateralized by substantially all assets of
the Company (Note 11)............................ -- -- 1,694,331
Notes payable to banks due in monthly installments
through 2000, with interest ranging from 7% to
14% per annum. The notes are collateralized by
certain equipment, and were refinanced with a
bank in 1997 (Note 11)........................... 54,693 143,570 --
Notes payable to a corporation due in monthly
installments through 2000, with interest ranging
from the rate of prime plus .5% to prime plus 2%
(8.75% to 10.25% at December 31, 1996). The notes
are collateralized by equipment.................. 48,986 23,731 23,731
Notes payable to a bank and corporations due in
monthly installments through 2000, with interest
ranging from the rate of 8% to 8.75% per annum.
The notes are collateralized by certain
equipment........................................ -- 91,700 75,282
---------- ---------- ----------
112,967 7,619,223 10,355,087
Less current portion............................... (51,127) (48,249) (4,361,577)
---------- ---------- ----------
$ 61,840 $7,570,974 $5,993,510
========== ========== ==========
</TABLE>
As of December 31, 1996, the aggregate principal maturities of long-term
debt, without giving effect to an initial public offering and assuming the $3
million unsecured note payable to stockholder is repaid in 1998, are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 48,249
1998........................................................ 6,403,721
1999........................................................ 1,156,812
2000........................................................ 10,441
----------
$7,619,223
==========
</TABLE>
F-24
<PAGE> 95
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CAPITAL LEASE OBLIGATIONS
The Company leases equipment under noncancelable capital leases (with an
initial or remaining term in excess of one year). Future minimum lease
commitments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1997...................................................... $ 54,413
1998...................................................... 50,195
1999...................................................... 31,604
2000...................................................... 14,706
2001...................................................... 1,364
--------
Total minimum lease payments................................ 152,282
Less amount representing interest........................... (36,563)
--------
Present value of minimum lease payments..................... $115,719
========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases its headquarters, store locations and certain office
equipment under noncancelable operating lease arrangements which expire at
various dates, most with options for renewal. Certain locations are leased from
stockholders of the Managed Professional Associations. As of December 31, 1996,
future minimum lease payments under noncancelable operating leases with original
terms of more than one year are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 1,624,776
1998........................................................ 1,620,771
1999........................................................ 1,440,429
2000........................................................ 1,278,998
2001........................................................ 1,167,241
Thereafter.................................................. 8,730,469
-----------
Total....................................................... $15,862,684
===========
</TABLE>
Rent expense in 1994, 1995 and 1996 was approximately $61,000, $76,000 and
$280,000, respectively. Rent expense related to locations leased from
stockholders of the Managed Professional Associations was approximately $53,000
during 1996.
Malpractice
The Company and the Managed Professional Associations are insured with
respect to medical malpractice risks primarily on a claims-made basis.
Management is aware of a claim pending against one of the Managed Professional
Associations. The claim, which alleges medical malpractice, is currently in the
discovery stage and no trial date has been set. The Managed Professional
Association, through its insurer, plans to vigorously contest the case. In the
opinion of Management, this litigation will not have a material adverse effect
on the results of operations, financial condition or liquidity of the Company.
Losses resulting from unreported claims cannot be estimated by management
and therefore, an accrual has not been included in the accompanying consolidated
financial statements.
F-25
<PAGE> 96
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
The Company did not have a current or deferred tax provision or benefit for
the years ended December 31, 1994, 1995 and 1996 due to its net losses.
At December 31, 1995 and 1996, the Company had temporary differences
between amounts of assets and liabilities for financial reporting purposes and
such amounts measured by income tax reporting purposes. The Company also has net
operating loss (NOL) carryforwards available to offset future taxable income.
Significant components of the Company's deferred tax assets and liabilities as
of December 31 are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX
ASSET (LIABILITY)
-----------------------
TEMPORARY DIFFERENCES/CARRYFORWARDS 1995 1996
- ----------------------------------- --------- -----------
<S> <C> <C>
Cash to accrual adjustments................................. $ 47,489 $ 469,859
Net operating losses........................................ 67,249 1,735,723
Other....................................................... -- 220,418
--------- -----------
Total deferred tax assets......................... 114,738 2,426,000
Identifiable intangible assets not deductible for tax
purposes.................................................. -- (1,190,582)
Other deferred tax liabilities.............................. (3,859) (278,282)
Valuation allowance......................................... (110,879) (957,136)
--------- -----------
Net deferred taxes................................ $ -- $ --
========= ===========
</TABLE>
SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a full valuation allowance at December 31, 1995 and 1996 is
warranted.
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Income tax benefit at the statutory rate............ $(51,876) $(416,987) $(2,080,676)
Permanent differences............................... 59,197 78,078 7,888
S-Corporation (income) loss......................... (7,435) 248,185 924,203
State taxes, net of federal benefit................. (12) (9,686) (122,628)
Change in valuation allowance....................... 126 100,410 1,271,213
-------- --------- -----------
Income taxes........................................ $ -- $ -- $ --
======== ========= ===========
</TABLE>
The Company has net operating loss carryforwards of approximately
$4,612,000 at December 31, 1996 that expire in various amounts from 2008 to
2011. These net operating loss carryforwards will be subject to the "ownership
change" rules of Section 382 of the Internal Revenue Code of 1986 and may be
limited as to their future use if there are changes in ownership exceeding 50%.
10. STOCKHOLDERS' EQUITY
Issuance of Stock
The Company entered into an agreement in 1993 to issue common stock in
exchange for cash. The related shares of common stock were not physically issued
until June 30, 1996. For financial reporting purposes the Company has presented
these shares of common stock as if they had been issued in 1993.
F-26
<PAGE> 97
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Option Plans
In July 1996, the Board of Directors adopted, and the stockholders of the
Company approved, two stock option plans: the Stock Incentive Plan (the
Incentive Plan) and the Affiliated Professionals Stock Plan (the Professionals
Plan and together with the Incentive Plan, the Plans). The purpose of the Plans
is to provide directors, officers, key employees, advisors and professionals
employed by the Managed Professional Associations with additional incentives by
increasing their proprietary interest in the Company or tying a portion of their
compensation to increases in the price of the Company's common stock. The
aggregate number of shares of common stock reserve for issuance related to the
Incentive Plan and the Professionals Plan is 1,000,000 shares and 600,000
shares, respectively. During 1996, the Company granted 459,667 and 102,333 stock
options to employees and non-employees, respectively, under the provisions of
the Plans with exercise prices equal to the estimated fair market value of the
Company's stock on the date of grant of $3.11 to $7.11. The options vest over
three to four-year periods.
A summary of the Plans is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
<S> <C> <C>
Options outstanding......................................... 562,000 620,667
Options exercisable......................................... -- --
</TABLE>
The weighted average grant-date fair value of all options granted during
1996 was $1.91. The weighted average remaining contractual life of those options
is 3.4 years.
Pro forma information regarding net income is required by SFAS 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for 1996: risk-free interest
rate of 6.0%; a dividend yield of zero; volatility factors of the expected
market price of the Company's common stock based on industry trends; and a
weighted-average expected life of the options of 3.4 years. In addition, for pro
forma purposes, the estimated fair value of the options is amortized to expense
over the options' vesting period. Based on these assumptions, the pro forma net
loss and net loss per common share for the year ended December 31, 1996 would be
approximately $(6,235,000) and $(1.02), respectively.
Stock Compensation
In May 1996, the Company granted 144,705 shares of common stock to a
consultant as compensation for prior service (the Grant). In October 1996, the
Company entered into advisory and services agreements (the Agreements) with the
consultant and its chief medical officer whereby they would be entitled to
233,760 shares of common stock as compensation over the term of the Agreements.
The Company recorded issuance of the common stock at its fair value on the dates
of the Agreements and Grant. The expense is recognized in 1996 for the Grant and
over the related terms for the Agreements. For the year ended December 31, 1996,
the Company recognized expense of approximately $401,000 and $132,000, related
to the Grant and Agreements, respectively.
Warrants
During December 1996, the Company issued $1.25 million, 10% senior
subordinated notes (the Senior Notes) along with detachable warrants. The
warrants allow the holders to purchase 208,333 shares, subject to certain
adjustments, of the Company's common stock upon payment of $6 per share, subject
to certain adjustments. The Company has allocated $125,000 of the proceeds to
the warrants, representing their estimated fair value at the date of issuance,
as determined by an investment banking firm. The Senior Notes
F-27
<PAGE> 98
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are limited in aggregate principal amount to $1.25 million and mature on the
earlier of a first liquidity event or December 19, 1999. The Senior Notes bear
stated interest at the rate of 10% per annum payable semiannually in arrears on
June 19 and December 19, with an effective interest rate of 13.5% (Note 11). An
amount equal to the estimated value of the warrants will be amortized using the
interest method over the term of the Senior Notes.
11. SUBSEQUENT EVENTS
On February 7, 1997, the Company obtained a $2 million revolving line of
credit (LOC) from a commercial bank with interest at the rate of prime plus 1%.
Borrowings under the LOC are due on demand and are collateralized by
substantially all assets of the Company. A stockholder is also a guarantor of
the LOC. The proceeds from the LOC were used to refinance certain outstanding
debt as of December 31, 1996 and to provide additional working capital.
On February 28, 1997, the Company issued a $2 million, 10% senior
subordinated note with a detachable warrant to purchase 333,333 shares, subject
to certain adjustments, of the Company's common stock upon payment of $6 per
share, subject to certain adjustments. The Company allocated $200,000 of the
proceeds to the warrant, representing its estimated fair value at the date of
the transaction as determined by an investment banking firm. The warrant expires
on December 19, 2003. The note is due upon the earlier of a first liquidity
event (initial public offering) or December 19, 1999. The effective interest
rate on the note is 13.5% and the proceeds will be used to provide additional
working capital. An amount equal to the estimated value of the warrants will be
amortized using the interest method over the term of the note.
On April 11, 1997, the Company entered into a $4.68 million credit facility
bearing interest at 10%. The Company entered into a binding commitment letter on
June 6, 1997 to amend the terms of the credit facility. The terms of the binding
commitment letter require the Company to use $2 million of the proceeds from the
credit facility to repay the $2 million revolving line of credit referred to
above, with assignment of the related collateral to the new lender. The
remaining proceeds will be used to provide additional working capital. The terms
of the binding commitment letter require the Company to sell to the lender a
warrant to purchase up to 633,333 shares of common stock. The exercise price for
the shares under the warrant will range from $6.00 per share to 80% of the
market price of the Company's common stock. The warrant will expire as follows:
(1) 583,333 shares on October 10, 2002, and (2) 50,000 shares on January 10,
2003. In addition to the exercise price, the lender will pay the Company
$320,000 for the warrant. The Company believes the consideration paid and the
exercise prices represent the fair value of the warrant. Accordingly, no amounts
will be amortized to interest expense. The terms of the binding commitment
letter extend the maturity of the credit facility to the earlier of January 1,
1998 or an initial public offering. The credit facility places certain
restrictions on the Company's ability to pay dividends in the future.
The Company has acquired three additional eye care practices during 1997,
and has entered into a binding agreement to acquire an ambulatory surgery
facility. The Company also intends to enter into business management agreements
with these entities. The acquisitions have been and will be accounted for by
recording assets and liabilities at fair value and allocating the remaining cost
to the related Management Agreements. The fair value of the net assets and
business management agreements associated with these entities is expected to
approximate $3.3 million (subject to certain adjustments), and will be financed
through the issuance of 449,303 shares of the Company's common stock (subject to
certain adjustments). The Vision Twenty-One common stock to be issued in
connection with these acquisitions will be valued at $3.96 to $8.86 per share.
F-28
<PAGE> 99
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1997, the Company agreed to acquire all of the outstanding common
stock of a medical consulting company for $700,000 in cash. This acquisition is
scheduled to close upon the Company's completion of an initial public offering.
On June 6, 1997, the Company's Board of Directors approved a 1-for-1.5
reverse stock split pursuant to the Company's initial public offering of common
stock. All share and per share amounts in the accompanying financial statements
have been restated to retroactively reflect the reverse split.
F-29
<PAGE> 100
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
Eye Institute of Southern Arizona, P.C.
We have audited the accompanying balance sheets of Eye Institute of
Southern Arizona, P.C. (the Company) as of December 31, 1995 and November 30,
1996, and the related statements of operations, stockholders' equity (deficit),
and cash flows for the year ended December 31, 1995 and the eleven-month period
ended November 30, 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 Eye Institute of Southern
Arizona, P.C. at December 31, 1995 and November 30, 1996, and the results of its
operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
January 15, 1997
F-30
<PAGE> 101
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 2,494 $ 49,943
Patient accounts receivable, net of allowances for
contractual adjustments and uncollectible accounts of
$612,000 and $466,000 at December 31, 1995 and November
30, 1996, respectively................................. 383,887 438,549
Due from related parties.................................. -- 8,032
Other receivables......................................... 94,023 39,113
Prepaid expenses.......................................... 14,354 14,818
---------- ----------
Total current assets.............................. 494,758 550,455
Deferred tax asset.......................................... 48,672 128,068
Property, equipment and improvements, net................... 1,552,728 1,463,539
---------- ----------
Total assets...................................... $2,096,158 $2,142,062
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 21,462 $ 42,844
Accrued compensation...................................... 180,022 141,449
Other current liabilities................................. 115,365 56,484
Due to related parties.................................... 57,985 --
Deferred tax liability.................................... 48,672 128,068
Current portion of capital lease obligation............... 50,884 55,107
---------- ----------
Total current liabilities......................... 474,390 423,952
Capital lease obligation, net of current portion............ 1,998,256 1,947,389
Stockholders' equity (deficit):
Common stock, $5 par value: 100,000 shares authorized;
2,000 shares issued and outstanding.................... 10,000 10,000
Deficiency in retained earnings........................... (386,488) (239,279)
---------- ----------
Total stockholders' equity (deficit).............. (376,488) (229,279)
---------- ----------
Total liabilities and stockholders' equity
(deficit)....................................... $2,096,158 $2,142,062
========== ==========
</TABLE>
See accompanying notes.
F-31
<PAGE> 102
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $3,649,990 $2,747,555
Premium revenue........................................... -- 69,401
Other..................................................... 355,644 338,774
---------- ----------
Total revenues.................................... 4,005,634 3,155,730
Expenses:
Salaries and benefits -- physicians....................... 2,522,538 1,658,590
Salaries and benefits -- other............................ 726,974 630,409
General and administrative................................ 358,936 298,254
Building and equipment rent............................... 175,918 168,424
Interest expense.......................................... 166,084 152,371
Depreciation and amortization............................. 112,175 100,473
---------- ----------
Total expenses.................................... 4,062,625 3,008,521
---------- ----------
Net income (loss)................................. $ (56,991) $ 147,209
========== ==========
</TABLE>
See accompanying notes.
F-32
<PAGE> 103
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK DEFICIENCY IN STOCKHOLDERS'
---------------- RETAINED EQUITY
SHARES AMOUNT EARNINGS (DEFICIT)
------ ------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995............................ 2,000 $10,000 $(329,497) $(319,497)
Net loss............................................ -- -- (56,991) (56,991)
----- ------- --------- ---------
BALANCE AT DECEMBER 31, 1995.......................... 2,000 10,000 (386,488) (376,488)
Net income.......................................... -- -- 147,209 147,209
----- ------- --------- ---------
BALANCE AT NOVEMBER 30, 1996.......................... 2,000 $10,000 $(239,279) $(229,279)
===== ======= ========= =========
</TABLE>
See accompanying notes.
F-33
<PAGE> 104
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ (56,991) $147,209
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 112,175 100,473
Changes in operating assets and liabilities:
Patient accounts receivable, net....................... (122,887) (54,662)
Due from related parties............................... 23,951 (8,032)
Other receivables...................................... (74,157) 54,910
Prepaid expenses....................................... 2,627 (464)
Accounts payable, accrued compensation and other
current liabilities................................... 46,505 (76,072)
Due to related parties................................. 42,152 (57,985)
--------- --------
Net cash provided by (used in) operating
activities...................................... (26,625) 105,377
INVESTING ACTIVITIES
Purchases of property and equipment......................... (24,783) (11,284)
--------- --------
Net cash used in investing activities....................... (24,783) (11,284)
FINANCING ACTIVITIES
Repayment of capital lease obligations...................... (46,984) (46,644)
--------- --------
Net cash used in financing activities....................... (46,984) (46,644)
--------- --------
Increase (decrease) in cash................................. (98,392) 47,449
Cash, beginning of period................................... 100,886 2,494
--------- --------
Cash, end of period......................................... $ 2,494 $ 49,943
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 165,691 $148,741
========= ========
Cash paid for income taxes.................................. $ 40,168 $ --
========= ========
</TABLE>
See accompanying notes.
F-34
<PAGE> 105
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Eye Institute of Southern Arizona, P.C., an Arizona Professional Company
(the Company), operates a professional medical practice in Tucson, Arizona,
specializing in general ophthalmology.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements are carried at cost. The Company's
building is held under a capital lease agreement. Depreciation and amortization,
including amortization of assets held under capital lease agreements, are
computed using the straight-line method, with useful lives generally ranging
from 5 to 31 years. Routine maintenance and repairs are charged to expense as
incurred, while costs of betterments and renewals are capitalized.
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates less
allowances for contractual adjustments for patients covered by Medicare, the
Arizona Health Care Cost Containment System (AHCCCS) and various other discount
arrangements. Payments received under these programs and arrangements, which
generally are based on predetermined rates, are generally less than the
Company's customary charges, and the differences are recorded as contractual
adjustments at the time the related service is rendered.
The Company has contracted, effective August 1, 1996, with CIGNA as a
qualified provider of general ophthalmology services. The Company receives a
monthly capitation payment for all plan members in its assigned geographic area.
The premium revenue is paid pursuant to CIGNA HealthCare of Arizona guidelines
and administered on their behalf by Connecticut General Life Insurance Company.
On December 1, 1996, the Company contracted with FHP as a qualified
provider of general ophthalmology services. The Company will receive a monthly
capitation payment for all plan members in its assigned geographic area. The
premium revenue will be paid pursuant to FHP guidelines and administered on
their behalf by the Eye Specialists of Arizona Network.
The following table summarizes the percent of patient service revenues by
payor class:
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medicare................................................... 35% 38%
FHP and CIGNA.............................................. 36 31
Other (including self-pay)................................. 29 31
--- ---
100% 100%
=== ===
</TABLE>
Laws and regulations governing the Medicare and AHCCCS programs are complex
and subject to interpretation. The Company believes that it is in compliance
with all applicable laws and regulations and is not aware of any pending or
threatened investigations involving allegations of potential wrong doing. While
no such regulatory inquiries have been made, compliance with such laws and
regulations can be subject to future government review and interpretation as
well as significant regulatory action including fines, penalties and exclusion
from the Medicare and AHCCCS programs.
F-35
<PAGE> 106
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes (SFAS 109). Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount for cash approximates its fair value because of its
short-term maturity. The fair value of the Company's capital lease obligation
cannot be determined due to its related party nature.
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 amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. RELATED PARTY TRANSACTIONS
Kuskat Investment Company (Kuskat) owns certain real property and surgical
equipment which the Company leases. Kuskat is owned by the two shareholders of
the Company. Rent expense for property owned by Kuskat totaled approximately
$176,000 and $168,000 for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996, respectively.
Due (to) from related parties consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Due to stockholders......................................... $(29,290) $(21,375)
Due (to) from Kuskat........................................ (43,025) 22,757
Employee advances........................................... 14,330 6,650
-------- --------
$(57,985) $ 8,032
======== ========
</TABLE>
3. PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Building under capital lease................................ $ 2,450,000 $ 2,450,000
Leasehold improvements...................................... 53,005 53,005
Medical equipment........................................... 75,184 76,775
Office equipment............................................ 36,967 45,515
Automobiles................................................. 66,964 66,964
Computer equipment.......................................... 44,251 44,251
Other....................................................... 16,005 16,619
----------- -----------
2,742,376 2,753,129
Accumulated depreciation and amortization................... (1,189,648) (1,289,590)
----------- -----------
$ 1,552,728 $ 1,463,539
=========== ===========
</TABLE>
F-36
<PAGE> 107
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. LEASE COMMITMENTS
The Company leases office space and medical equipment under capital and
operating leases.
Future minimum lease commitments under a related party capital lease and
noncancelable operating leases (with terms of one year or more) consist of the
following at November 30, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASES
----------- ---------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 17,748 $ 13,265
Year ending December 31:
1997...................................................... 212,976 159,180
1998...................................................... 212,976 159,180
1999...................................................... 212,976 145,915
2000...................................................... 212,976 --
2001...................................................... 212,976 --
Thereafter................................................ 2,644,291 --
----------- --------
Total minimum lease payments................................ 3,726,919 $477,540
========
Less amount representing interest........................... (1,724,423)
-----------
Present value of minimum lease payments..................... $ 2,002,496
===========
</TABLE>
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Contribution carryforward................................. $ 663 $ 663
Net operating loss carryforward........................... 48,675 71,622
Lease capitalized for financial reporting purposes........ 207,771 196,746
Accumulated depreciation.................................. 59,474 62,615
-------- --------
316,583 331,646
Valuation allowance......................................... 267,911 203,578
-------- --------
Total deferred tax assets......................... $ 48,672 $128,068
======== ========
DEFERRED TAX LIABILITIES
Current:
Accrual to cash adjustment................................ $ 48,672 $128,068
-------- --------
Total deferred tax liabilities.................... $ 48,672 $128,068
======== ========
</TABLE>
F-37
<PAGE> 108
EYE INSTITUTE OF SOUTHERN ARIZONA, P.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $(19,377) $ 50,051
Permanent differences....................................... 8,892 3,494
State taxes, net of federal benefit......................... (1,832) 9,355
Change in valuation allowance............................... 12,598 (64,333)
Personal service corporation status......................... (281) 1,433
-------- --------
$ -- $ --
======== ========
</TABLE>
SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $267,911 and $203,578 valuation allowance at December 31, 1995
and November 30, 1996, respectively, is necessary to reduce the deferred tax
assets to the amount that will more likely than not be realized. The change in
the valuation allowance for the current year is $(64,333). At November 30, 1996
and December 31, 1995, the Company has available net operating loss
carryforwards of approximately $174,000 and $119,000, respectively, which expire
in the years 2010 and 2011, respectively.
6. MALPRACTICE INSURANCE
The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $3 million per incident, with a
$5 million annual limit. In addition, the Company has an umbrella policy which
provides coverage of $3 million per claim, with a $5 million annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying financial statements.
7. RETIREMENT PLAN
The Company maintains an employee savings plan under Section 401(k) of the
Internal Revenue Code. The plan covers substantially all employees. Management
has elected to not make matching or discretionary contributions to the plan.
8. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 595,000 shares of Vision common stock. In connection therewith,
the Company entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
Company.
The financial statements of the Company have been prepared as supplemental
information about the association to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.
F-38
<PAGE> 109
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Daniel B. Feller, M.D., P.C., d/b/a
Paradise Valley Eye Specialists;
Eye Specialists of Arizona Network, P.C.; and
Sharona Optical, Inc.
We have audited the accompanying combined balance sheets of Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists; Eye Specialists of
Arizona Network, P.C.; and Sharona Optical, Inc. (collectively referred to as
the Company), as of December 31, 1995 and November 30, 1996, and the related
combined statements of income, stockholders' equity, and cash flows for the year
ended December 31, 1995 and the eleven-month period ended November 30, 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 combined financial position of Daniel B. Feller,
M.D., P.C., d/b/a Paradise Valley Eye Specialists; Eye Specialists of Arizona
Network, P.C.; and Sharona Optical, Inc. at December 31, 1995 and November 30,
1996, and the combined results of their operations and their cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30, 1996
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
January 17, 1997
F-39
<PAGE> 110
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 32,543 $ 36,711
Patient accounts receivable, net.......................... 110,452 80,081
Inventory................................................. 60,768 62,450
Prepaid expenses and other................................ 7,808 6,929
-------- --------
Total current assets.............................. 211,571 186,171
Property and equipment, net................................. 314,307 242,204
Deposits.................................................... 10,363 10,363
-------- --------
Total assets...................................... $536,241 $438,738
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 23,033 $ 70,260
Accrued salaries and benefits............................. 36,017 30,015
Notes payable and current portion of long-term debt....... 36,560 32,786
Current portion of obligations under capital leases....... 10,385 11,097
Deferred tax liability...................................... 23,632 11,468
-------- --------
Total current liabilities......................... 129,627 155,626
Deferred tax liability...................................... 27,377 23,039
Loan payable -- stockholder................................. -- 4,648
Long-term debt, less current portion........................ 97,412 58,914
Obligations under capital leases, less current portion...... 35,264 25,060
Stockholders' equity:
Common stock, $1 par value: PVES -- 100,000 shares
authorized, 500 shares issued and outstanding;
ESAN -- 10,000 shares authorized, issued and
outstanding; Sharona Optical -- 500,000 shares
authorized, 5,000 shares issued and outstanding........ 15,500 15,500
Retained earnings......................................... 231,061 155,951
-------- --------
Total stockholders' equity........................ 246,561 171,451
-------- --------
Total liabilities and stockholders' equity........ $536,241 $438,738
======== ========
</TABLE>
See accompanying notes.
F-40
<PAGE> 111
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $1,136,324 $ 888,289
Capitation revenues....................................... 1,433,085 1,272,761
Retail income............................................. 300,110 380,715
Rental income............................................. 19,700 16,550
Interest income........................................... 1,990 4,075
---------- ----------
Total revenues.................................... 2,891,209 2,562,390
Expenses:
Cost of sales............................................. 131,388 167,630
Salaries and benefits -- physicians....................... 743,957 530,226
Salaries and benefits -- all other........................ 745,425 760,307
Professional fees......................................... 383,478 381,707
Medical supplies.......................................... 108,964 46,210
General and administrative................................ 266,992 249,929
Building and equipment rent............................... 322,411 278,973
Depreciation and amortization............................. 76,596 82,340
Insurance................................................. 39,139 29,678
Interest.................................................. 12,945 12,525
---------- ----------
Total expenses.................................... 2,831,295 2,539,525
---------- ----------
Income before income taxes.................................. 59,914 22,865
Income tax expense (benefit)................................ (10,098) (16,502)
---------- ----------
Net income........................................ $ 70,012 $ 39,367
========== ==========
</TABLE>
See accompanying notes.
F-41
<PAGE> 112
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED STOCKHOLDERS'
NUMBER AMOUNT EARNINGS EQUITY
------ ------- --------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995........................ 15,500 $15,500 $ 233,049 $ 248,549
Distributions to stockholders................. -- -- (72,000) (72,000)
Net income.................................... -- -- 70,012 70,012
------ ------- --------- ---------
BALANCE, DECEMBER 31, 1995...................... 15,500 15,500 231,061 246,561
Distributions to stockholders................. -- -- (114,477) (114,477)
Net income.................................... -- -- 39,367 39,367
------ ------- --------- ---------
BALANCE, NOVEMBER 30, 1996...................... 15,500 $15,500 $ 155,951 $ 171,451
====== ======= ========= =========
</TABLE>
See accompanying notes.
F-42
<PAGE> 113
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 70,012 $ 39,367
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 76,596 82,340
Loss on disposal of fixed assets.......................... -- 6,963
Provision for doubtful accounts........................... 1,000 --
Deferred income taxes..................................... (10,098) (16,502)
Changes in assets and liabilities:
Patient accounts receivable............................ 64,857 30,371
Inventory.............................................. (4,768) (1,682)
Prepaid expenses and other............................. 5,721 879
Accounts payable....................................... 7,493 47,227
Accrued salaries and benefits.......................... 4,729 (6,002)
Loan payable--stockholder.............................. -- 4,648
--------- ---------
Net cash provided by operating activities......... 215,542 187,609
INVESTING ACTIVITIES
Purchases of property and equipment......................... (128,337) (17,200)
--------- ---------
Net cash used in investing activities............. (128,337) (17,200)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................... 33,689 21,250
Payments of long-term debt.................................. (34,561) (63,522)
Principal payments of capital leases........................ (8,546) (9,492)
Distributions to stockholders............................... (72,000) (114,477)
--------- ---------
Net cash used in financing activities............. (81,418) (166,241)
--------- ---------
Net increase in cash........................................ 5,787 4,168
Cash at beginning of period................................. 26,756 32,543
--------- ---------
Cash at end of period............................. $ 32,543 $ 36,711
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 12,945 $ 12,525
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Purchase of property and equipment through issuance of
capital lease obligations................................. $ 19,950 $ --
========= =========
</TABLE>
See accompanying notes.
F-43
<PAGE> 114
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Daniel B. Feller, M.D., P.C. d/b/a Paradise Valley Eye Specialists (PVES),
a professional corporation, operates a professional medical practice
specializing in optometry and general ophthalmology. Eye Specialists of Arizona
Network, P.C. (ESAN), a professional corporation with common ownership, was
formed in 1994 to negotiate capitated contracts with managed care companies.
Sharona Optical, Inc., a C-corporation, operates a retail store which sells
sunglasses and eyeglass frames. All three of the corporations operate in the
Phoenix area, and are hereinafter collectively referred to as the Company. All
significant intercompany transactions have been eliminated.
INVENTORIES
Inventories are stated at cost.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method, with the assets' useful lives estimated at five to
seven years.
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 312,785 $ 335,500
Office equipment............................................ 186,718 191,158
Computer equipment.......................................... 99,140 104,873
Automobile.................................................. 34,494 --
--------- ---------
633,137 631,531
Less accumulated depreciation and amortization.............. (318,830) (389,327)
--------- ---------
$ 314,307 $ 242,204
========= =========
</TABLE>
Included in medical equipment as of December 31, 1995 and November 30, 1996
are assets acquired through capital leases with original costs of approximately
$57,000.
Amortization expense related to capital leases is included in depreciation
and amortization in the combined statements of income.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and accounts receivable are reflected in the
financial statements at fair value because of the short-term maturity of these
instruments.
F-44
<PAGE> 115
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amount and approximate fair values of the Company's long-term
debt and obligations under capital leases at December 31, 1995 and November 30,
1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
-------------------- --------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
$179,621 $183,516 $127,857 $143,161
======== ======== ======== ========
</TABLE>
Fair value is based on quoted market rates for debt with similar terms.
PATIENT SERVICE REVENUES
Revenues are based on established billing rates less allowances and
discounts for patients covered by Medicare, the Arizona Health Care Cost
Containment System (AHCCCS) and various other discount arrangements. Payments
received under these programs and arrangements, which are based on either
predetermined rates or the cost of services, are generally less than the
Company's customary charges. Revenues are recorded net of such contractual
adjustments or policy discounts.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, the Company's net patient revenues derived from Medicare and
AHCCCS were approximately 15 percent. The Company does not believe that there
are any credit risks associated with receivables due from governmental agencies.
Concentration of credit risk from other payors is limited by the number of
patients and payors.
The Company has arrangements with third-party payors under capitated
medical services contracts. Under these contracts, the Company receives fixed,
monthly fees from the third-party payors for each covered life in exchange for
assuming responsibility for the provision of specified medical services.
Laws and regulations governing the Medicare and AHCCCS programs are complex
and subject to interpretation. The Company believes that it is in compliance
with all applicable laws and regulations and is not aware of any pending or
threatened investigations involving allegations of potential wrong doing. While
no such regulatory inquiries have been made, compliance with such laws and
regulations can be subject to future government review and interpretation as
well as significant regulatory action including fines, penalties and exclusion
from the Medicare and AHCCCS programs.
INCOME TAXES
Income taxes for PVES have been provided using the liability method in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
ESAN and Sharona Optical, Inc. have elected to have their income taxed as S
corporations under the federal Internal Revenue Code. As a result, in lieu of
corporate income tax, ESAN and Sharona Optical, Inc.'s taxable income is passed
through to the stockholders of ESAN and Sharona Optical, Inc. and taxed at the
individual level. Accordingly, no provision or liability for federal income tax
has been reflected in these combined financial statements for ESAN and Sharona
Optical, Inc.
F-45
<PAGE> 116
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Promissory note bearing interest at prime plus .5% (9.25%
and 8.75% at December 31, 1995 and November 30, 1996,
respectively), payable in equal installments of $1,564,
principal and interest, through April 2000, collateralized
by office equipment....................................... $ 82,875 $ 65,674
Note payable with interest at 8%, payable in monthly
installments of $1,564, principal and interest, through
October 1999.............................................. 21,418 17,095
Promissory note bearing interest at prime plus .5% (9.25% at
December 31, 1995), payable in equal installments of $573,
principal and interest, paid in full October 1996......... 23,490 --
Note payable with interest at 8.25%, payable in monthly
installments of $2,731, principal and interest, through
February 1997............................................. -- 8,082
Installment loan from vendor for medical equipment.......... 6,189 849
-------- --------
133,972 91,700
Less current portion........................................ (36,560) (32,786)
-------- --------
Notes payable and long-term debt............................ $ 97,412 $ 58,914
======== ========
</TABLE>
As of November 30, 1996, maturities of notes payable and long-term debt is
as follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 5,498
Year ending December 31:
1997...................................................... 29,295
1998...................................................... 24,313
1999...................................................... 24,776
2000...................................................... 7,818
-------
$91,700
=======
</TABLE>
F-46
<PAGE> 117
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. LEASE COMMITMENTS
Future minimum lease commitments under noncancelable operating and capital
leases (with an initial or remaining term in excess of one year) at November 30,
1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ----------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 1,150 $ 17,947
Year ending December 31:
1997........................................................ 13,803 216,838
1998........................................................ 13,803 203,929
1999........................................................ 10,242 169,728
2000........................................................ 2,716 159,106
2001........................................................ -- 162,108
Thereafter.................................................. -- 229,653
------- ----------
Total minimum lease obligations............................. 41,714 $1,159,309
==========
Less amount representing interest........................... (5,557)
-------
Present value of minimum lease payments (including current
portion of $11,097)....................................... $36,157
=======
</TABLE>
4. MALPRACTICE INSURANCE
The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $1,000,000 per incident, with a
$2,000,000 annual limit. In addition, the Company has an umbrella policy which
provides coverage of $5,000,000 per claim, with a $5,000,000 annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.
5. RELATED PARTY TRANSACTIONS
The Company leases a medical building from a stockholder. Total lease
payments were approximately $167,000 for the eleven-month period ended November
30, 1996 and $122,000 for the year ended December 31, 1995. The Company also
leased a medical building from an employee with total lease payments
approximating $29,000 for the eleven-month period ended November 30, 1996 and
$36,000 for the year ended December 31, 1995.
The Company received rental income of approximately $17,000 for the
eleven-month period ended November 30, 1996 from a medical building sublease
arrangement with an affiliated physician. Future minimum rentals to be received
under this sublease arrangement total approximately $156,000 at November 30,
1996.
The Company paid a stockholder approximately $311,000 for the eleven-month
period ended November 30, 1996 and $448,000 for the year ended December 31, 1995
as compensation for services provided to the Company.
F-47
<PAGE> 118
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
PVES' deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Tax credit carryforward................................... $ 5,286 $ 5,286
Net operating loss carryforward........................... 2,576 5,851
-------- --------
Total deferred tax assets......................... 7,862 11,137
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... 23,632 11,468
Noncurrent:
Capital lease............................................. 4,810 8,688
Depreciation expense...................................... 30,429 25,488
-------- --------
35,239 34,176
-------- --------
Total deferred tax liabilities.................... 58,871 45,644
-------- --------
Net deferred tax assets........................... $(51,009) $(34,507)
======== ========
</TABLE>
Components of the income tax provision (benefit) which relates only to PVES
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 NOVEMBER 30, 1996
----------------------------- -----------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal.................. $ -- $ (9,038) $ (9,038) $ -- $(12,866) $(12,866)
State.................... -- (1,060) (1,060) -- (3,636) (3,636)
------- -------- -------- ------- -------- --------
$ -- $(10,098) $(10,098) $ -- $(16,502) $(16,502)
======= ======== ======== ======= ======== ========
</TABLE>
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Income taxes at the statutory rate........................ $ 20,371 $ 7,774
Permanent differences..................................... 356 356
S corporation income...................................... (24,732) (21,865)
State taxes, net of federal benefit....................... (700) (2,400)
Tax credit................................................ (5,286) --
Personal service corporation status....................... (107) (367)
-------- --------
$(10,098) $(16,502)
======== ========
</TABLE>
At December 31, 1995 and November 30, 1996, PVES has available net
operating loss carryforwards of approximately $6,000 (which expires in 2010) and
$14,000 (which expires in 2011), respectively.
F-48
<PAGE> 119
DANIEL B. FELLER, M.D., P.C.,
D/B/A PARADISE VALLEY EYE SPECIALISTS;
EYE SPECIALISTS OF ARIZONA NETWORK, P.C.;
AND SHARONA OPTICAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists, Eye Specialists of
Arizona Network, P.C., and Sharona Optical, Inc. were acquired by Vision
Twenty-One, Inc. (Vision) in exchange for approximately 421,000 shares of Vision
common stock and notes of approximately $150,000. In connection therewith, the
Company entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
practice.
The combined financial statements of Daniel B. Feller, M.D., P.C., d/b/a
Paradise Valley Eye Specialists; Eye Specialists of Arizona Network, P.C.; and
Sharona Optical, Inc. have been prepared as supplemental information about the
association to which Vision will provide management services following
consummation of the acquisition. The Company previously operated as a separate
independent association. The historical financial position, results of
operations and cash flows do not reflect any adjustments relating to the
acquisition.
F-49
<PAGE> 120
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Northwest Eye Specialists, P.L.L.C.
We have audited the accompanying balance sheets of Northwest Eye
Specialists, P.L.L.C. (the Company) as of December 31, 1995 and November 30,
1996, and the related statements of income, partners' equity, and cash flows for
the year ended December 31, 1995 and the eleven-month period ended November 30,
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 Northwest Eye Specialists,
P.L.L.C. at December 31, 1995 and November 30, 1996, and the results of its
operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
January 15, 1997
F-50
<PAGE> 121
NORTHWEST EYE SPECIALISTS, P.L.L.C.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $135,148 $122,445
Patient accounts receivable, net of allowances for
uncollectible accounts of approximately $49,000 and
$96,000 at December 31, 1995 and November 30, 1996,
respectively........................................... 195,209 349,974
Due from related parties.................................. 32,420 32,107
Prepaid expenses.......................................... 24,963 40,384
Inventories............................................... -- 65,476
-------- --------
Total current assets.............................. 387,740 610,386
Property, equipment and improvements, net................... 105,841 141,201
Other assets................................................ 27,072 27,072
-------- --------
Total assets...................................... $520,653 $778,659
======== ========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 53,832 $250,386
Accrued compensation...................................... 34,421 72,452
Accrued distributions to physicians....................... -- 101,260
Other accrued liabilities................................. 8,727 8,018
Profit sharing payable.................................... 51,162 30,000
Due to related parties.................................... 7,082 7,082
Short-term borrowings..................................... -- 45,000
Current maturities of obligations under capital leases.... 7,962 8,341
-------- --------
Total current liabilities......................... 163,186 522,539
Obligations under capital leases, net of current portion.... 19,742 12,337
Partners' equity............................................ 337,725 243,783
-------- --------
Total liabilities and partners' equity............ $520,653 $778,659
======== ========
</TABLE>
See accompanying notes.
F-51
<PAGE> 122
NORTHWEST EYE SPECIALISTS, P.L.L.C.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $2,302,823 $2,160,519
Sales of optical goods.................................... -- 250,901
Other..................................................... 42,399 2,964
---------- ----------
Total revenues.................................... 2,345,222 2,414,384
Expenses:
Salaries, wages and benefits.............................. 559,124 620,435
Cost of optical goods sold................................ -- 94,901
Medical supplies.......................................... 177,681 156,962
General and administrative................................ 430,894 571,594
Insurance................................................. 190,045 146,808
Building and equipment rent............................... 120,000 140,657
Depreciation and amortization............................. 26,372 27,688
Consulting fee to physician............................... -- 11,000
Interest.................................................. 50,817 5,353
---------- ----------
Total expenses.................................... 1,554,933 1,775,398
---------- ----------
Net income........................................ $ 790,289 $ 638,986
========== ==========
</TABLE>
See accompanying notes.
F-52
<PAGE> 123
NORTHWEST EYE SPECIALISTS, P.L.L.C.
STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Partners' equity, beginning of period....................... $ 278,895 $ 337,725
Net income................................................ 790,289 638,986
Cash contributions from partners.......................... 75,321 --
In-kind capital contributions from partner................ 120,000 151,657
Distributions to partners................................. (926,780) (884,585)
--------- ---------
Partners' equity, end of period............................. $ 337,725 $ 243,783
========= =========
</TABLE>
See accompanying notes.
F-53
<PAGE> 124
NORTHWEST EYE SPECIALISTS, P.L.L.C.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 790,289 $ 638,986
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 26,372 27,688
In-kind capital contributions from partner................ 120,000 151,657
Changes in operating assets and liabilities:
Patient accounts receivable, net....................... (25,534) (154,765)
Due from related parties............................... (3,025) 313
Prepaid expenses....................................... (17,529) (15,421)
Inventories............................................ -- (65,476)
Accounts payable, accrued expenses and other........... 17,350 313,974
--------- ---------
Net cash provided by operating activities......... 907,923 896,956
INVESTING ACTIVITIES
Cash contributions from partners............................ 75,321 --
Purchases of property and equipment......................... (66,650) (63,048)
--------- ---------
Net cash provided by (used in) investing activities......... 8,671 (63,048)
FINANCING ACTIVITIES
Proceeds from short-term borrowings......................... -- 45,000
Principal payments on capital leases........................ (7,041) (7,026)
Distributions to partners................................... (926,780) (884,585)
--------- ---------
Net cash used in financing activities....................... (933,821) (846,611)
--------- ---------
Decrease in cash............................................ (17,227) (12,703)
Cash at beginning of period................................. 152,375 135,148
--------- ---------
Cash at end of period....................................... $ 135,148 $ 122,445
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 48,013 $ 5,353
========= =========
</TABLE>
See accompanying notes.
F-54
<PAGE> 125
NORTHWEST EYE SPECIALISTS, P.L.L.C.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Northwest Eye Specialists, P.L.L.C. (the Company), an Arizona Professional
Company, operates a professional medical practice in Tucson, Arizona,
specializing in general ophthalmology and surgery. Per the operating agreement
dated June 1, 1993, the Company will cease to exist upon the occurrence of
certain events or on December 31, 2050. Each member's liability for the debts
and obligation of the Company shall be limited as set forth in the Arizona
Limited Liability Company Act, Section 29-651.
INVENTORIES
Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames (collectively, "optical goods"). Inventories are stated at the
lower of cost or market, with cost determined on a specific-identification
basis.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements are carried at cost. Depreciation,
including amortization of assets held under capital lease obligations, is
computed using the straight-line method, with the assets' useful lives ranging
from 5 to 39 years. Routine maintenance and repairs are charged to expense as
incurred, while costs of betterments and renewals are capitalized.
Property, equipment and improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 57,827 $ 74,611
Office equipment............................................ 38,120 42,954
Optical shop equipment...................................... 15,000 19,158
Medical equipment held under capital leases................. 39,924 39,924
Leasehold improvements...................................... 7,121 44,393
-------- --------
157,992 221,040
Less accumulated depreciation and amortization.............. (52,151) (79,839)
-------- --------
$105,841 $141,201
======== ========
</TABLE>
Amortization expense related to capital leases is included in depreciation
and amortization in the accompanying statements of income.
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare, Arizona
Health Care Cost Containment System (AHCCCS) and various other discount
arrangements. Payments received under these programs and arrangements, which are
based on predetermined rates, are generally less than the Company's established
billing rates and the differences are recorded as contractual adjustments at the
time the related service is rendered.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 53% and 52%, respectively, of the Company's net
patient service revenues were derived from the Medicare and AHCCCS programs. The
Company does not believe that there are any credit risks associated with
receivables due from governmental agencies. Concentration of credit risk from
other payors is
F-55
<PAGE> 126
NORTHWEST EYE SPECIALISTS, P.L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
limited by the number of patients and payors. The Company does not require any
form of collateral from its patients or third-party payors.
Laws and regulations governing the Medicare and AHCCCS programs are complex
and subject to interpretation. The Company believes that it is in compliance
with all applicable laws and regulations and is not aware of any pending or
threatened investigations involving allegations of potential wrong doing. While
no such regulatory inquiries have been made, compliance with such laws and
regulations can be subject to future government review and interpretation as
well as significant regulatory action including fines, penalties and exclusion
from the Medicare and AHCCCS programs.
INCOME TAXES
The Company was organized as an Arizona Limited Liability Company and is
taxed as a partnership for federal and state income tax purposes. As a result,
in lieu of corporate income taxes, the Company's taxable income is passed
through to the partners of the Company and taxed at the individual taxpayer
level in accordance with their ownership interests. As a result, the
accompanying financial statements include no provision for income taxes for the
Company.
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 amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash reflects its fair value because of the
short-term maturity of that financial instrument. It is not practicable to
estimate the fair value of the Company's capital lease obligation because the
Company's incremental borrowing rate cannot reasonably be determined.
2. RELATED PARTY TRANSACTIONS
The Company leases its operating facilities and certain equipment from a
partner of the Company. Expenses under such leases amounted to approximately
$120,000 and $141,000 for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996, respectively. Such amounts are recognized as
in-kind capital contributions from partner because no payment was made to the
partner.
The Company recognized expense of $11,000 for the eleven-month period ended
November 30, 1996 under a consulting agreement with a partner of the Company.
Such amount is recognized as in-kind capital contributions from partner because
no payment was made to the partner.
The Company reimbursed a partner in 1995 for interest on a loan relating to
the Company's facility. Such interest expense reimbursement was approximately
$51,000 for the year ended December 31, 1995. Although the partner incurred
interest on the loan in 1996, the Company did not reimburse the partner for such
interest in 1996.
F-56
<PAGE> 127
NORTHWEST EYE SPECIALISTS, P.L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LEASE COMMITMENTS
At November 30, 1996, approximate future minimum rental commitments under
noncancelable operating leases (with an initial or remaining term in excess of
one year) and a capital lease are as follows (including related party leases):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASE
---------- -------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 10,984 $ 820
Year ending December 31:
1997...................................................... 133,955 9,845
1998...................................................... 134,492 9,845
1999...................................................... 121,820 2,461
2000...................................................... 120,000 --
Thereafter................................................ 6,000,000 --
---------- -------
Total minimum lease obligations............................. $6,521,251 22,971
==========
Less amount representing interest........................... (2,293)
-------
Present value of minimum lease obligations.................. $20,678
=======
</TABLE>
4. RETIREMENT PLAN
The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to the plan was
approximately $52,000 and $44,000 for the year ended December 31, 1995 and for
the eleven-month period ended November 30, 1996, respectively.
5. MALPRACTICE INSURANCE
The Company carries separate occurrence based malpractice insurance
policies for each of its two physicians. This insurance provides separate
per-occurrence coverage of $2,000,000 and $3,000,000, respectively, for the two
physicians with an aggregate limit of $4,000,000 and $5,000,000, respectively.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying financial statements.
6. SHORT-TERM BORROWINGS
Short-term borrowings represent a bank revolving line of credit of $75,000
for working capital needs, of which $30,000 is available at November 30, 1996.
The maturity date is June 16, 1997. Interest payments are due monthly with
interest accruing at the bank's prime rate (9.25% at November 30, 1996). The
revolving line of credit is collateralized by the Company's receivables and
guaranteed by the partners.
7. COMMITMENTS AND CONTINGENCIES
Other assets include an investment in an unrelated limited liability
investment company with a book value of $27,072 at December 31, 1995 and
November 30, 1996. Under the investment agreement, the investment company may
require additional capital contributions from the Company not to exceed $50,000
in the aggregate. Additional capital contributions of approximately $3,000 have
been made through November 30, 1996.
F-57
<PAGE> 128
NORTHWEST EYE SPECIALISTS, P.L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. OTHER REVENUE
Through December 31, 1995, an unrelated organization operated an optical
shop on the Company's premises. Other revenue for the year ended December 31,
1995 includes approximately $41,000 received by the Company related to the
optical shop arrangement with such unrelated organization.
9. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 492,000 shares of Vision common stock and notes of approximately
$396,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.
The financial statements of the Company have been prepared as supplemental
information about the associations to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.
F-58
<PAGE> 129
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Lindstrom, Samuelson & Hardten Ophthalmology Associates, P.A.
and Vision Correction Centers, Inc.
We have audited the accompanying combined balance sheets of Lindstrom,
Samuelson & Hardten Ophthalmology Associates, P.A. and Vision Correction
Centers, Inc. as of December 31, 1995 and November 30, 1996, and the related
combined statements of operations, stockholders' equity, and cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30,
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 combined financial position of Lindstrom,
Samuelson & Hardten Ophthalmology Associates, P.A. and Vision Correction
Centers, Inc. at December 31, 1995 and November 30, 1996, and the combined
results of their operations and their cash flows for the year ended December 31,
1995 and the eleven-month period ended November 30, 1996 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
January 14, 1997
F-59
<PAGE> 130
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 353 $177,637
Patient accounts receivable, net of allowance for doubtful
accounts of approximately $51,000 and $48,000 at
December 31, 1995 and November 30, 1996,
respectively........................................... 305,103 290,272
Other receivables......................................... 5,000 11,706
Prepaid expenses.......................................... 12,473 3,932
-------- --------
Total current assets.............................. 322,929 483,547
Property, equipment and improvements, net................... 584,653 455,448
Other assets................................................ 51,912 36,771
-------- --------
Total assets...................................... $959,494 $975,766
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $125,531 $257,421
Due to related party...................................... -- 84,825
Revolving credit note payable............................. -- 60,000
Current portion of long-term debt......................... 53,713 46,439
Current portion of obligations under capital leases....... 81,419 111,817
-------- --------
Total current liabilities......................... 260,663 560,502
Long-term debt.............................................. 106,938 65,079
Obligations under capital leases, net of current portion.... 388,299 316,473
Stockholders' equity:
Common stock, $1 par value: 100 shares authorized, issued
and outstanding........................................ 100 100
Retained earnings......................................... 203,494 33,612
-------- --------
Total stockholders' equity........................ 203,594 33,712
-------- --------
Total liabilities and stockholders' equity........ $959,494 $975,766
======== ========
</TABLE>
See accompanying notes.
F-60
<PAGE> 131
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $2,679,914 $3,404,975
Other..................................................... 61,171 57,991
---------- ----------
Total revenues.................................... 2,741,085 3,462,966
Expenses:
Compensation to physician stockholders.................... 884,903 947,780
Salaries, wages and benefits.............................. 585,386 746,251
Advertising............................................... 239,904 240,848
Professional fees -- related party........................ -- 591,455
Professional fees -- other................................ 197,680 164,794
General and administrative................................ 263,856 332,598
Medical supplies.......................................... 82,429 118,665
Insurance................................................. 73,697 31,496
Building and equipment rent............................... 162,534 171,980
Depreciation and amortization............................. 257,730 235,047
Interest.................................................. 79,674 51,934
---------- ----------
Total expenses.................................... 2,827,793 3,632,848
---------- ----------
Net loss.......................................... $ (86,708) $ (169,882)
========== ==========
</TABLE>
See accompanying notes.
F-61
<PAGE> 132
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
NUMBER AMOUNT EARNINGS EQUITY
------ ------ --------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995............................... 100 $100 $ 290,202 $ 290,302
Net loss............................................. -- -- (86,708) (86,708)
--- ---- --------- ---------
BALANCE, DECEMBER 31, 1995............................. 100 100 203,494 203,594
Net loss............................................. -- -- (169,882) (169,882)
--- ---- --------- ---------
BALANCE, NOVEMBER 30, 1996............................. 100 $100 $ 33,612 $ 33,712
=== ==== ========= =========
</TABLE>
See accompanying notes.
F-62
<PAGE> 133
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A. AND
VISION CORRECTION CENTERS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (86,708) $(169,882)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 257,730 235,047
(Gain) loss on disposal of fixed assets................... (8,477) 1,096
Changes in assets and liabilities:
Patient accounts receivable, net....................... (20,851) 14,831
Other receivables...................................... 6,000 (6,706)
Prepaid expenses....................................... (1,298) 8,541
Accounts payable and accrued expenses.................. 16,867 116,807
Due to related party................................... -- 84,825
--------- ---------
Net cash provided by operating activities......... 163,263 284,559
INVESTING ACTIVITIES
Purchases of property and equipment......................... (55,947) (47,884)
(Increase) decrease in other assets......................... (1,089) 4,700
--------- ---------
Net cash used in investing activities....................... (57,036) (43,184)
FINANCING ACTIVITIES
Proceeds from issuance of revolving credit note payable..... -- 80,000
Payment of revolving credit note payable.................... -- (20,000)
Payment of long-term debt................................... (83,898) (49,133)
Principal payments on capital leases........................ (60,035) (74,958)
--------- ---------
Net cash used in financing activities....................... (143,933) (64,091)
--------- ---------
(Decrease) increase in cash................................. (37,706) 177,284
Cash at beginning of period................................. 38,059 353
--------- ---------
Cash at end of period....................................... $ 353 $ 177,637
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 72,954 $ 56,000
========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITY
Capital lease obligations incurred to acquire equipment..... $ 45,889 $ 33,530
========= =========
Loan and vendor accounts payable incurred to acquire
equipment................................................. $ 24,856 $ 15,083
========= =========
</TABLE>
See accompanying notes.
F-63
<PAGE> 134
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Lindstrom, Samuelson & Hardten Ophthalmology Associates, P.A. (Practice), a
Minnesota corporation, operates a professional medical practice, specializing in
general ophthalmology and surgery. Vision Correction Centers, Inc. (VCC), a
Minnesota corporation with common ownership with the Practice, was formed in
1994 to provide ophthalmic surgery services. Both corporations operate in the
greater Minneapolis and St. Paul area, and are hereinafter collectively referred
to as the Company. During 1995, VCC transferred all of its assets and
liabilities to the Practice and ceased all operations. All significant
intercompany transactions have been eliminated.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements are carried at cost. Depreciation is
computed using straight-line and accelerated methods, with the assets' useful
lives estimated at five to seven years. Routine maintenance and repairs are
charged to expense as incurred, while costs of betterments and renewals are
capitalized.
Property, equipment and improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 991,724 $1,043,715
Office furniture and equipment.............................. 147,760 181,938
Computer software........................................... 25,021 25,521
Leasehold improvements...................................... 35,752 37,170
---------- ----------
1,200,257 1,288,344
Less accumulated depreciation and amortization.............. (615,604) (832,896)
---------- ----------
$ 584,653 $ 455,448
========== ==========
</TABLE>
Included in medical equipment as of December 31, 1995 and November 30, 1996
are assets acquired through capital leases with original costs of approximately
$558,000. Included in office furniture and equipment as of November 30, 1996 are
assets acquired through capital leases with original costs of approximately
$15,000.
Amortization expense related to capital leases is included in depreciation
and amortization in the combined statements of operations.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and revolving credit note payable reported in
the combined financial statements reflects their fair value because of the
short-term maturity of those financial instruments. It is not practicable to
estimate the fair value of the Company's long-term debt and obligations under
capital leases because the Company's incremental borrowing rate cannot
reasonably be determined.
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less
F-64
<PAGE> 135
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
than the Company's established billing rates and the differences are recorded as
contractual adjustments at the time the related service is rendered.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 23% and 19%, respectively, of the Company's net
patient service revenues were derived from the Medicare and Medicaid programs.
The Company does not believe that there are any credit risks associated with
receivables due from governmental agencies. Concentration of credit risk from
other payors is limited by the number of patients and payors. The Company does
not require any form of collateral from its patients or third-party payors.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquires have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.
ADVERTISING COSTS
The Company expenses advertising costs as incurred.
INCOME TAXES
Income taxes for VCC have been provided using the liability method in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
The Practice is taxed under the provisions of Subchapter S of the Internal
Revenue Code, which generally provides that in lieu of corporate taxes, the
stockholders shall be taxed on the Practice's taxable income in accordance with
their ownership interests. As a result, the accompanying combined financial
statements include no provision for income taxes for the Practice.
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amount reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
OTHER ASSETS
The Company purchased a physician practice in 1994. Costs of approximately
$43,000 and $32,000 (net of accumulated amortization of approximately $14,000
and $25,000) as of December 31, 1995 and November 30, 1996, respectively, are
included in other assets in the combined financial statements. The costs are
being amortized over five years and the related expense is included in
depreciation and amortization in the combined statements of operations.
F-65
<PAGE> 136
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Bank term loan bearing interest at prime plus 1% (9.75% and
9.25% at December 31, 1995 and November 30, 1996,
respectively), payable in equal installments of $3,000
(principal and interest) through December 1998............. $100,475 $ 75,219
Note payable with interest imputed at 10%, payable in
monthly installments of $1,200 (principal and interest)
through September 1999..................................... 44,876 36,299
Installment loan from vendor for medical equipment......... 15,300 --
-------- --------
160,651 111,518
Less current portion....................................... (53,713) (46,439)
-------- --------
$106,938 $ 65,079
======== ========
</TABLE>
The term loan is collateralized by substantially all of the assets of the
Company.
As of November 30, 1996, the aggregate amounts of annual principal
maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 4,222
Year ending December 31:
1997...................................................... 46,239
1998...................................................... 50,693
1999...................................................... 10,364
--------
$111,518
========
</TABLE>
3. LEASE COMMITMENTS
Future minimum lease commitments under noncancelable operating and capital
leases (with an initial or remaining term in excess of one year) at November 30,
1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 21,757 $ 15,277
Year ending December 31:
1997...................................................... 160,267 186,950
1998...................................................... 183,857 194,322
1999...................................................... 120,395 201,654
2000...................................................... 11,990 208,986
2001...................................................... 1,364 106,326
-------- --------
Total minimum lease payments................................ 499,630 $913,515
========
Less amount representing interest........................... (71,340)
--------
Present value of minimum lease payments..................... $428,290
========
</TABLE>
F-66
<PAGE> 137
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
At December 31, 1995, VCC had no deferred tax assets or liabilities as the
result of the sale of its assets to the Practice. This sale resulted in income
during 1995 for tax purposes.
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Income taxes at the statutory rate.......................... $(29,481)
Permanent differences....................................... 28,573
S-corporation income........................................ 14,448
State taxes, net of federal benefit......................... 2,576
Benefit of graduated rates.................................. (6,825)
Change in valuation allowance............................... (9,291)
--------
$ --
========
</TABLE>
The change in the valuation allowance for the year ended December 31, 1995
was $9,291.
5. MALPRACTICE INSURANCE
The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $5,000,000 per incident, with a
$5,000,000 annual limit. In addition, the Company has an umbrella policy which
provides coverage of $2,000,000 per claim, with a $4,000,000 annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.
6. RETIREMENT PLAN
The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to this plan was
approximately $42,000 for the year ended December 31, 1995 and for the
eleven-month period ended November 30, 1996.
7. COMMITMENTS
The Company has employment agreements with each of the three
physician-stockholders which provide for, among other things, base pay and
incentive compensation based on the Company's net income. Additionally, the
Company has a deferred compensation agreement with each physician-stockholder
which provides for compensation in the event of voluntary or involuntary
termination. In connection with the transaction described in Note 9, each of the
aforementioned agreements was terminated.
The Company has a revolving credit note payable of $100,000 due on demand,
bearing interest at a rate of prime plus 0.5% (8.75% at November 30, 1996). As
of November 30, 1996, the Company had $60,000 outstanding on this revolving
credit note payable.
8. RELATED PARTY TRANSACTIONS
During the eleven-month period ended November 30, 1996, the Company
incurred costs of approximately $591,000 for the use of laser equipment owned by
Laser Vision Centers, Inc. (LVC). As of
F-67
<PAGE> 138
LINDSTROM, SAMUELSON & HARDTEN OPHTHALMOLOGY ASSOCIATES, P.A.
AND VISION CORRECTION CENTERS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
November 30, 1996, $84,825 was payable to LVC and is included in due to related
party in the combined balance sheets. The majority stockholder of the Company is
a shareholder and director of LVC.
Subsequent to November 30, 1996, the Company executed a letter of intent
with LVC whereby the Company will sell certain equipment and assets with a net
book value of approximately $225,000. The letter of intent also states that the
Company will enter into a management service agreement with LVC for the
performance of various management services related to refractive surgery.
9. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 371,000 shares of Vision common stock and notes of approximately
$460,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.
The combined financial statements of the Company have been prepared as
supplemental information about the associations to which Vision will provide
management services following consummation of the acquisition. The Company
previously operated as a separate independent association. The historical
financial position, results of operations and cash flows do not reflect any
adjustments relating to the acquisition.
F-68
<PAGE> 139
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Cambridge Eye Clinic, P.A. --
John W. Lahr, Optometrist, P.A. and
Eyeglass Express Optical Lab, Inc.
We have audited the accompanying combined balance sheets of Cambridge Eye
Clinic, P. A. -- John W. Lahr, Optometrist, P.A. and Eyeglass Express Optical
Lab, Inc. as of December 31, 1995 and November 30, 1996, and the related
combined statements of operations, stockholders' equity, and cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30,
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 combined financial position of Cambridge Eye
Clinic, P. A. -- John W. Lahr, Optometrist, P.A. and Eyeglass Express Optical
Lab, Inc. at December 31, 1995 and November 30, 1996, and the combined results
of their operations and their cash flows for the year ended December 31, 1995
and the eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
January 10, 1997
F-69
<PAGE> 140
CAMBRIDGE EYE CLINIC, P. A.--
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 45,061 $ 83,302
Patient accounts receivable, net of allowances for
uncollectible accounts of approximately $37,000 and
$25,000 at December 31, 1995 and November 30, 1996,
respectively........................................... 191,680 129,517
Other receivables......................................... 3,374 15,668
Inventories............................................... 207,968 210,701
Prepaid expenses.......................................... 11,381 11,581
-------- --------
Total current assets.............................. 459,464 450,769
Deferred tax assets......................................... 31,433 33,237
Other assets................................................ 600 462
Property, equipment and improvements, net................. 149,518 101,922
-------- --------
Total assets...................................... $641,015 $586,390
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 65,151 $141,222
Note payable to stockholder............................... 5,946 5,946
Demand notes payable...................................... 5,363 1,857
Current maturities of long-term debt...................... 24,795 22,330
Deferred tax liabilities.................................. 141,368 89,277
-------- --------
Total current liabilities......................... 242,623 260,632
Long-term debt, net of current portion...................... 155,480 161,557
Stockholders' equity:
Common stock, no par value: 2,500 shares authorized; 1,250
shares issued and outstanding.......................... -- --
Additional paid-in capital................................ 42,389 42,389
Note receivable from stock sales.......................... (12,850) --
Retained earnings......................................... 213,373 148,840
Treasury stock at cost (750 shares)....................... -- (27,028)
-------- --------
Total stockholders' equity........................ 242,912 164,201
-------- --------
Total liabilities and stockholders' equity........ $641,015 $586,390
======== ========
</TABLE>
See accompanying notes.
F-70
<PAGE> 141
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $ 537,834 $ 527,068
Sales of optical goods.................................... 900,826 749,783
Other income.............................................. 2,080 2,724
---------- ----------
Total revenues.................................... 1,440,740 1,279,575
Expenses:
Compensation to physician stockholder..................... 65,175 62,306
Salaries, wages and benefits.............................. 582,086 639,931
Cost of optical goods sold................................ 348,984 316,115
General and administrative................................ 182,769 177,697
Insurance................................................. 15,791 6,891
Building and equipment rent............................... 136,965 125,894
Depreciation.............................................. 60,878 42,458
Interest.................................................. 21,759 16,931
Other..................................................... 6,503 3,107
---------- ----------
Total expenses.................................... 1,420,910 1,391,330
---------- ----------
Income (loss) before income taxes........................... 19,830 (111,755)
Income tax expense (benefit)................................ 7,984 (47,222)
---------- ----------
Net income (loss)........................................... $ 11,846 $ (64,533)
========== ==========
</TABLE>
See accompanying notes.
F-71
<PAGE> 142
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTE
NO-PAR ADDITIONAL RECEIVABLE TOTAL
COMMON PAID-IN FROM RETAINED TREASURY STOCKHOLDERS'
STOCK SHARES CAPITAL STOCK SALES EARNINGS STOCK EQUITY
------------ ---------- ----------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995..... 1,250 $42,389 $(12,850) $201,527 $ -- $231,066
Net income................... -- -- -- 11,846 -- 11,846
----- ------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1995... 1,250 42,389 (12,850) 213,373 -- 242,912
Net loss..................... -- -- -- (64,533) -- (64,533)
Payment on note receivable
from stock sales.......... -- -- 12,850 -- -- 12,850
Purchase of treasury stock at
cost...................... -- -- -- -- (27,028) (27,028)
----- ------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1996... 1,250 $42,389 $ -- $148,840 $(27,028) $164,201
===== ======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-72
<PAGE> 143
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 11,846 $(64,533)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation.............................................. 60,878 42,458
Loss on disposal of property, equipment and
improvements........................................... -- 2,774
Provision for deferred taxes.............................. 3,715 (53,895)
Changes in assets and liabilities:
Patient accounts receivable, net....................... 16,921 62,163
Other receivables...................................... 10,135 (12,294)
Inventories............................................ (7,968) (2,733)
Prepaid expenses....................................... (11,381) (200)
Other assets........................................... (320) 138
Accounts payable and accrued expenses.................. (28,483) 76,071
-------- --------
Net cash provided by operating activities......... 55,343 49,949
INVESTING ACTIVITIES
Proceeds from collection on notes receivable from stock
sales..................................................... -- 12,850
Proceeds from sale of property, plant and equipment....... -- 2,364
Purchases of property, equipment and improvements......... (42,350) --
-------- --------
Net cash (used in) provided by investing
activities...................................... (42,350) 15,214
FINANCING ACTIVITIES
Proceeds from long-term debt................................ 20,000 21,500
Repayment of long-term debt and demand notes payable........ (62,696) (21,394)
Purchase of treasury stock.................................. -- (27,028)
Proceeds from issuance of note payable to stockholder....... 5,946 --
-------- --------
Net cash used in financing activities............. (36,750) (26,922)
-------- --------
(Decrease) increase in cash................................. (23,757) 38,241
Cash at beginning of period................................. 68,818 45,061
-------- --------
Cash at end of period....................................... $ 45,061 $ 83,302
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 21,202 $ 16,931
======== ========
Cash paid during the year for income taxes.................. $ -- $ 6,673
======== ========
</TABLE>
See accompanying notes.
F-73
<PAGE> 144
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Cambridge Eye Clinic, P. A. -- John W. Lahr, Optometrist, P.A. (the Clinic)
is a Minnesota corporation which operates professional medical practices,
specializing in general ophthalmology and optometry. The Clinic's service area
is Cambridge, Minnesota, and surrounding communities in North Branch, Mora,
Sandstone and Pine City, Minnesota.
The combined financial statements include the accounts of Cambridge Eye
Clinic, P. A. -- John W. Lahr, Optometrist, P.A. and Eyeglass Express Optical
Lab, Inc., which are companies under common ownership and are collectively
referred to herein as the "Company." All intercompany accounts and transactions
have been eliminated from these combined financial statements.
CASH EQUIVALENTS
The Company considers all liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames (collectively, "optical goods"). Inventories are stated at the
lower of cost or market, with cost determined on a specific-identification
basis.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements are carried at cost. Depreciation is
computed using accelerated methods, with the assets' useful lives estimated at
19 years for leasehold improvements and three to seven years for the other asset
categories. Routine maintenance and repairs are charged to expense as incurred,
while costs of betterments and renewals are capitalized.
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which generally are based on predetermined rates, are
generally less than the Company's customary charges, and the differences are
recorded as contractual adjustments at the time the related service is rendered.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 35% of the Company's net patient service
revenues were derived from services rendered to Medicare and Medicaid patients.
The Company does not believe that there are any credit risks associated with
F-74
<PAGE> 145
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
receivables due from governmental agencies. Concentration of credit risk from
other third-party payors is limited by the number of patients and payors. The
Company does not require any form of collateral from its patients or third-party
payors.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquiries have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expenses
amounted to $26,182 for the year ended December 31, 1995 and $21,740 for the
eleven-month period ended November 30, 1996.
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 amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents reported in the combined
financial statements reflects its fair value because of the short-term nature of
that financial instrument. It is not practicable to estimate the fair value of
the Company's long-term debt because the Company's incremental borrowing rate
cannot reasonably be determined.
2. PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Equipment................................................... $ 504,616 $ 504,616
Leasehold improvements...................................... 19,088 19,088
Furniture and fixtures...................................... 102,544 102,544
Vehicles.................................................... 18,051 --
Other....................................................... 15,547 15,547
--------- ---------
659,846 641,795
Less accumulated depreciation............................... (510,328) (539,873)
--------- ---------
$ 149,518 $ 101,922
========= =========
</TABLE>
F-75
<PAGE> 146
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
10% note payable due in 180 monthly installments of $526
principal and interest through January 2000............... $ 20,760 $ 16,705
8% note payable due in 120 monthly installments of $89
principal and interest through July 1996.................. 2,182 --
8.25% note payable due in 173 monthly installments of $1,050
principal and interest through May 2003................... 69,366 62,840
Bank term loan payable due in 102 monthly installments of
$143 principal and interest at 1% over the Wall Street
Journal's prime rate, through September 2, 1996........... 1,501 --
Line of credit secured by the Clinic's receivables,
equipment and inventory, payable in monthly installments.
A final payment of the unpaid principal balance plus
accrued interest is due and payable December 1, 2001. The
interest rate is 2.75% over the Wall Street Journal's
prime rate................................................ 86,466 104,342
-------- --------
180,275 183,887
Less current portion........................................ (24,795) (22,330)
-------- --------
$155,480 $161,557
======== ========
</TABLE>
Maturities under the long-term debt agreements described above are as
follows:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
Month ending December 31, 1996.............................. $ 1,860
Year ending December 31:
1997...................................................... 22,370
1998...................................................... 35,254
1999...................................................... 39,307
2000...................................................... 36,113
2001...................................................... 33,704
Thereafter................................................ 15,279
--------
$183,887
========
</TABLE>
4. LEASE COMMITMENTS
Rent expense relating primarily to operating leases for office space is
classified as building and equipment rent in the accompanying combined
statements of operations.
F-76
<PAGE> 147
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease commitments under noncancelable operating leases (with
an initial or remaining term in excess of one year) at November 30, 1996 are as
follows (including related party leases):
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 3,458
Year ending December 31:
1997...................................................... 41,494
1998...................................................... 41,494
1999...................................................... 41,494
2000...................................................... 41,494
2001...................................................... 41,494
Thereafter................................................ 65,699
--------
Total minimum lease obligations................... $276,627
========
</TABLE>
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Net operating loss carryforward........................... $ 31,433 $33,237
-------- -------
Total deferred tax assets......................... 31,433 33,237
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... 141,368 89,277
-------- -------
Net deferred tax liabilities...................... $109,935 $56,040
======== =======
</TABLE>
Components of the income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED ELEVEN-MONTH PERIOD ENDED
DECEMBER 31, 1995 NOVEMBER 30, 1996
--------------------------- -----------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal................................... $2,476 $2,835 $5,311 $3,871 $(41,129) $(37,258)
State..................................... 1,793 880 2,673 2,802 (12,766) (9,964)
------ ------ ------ ------ -------- --------
$4,269 $3,715 $7,984 $6,673 $(53,895) $(47,222)
====== ====== ====== ====== ======== ========
</TABLE>
F-77
<PAGE> 148
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31 NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $ 6,742 $(36,821)
Permanent differences....................................... 2,532 (6,845)
State taxes, net of federal benefit......................... 1,684 2,459
Benefit of graduated rates.................................. (3,082) (4,815)
Personal service corporation status......................... 108 (1,200)
------- --------
$ 7,984 $(47,222)
======= ========
</TABLE>
SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that no valuation allowance at December 31, 1995 and November 30,
1996 is necessary to reduce the deferred tax assets to the amount that will more
likely than not be realized. At November 30, 1996, the Company has available net
operating loss carryforwards of approximately $83,000, which expire in the year
2011.
6. MALPRACTICE INSURANCE
The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $1,000,000 per incident, with a
$2,000,000 aggregate annual limit. In addition, the Company has an umbrella
policy which provides coverage of $1,000,000 per claim, with a $3,000,000
aggregate annual limit. Management is not aware of any reported claims pending
against the Company not covered by its malpractice insurance policy. Losses
resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.
7. RETIREMENT PLAN
The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to this plan was
approximately $7,000 for the year ended December 31, 1995 and $10,000 for the
eleven-month period ended November 30, 1996.
8. RELATED PARTY TRANSACTIONS
The Company leases office space from the general stockholder. Rent expense
on these leases amounted to approximately $125,000 for the year ended December
31, 1995 and $114,000 for the eleven-month period ended November 30, 1996.
F-78
<PAGE> 149
CAMBRIDGE EYE CLINIC, P. A. --
JOHN W. LAHR, OPTOMETRIST, P.A. AND
EYEGLASS EXPRESS OPTICAL LAB, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 116,000 shares of Vision common stock. In connection therewith,
the Company entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
practice.
The financial statements of the Company have been prepared as supplemental
information about the association to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.
F-79
<PAGE> 150
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Optometric Eye Care Centers, P.A.
We have audited the accompanying balance sheets of Optometric Eye Care
Centers, P.A. as of December 31, 1995 and November 30, 1996, and the related
statements of income, stockholders' equity, and cash flows for the year ended
December 31, 1995 and the eleven-month period ended November 30, 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 Optometric Eye Care Centers,
P.A. at December 31, 1995 and November 30, 1996, and the results of its
operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
January 17, 1997
F-80
<PAGE> 151
OPTOMETRIC EYE CARE CENTERS, P.A.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 23,954 $ 19,271
Accounts receivable, net of allowances for uncollectible
accounts of approximately $1,000 at December 31, 1995
and November 30, 1996.................................. 79,508 71,152
Inventories............................................... 82,397 109,106
Deferred tax asset........................................ -- 238
Other current assets...................................... 392 3,300
-------- --------
Total current assets.............................. 186,251 203,067
Deferred tax asset.......................................... 5,020 10,772
Property, equipment and improvements........................ 68,858 37,002
-------- --------
Total assets...................................... $260,129 $250,841
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 44,376 $ 54,642
Income taxes payable...................................... -- 3,096
Current maturities of obligations under capital leases.... 7,002 3,744
Current maturities of long-term debt...................... 24,196 27,132
-------- --------
Total current liabilities......................... 75,574 88,614
Long-term debt.............................................. 87,262 61,963
Obligations under capital leases............................ 18,644 6,817
Stockholders' equity:
Common stock, $1 par value: 2,500 shares authorized; 1,000
shares issued and outstanding.......................... 1,000 1,000
Retained earnings......................................... 77,649 92,447
-------- --------
Total stockholders' equity........................ 78,649 93,447
-------- --------
Total liabilities and stockholders' equity........ $260,129 $250,841
======== ========
</TABLE>
See accompanying notes.
F-81
<PAGE> 152
OPTOMETRIC EYE CARE CENTERS, P.A.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $ 213,384 $ 242,793
Sale of optical goods..................................... 811,509 820,392
Other..................................................... 7,775 1,780
---------- ----------
Total revenues.................................... 1,032,668 1,064,965
Expenses:
Compensation -- physician stockholders.................... 192,463 218,126
Salaries, wages and benefits.............................. 252,922 247,992
Cost of optical goods sold................................ 333,145 310,367
General and administrative................................ 102,887 139,730
Contract services......................................... 1,766 15,170
Optical and clinical supplies............................. 7,893 10,893
Insurance................................................. 9,945 2,164
Building and equipment rent............................... 56,717 52,361
Depreciation and amortization............................. 43,987 33,111
Interest.................................................. 18,741 15,081
---------- ----------
Total expenses.................................... 1,020,466 1,044,995
---------- ----------
Income before income taxes.................................. 12,202 19,970
Provision for income taxes.................................. 2,815 5,172
---------- ----------
Net income........................................ $ 9,387 $ 14,798
========== ==========
</TABLE>
See accompanying notes.
F-82
<PAGE> 153
OPTOMETRIC EYE CARE CENTERS, P.A.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
NUMBER AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995............................... 1,000 $1,000 $68,262 $69,262
Net income............................................. -- -- 9,387 9,387
----- ------ ------- -------
BALANCE AT DECEMBER 31, 1995............................. 1,000 $1,000 77,649 78,649
Net income............................................. -- -- 14,798 14,798
----- ------ ------- -------
BALANCE AT NOVEMBER 30, 1996............................. 1,000 $1,000 $92,447 $93,447
===== ====== ======= =======
</TABLE>
See accompanying notes.
F-83
<PAGE> 154
OPTOMETRIC EYE CARE CENTERS, P.A.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 9,387 $ 14,798
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 43,987 33,111
Changes in assets and liabilities:
Patient accounts receivable, net....................... (9,766) 8,356
Inventories............................................ (3,928) (26,709)
Other current assets................................... 1,658 (2,908)
Deferred income taxes.................................. (6,891) (5,990)
Accounts payable and accrued expenses.................. 5,435 10,266
Income taxes payable................................... -- 3,096
-------- --------
Net cash provided by operating activities......... 39,882 34,020
INVESTING ACTIVITIES
Purchases of property plant and equipment................... -- (1,255)
-------- --------
Net cash used in investing activities....................... -- (1,255)
FINANCING ACTIVITIES
Repayment of long-term debt................................. (21,351) (22,363)
Repayment of capital lease obligations...................... (6,065) (15,085)
-------- --------
Net cash used in financing activities....................... (27,416) (37,448)
-------- --------
Net increase (decrease) in cash............................. 12,466 (4,683)
Cash at beginning of period................................. 11,488 23,954
-------- --------
Cash at end of period....................................... $ 23,954 $ 19,271
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 18,741 $ 15,081
======== ========
Cash paid during the year for income taxes.................. $ 3,900 $ 4,200
======== ========
</TABLE>
See accompanying notes.
F-84
<PAGE> 155
OPTOMETRIC EYE CARE CENTERS, P.A.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Optometric Eye Care Centers, P.A. (the Company), a Minnesota corporation,
operates a professional medical practice, specializing in general optometry. The
Company's service area is Fridley, Minnesota, and the surrounding communities of
Minneapolis, Minnesota.
INVENTORIES
Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames (collectively, "optical goods"). Inventories are stated at the
lower of cost or market, with cost determined on a first-in, first-out basis.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements are carried at cost. Depreciation is
computed using straight-line and accelerated methods, with the assets' useful
lives estimated at five to seven years. Routine maintenance and repairs are
charged to expense as incurred, while costs of betterments and renewals are
capitalized.
Property, equipment and improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 137,125 $ 137,551
Leasehold improvements...................................... 94,971 94,971
Office equipment and furniture.............................. 34,795 35,624
--------- ---------
266,891 268,146
Less accumulated depreciation and amortization.............. (198,033) (231,144)
--------- ---------
$ 68,858 $ 37,002
========= =========
</TABLE>
Included in medical equipment as of December 31, 1995 and November 30, 1996
are assets acquired through capital leases with original costs of approximately
$38,000.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash reported in the financial statements reflects
its fair value because of the short-term maturity of this financial instrument.
It is not practicable to estimate the fair value of the Company's long-term debt
and obligations under capital lease because the Company's incremental borrowing
rate cannot reasonably be determined.
PATIENT SERVICE REVENUES
Net patient service revenues are based on establishing billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates and the differences are
recorded as contractual adjustments at the time the related service is rendered.
For the year ended December 31, 1995, approximately 6% and 81% of the
Company's gross patient service revenues were derived from Medicare and various
third-party programs, respectively. For the eleven-month period ended November
30, 1996, approximately 5% and 76% of the Company's gross patient service
revenues were derived from Medicare and various third-party programs,
respectively. The Company does not believe that there are any credit risks
associated with receivables due from governmental agencies.
F-85
<PAGE> 156
OPTOMETRIC EYE CARE CENTERS, P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of credit risk from other payors is limited by the number of
patients and payors. The Company does not require any form of collateral from
its patients or third-party payors.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquires have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
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 amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Bank term loan, bearing interest at prime plus 2.5% (11.00%
and 11.25% at December 31, 1995 and November 30, 1996,
respectively), payable in equal monthly installments of
$2,957 (principal and interest) through October 1999...... $111,458 $ 89,095
Less current portion........................................ (24,196) (27,132)
-------- --------
$ 87,262 $ 61,963
======== ========
</TABLE>
As of November 30, 1996, the aggregate amounts of annual principal
maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Month ending December 1996.................................. $ 2,149
Year ending December 31:
1997...................................................... 27,377
1998...................................................... 30,545
1999...................................................... 29,024
-------
$89,095
=======
</TABLE>
F-86
<PAGE> 157
OPTOMETRIC EYE CARE CENTERS, P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LEASE COMMITMENTS
Future minimum lease commitments under noncancelable operating and capital
leases (with an initial or remaining term in excess of one year) at November 30,
1996 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
Month ending December 1996.................................. $ 3,256 $ 416
Year ending December 31:
1997...................................................... 31,224 4,990
1998...................................................... 27,330 4,990
1999...................................................... 2,275 2,159
------- -------
Total minimum lease payments...................... $64,085 12,555
=======
Less amount representing interest........................... (1,994)
-------
Present value of minimum lease payments (including current
portion of $4,080)........................................ $10,561
=======
</TABLE>
4. INCOME TAXES
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Current:
Allowance for doubtful accounts........................... $ -- $ 238
Noncurrent:
Depreciation expense...................................... 5,020 10,772
------ -------
Total deferred tax assets......................... $5,020 $11,010
====== =======
</TABLE>
Components of the income tax provision (benefit) consist of the following:
<TABLE>
<CAPTION>
ELEVEN-MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, 1995 NOVEMBER 30, 1996
------------------------------ ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
-------- --------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Federal....................... $5,436 $(3,996) $1,440 $ 6,473 $(3,474) $2,999
State......................... 4,270 (2,895) 1,375 4,689 (2,516) 2,173
------ ------- ------ ------- ------- ------
$9,706 $(6,891) $2,815 $11,162 $(5,990) $5,172
====== ======= ====== ======= ======= ======
</TABLE>
F-87
<PAGE> 158
OPTOMETRIC EYE CARE CENTERS, P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Income taxes at the statutory rate........................ $ 4,149 $ 6,790
Permanent differences..................................... 256 1,436
State taxes, net of federal benefit....................... 963 748
Benefit of graduated rates................................ (2,553) (3,802)
------- -------
$ 2,815 $ 5,172
======= =======
</TABLE>
5. MALPRACTICE INSURANCE
The Company carries malpractice insurance for each of its physicians
written on an occurrence basis. This insurance provides coverage of $1 million
per incident, with a $2 million annual limit. In addition, the Company has an
umbrella policy which provides coverage of $3 million per incident, with a $3
million annual limit. Management is not aware of any reported claims pending
against the Company. Losses resulting from unreported claims cannot be estimated
by management and, therefore, are not included in the accompanying financial
statements.
6. RELATED PARTY TRANSACTIONS
The physician stockholders of the Company provide all optometry services
for the Company and their salaries and related benefits are reported as
compensation -- physician stockholders in the accompanying statements of income.
Salaries and benefits of approximately $18,000 and $19,000 for the year ended
December 31, 1995 and the eleven-month period ended November 30, 1996,
respectively, which are paid to a related party, are included in salaries, wages
and benefits in the accompanying statements of income.
7. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 94,700 shares of Vision common stock and notes of approximately
$46,800. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision, will provide substantially all
nonmedical services to the practice.
The financial statements of the Company have been prepared as supplemental
information about the associations to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.
F-88
<PAGE> 159
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholder
Jerald B. Turner, M.D., P.A.
We have audited the accompanying balance sheets of Jerald B. Turner, M.D.,
P.A. as of December 31, 1995 and November 30, 1996, and the related statements
of income, stockholder's equity, and cash flows for the year ended December 31,
1995 and the eleven-month period ended November 30, 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 Jerald B. Turner, M.D., P.A.
at December 31, 1995 and November 30, 1996, and the results of its operations
and its cash flows for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Tampa, Florida
February 26, 1997
F-89
<PAGE> 160
JERALD B. TURNER, M.D., P.A.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 59,029 $297,516
Patient accounts receivable, net of allowances for
uncollectible accounts of approximately $14,000 and
$15,000 at December 31, 1995 and November 30, 1996,
respectively........................................... 146,336 178,977
Inventories............................................... 25,020 32,134
Prepaid expenses and other current assets................. 9,566 23,791
-------- --------
Total current assets.............................. 239,951 532,418
Property, equipment and improvements, net................... 194,695 389,626
-------- --------
Total assets...................................... $434,646 $922,044
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 10,072 $ 14,666
Accrued salaries, wages and benefits...................... 59,539 128,192
Note payable to stockholder............................... -- 293,262
-------- --------
Total current liabilities......................... 69,611 436,120
Stockholder's equity:
Common stock, $1 par value: 7,500 shares authorized; 500
shares issued and outstanding.......................... 500 500
Additional paid-in capital................................ 7,822 7,822
Retained earnings......................................... 356,713 477,602
-------- --------
Total stockholder's equity........................ 365,035 485,924
-------- --------
Total liabilities and stockholder's equity........ $434,646 $922,044
======== ========
</TABLE>
See accompanying notes.
F-90
<PAGE> 161
JERALD B. TURNER, M.D., P.A.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $1,262,429 $1,520,911
Sales of optical goods.................................... 13,123 90,407
Other..................................................... 816 2,568
---------- ----------
Total revenues.................................... 1,276,368 1,613,886
Expenses:
Compensation to physician stockholder..................... 526,735 423,641
Salaries, wages and benefits.............................. 414,263 682,687
Cost of optical goods sold................................ 8,439 37,857
Medical supplies.......................................... 20,909 20,824
Optical supplies.......................................... 1,709 6,972
General and administrative................................ 80,054 119,429
Insurance................................................. 11,272 14,415
Building rent............................................. 67,998 61,531
Depreciation.............................................. 67,552 113,577
Repairs and maintenance................................... 9,070 4,269
Interest.................................................. -- 7,795
---------- ----------
Total expenses.................................... 1,208,001 1,492,997
---------- ----------
Net income........................................ $ 68,367 $ 120,889
========== ==========
</TABLE>
See accompanying notes.
F-91
<PAGE> 162
JERALD B. TURNER, M.D., P.A.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995...................... 500 $500 $7,822 $288,346 $296,668
Net income.................................... -- -- -- 68,367 68,367
--- ---- ------ -------- --------
BALANCE AT DECEMBER 31, 1995.................... 500 500 7,822 356,713 365,035
Net income.................................... -- -- -- 120,889 120,889
--- ---- ------ -------- --------
BALANCE AT NOVEMBER 30, 1996.................... 500 $500 $7,822 $477,602 $485,924
=== ==== ====== ======== ========
</TABLE>
See accompanying notes.
F-92
<PAGE> 163
JERALD B. TURNER, M.D., P.A.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 68,367 $120,889
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 67,552 113,577
Loss on disposal of property, equipment and
improvements........................................... -- 1,600
Changes in operating assets and liabilities:
Increase in patient accounts receivable, net........... (9,749) (32,641)
Increase in inventories................................ (25,020) (7,114)
Decrease (increase) in prepaid expenses and other
current assets........................................ 4,043 (14,225)
Increase in accounts payable and accrued expenses...... 8,031 4,594
Increase in accrued salaries, wages and benefits....... 8,877 68,653
--------- --------
Net cash provided by operating activities......... 122,101 255,333
INVESTING ACTIVITIES
Purchases of property, equipment and improvements........... (113,451) (16,846)
--------- --------
Net cash used in investing activities....................... (113,451) (16,846)
FINANCING ACTIVITIES
Net cash provided by financing activities................... -- --
--------- --------
Increase in cash............................................ 8,650 238,487
Cash at beginning of period................................. 50,379 59,029
--------- --------
Cash at end of period....................................... $ 59,029 $297,516
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ -- $ 5,605
========= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY
Note payable incurred to acquire property, equipment and
improvements.............................................. $ -- $293,262
========= ========
</TABLE>
See accompanying notes.
F-93
<PAGE> 164
JERALD B. TURNER, M.D., P.A.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Jerald B. Turner, M.D., P.A., a Florida corporation (the Company), operates
a professional medical practice, specializing in general ophthalmology. The
Company's service area is Clearwater, Florida, and surrounding communities in
Pinellas County, Florida.
INVENTORIES
Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames (collectively, "optical goods"). Inventories are stated at the
lower of cost or market, with cost determined on a first-in, first-out basis.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements are carried at cost. Depreciation is
computed using straight-line and accelerated methods, with the assets' useful
lives estimated at five to ten years for equipment, furniture and fixtures, and
seven to thirty-nine years for leasehold improvements. Routine maintenance and
repairs are charged to expense as incurred, while costs of betterments and
renewals are capitalized.
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which generally are based on predetermined rates, are
generally less than the Company's established billing rates, and the differences
are recorded as contractual adjustments at the time the related service is
rendered.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 61% and 64%, respectively, of the Company's net
patient service revenues were derived from third-party payors (Medicare,
Medicaid and managed care contracts). The Company does not believe that there
are any credit risks associated with receivables due from governmental agencies.
Concentration of credit risk from other payors is limited by the number of
patients and payors. The Company does not require any form of collateral from
its patients or third-party payors.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing. While no such regulatory inquiries have been made, compliance with
such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.
INCOME TAXES
The Company has elected to have its income taxed as an S Corporation under
the federal Internal Revenue Code. As a result, in lieu of corporate income tax,
the Company's taxable income is passed through to the stockholder of the Company
and taxed at the individual level. Accordingly, no provision or liability for
federal income tax has been reflected in these financial statements.
F-94
<PAGE> 165
JERALD B. TURNER, M.D., P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount for cash reported in the balance sheets approximates
its fair value because of its short-term nature. It is not practicable to
estimate the fair value of the Company's note payable to stockholder due to its
related party nature.
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 amount reported in the financial statements and
accompanying footnotes. Actual results could differ from those estimates.
2. PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment.......................................... $ 368,662 $ 567,746
Computer equipment......................................... 66,885 132,494
Furniture and fixtures..................................... 141,177 152,755
Leasehold improvements..................................... 3,800 26,421
--------- ---------
580,524 879,416
Less accumulated depreciation.............................. (385,829) (489,790)
--------- ---------
$ 194,695 $ 389,626
========= =========
</TABLE>
3. OPERATING LEASES
The Company leases office space at $1,148 per month under a short-term
operating lease expiring July 31, 1997 and a month-to-month lease in a space
owned by the physician stockholder for $5,000 per month. Lease agreements
generally provide for the payment of taxes, insurance, utilities and repairs by
the lessee.
4. NOTE PAYABLE TO STOCKHOLDER
On November 15, 1996, the Company entered into an unsecured demand note
agreement for approximately $293,000 at 9% with its principal stockholder,
Jerald B. Turner, M.D. The proceeds were used during the eleven-month period
ended November 30, 1996 to purchase property, equipment and improvements and
interest is payable monthly. Interest expense during the eleven-month period
ended November 30, 1996 amounted to $7,795.
5. MALPRACTICE INSURANCE
The Company carries claims-made medical malpractice insurance for each of
its physicians. This insurance provides coverage of $1,000,000 per incident,
with a $3,000,000 aggregate annual limit. In the normal course of business, the
Company has been named in various medical malpractice lawsuits; however,
management is not aware of any reported claims currently pending against the
Company. Losses from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying financial statements.
F-95
<PAGE> 166
JERALD B. TURNER, M.D., P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. PROFIT SHARING PLAN
The Company maintains an employee profit sharing plan covering
substantially all employees and the physician stockholder. Under the Plan, the
Company may make discretionary contributions subject to various limits. Total
Company expense related to this plan was approximately $53,000 and $64,000 for
the year ended December 31, 1995 and the eleven-month period ended November 30,
1996, respectively. Company contributions to the physician stockholder are
included in compensation to physician stockholder in the accompanying statements
of income.
7. SUBSEQUENT EVENTS
OPERATING LEASE AGREEMENT WITH PHYSICIAN STOCKHOLDER
On December 1, 1996, the Company and the physician stockholder executed a
long-term lease agreement expiring in the year 2001 under which the Company
leases office space in a building owned by the physician stockholder. The lease
agreement provides for the payment of taxes, insurance, utilities and repairs by
the lessee. The Company, at its option, can renew the lease at rental rates
adjusted by the consumer price index.
Future minimum lease payments as of November 30, 1996 are as follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 7,782
Year ending December 31,
1997...................................................... 93,380
1998...................................................... 93,380
1999...................................................... 93,380
2000...................................................... 93,380
2001...................................................... 85,598
Thereafter................................................ --
--------
$466,900
========
</TABLE>
SALE OF ASSETS
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 194,000 shares of Vision common stock and notes of approximately
$231,000. In connection therewith, Jerald B. Turner, M.D., principal
stockholder, entered into a 40-year business management agreement with Vision,
whereby Vision will provide substantially all nonmedical services to the
practice.
The financial statements of the Company have been prepared as supplemental
information about the associations to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.
F-96
<PAGE> 167
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Gillette, Beiler & Associates, P.A.
We have audited the accompanying balance sheets of Gillette, Beiler &
Associates, P.A. as of December 31, 1995 and November 30, 1996, and the related
statements of operations, stockholders' deficit, and cash flows for the year
ended December 31, 1995 and the eleven-month period ended November 30, 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 Gillette, Beiler &
Associates, P.A. at December 31, 1995 and November 30, 1996, and the results of
its operations and its cash flows for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
March 22, 1997
F-97
<PAGE> 168
GILLETTE, BEILER & ASSOCIATES, P.A.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 52,425 $ 16,846
Patient accounts receivable, net of allowance for
doubtful accounts of $14,000 in 1995 and $32,000 in
1996.................................................. 87,602 105,932
Due from related party................................... 27,741 79,722
--------- ---------
Total current assets............................. 167,768 202,500
Property and equipment, net................................ 179,243 187,023
Goodwill................................................... -- 127,574
--------- ---------
Total assets..................................... $ 347,011 $ 517,097
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accrued compensation..................................... $ 183,147 $ 221,962
Accounts payable and accrued expenses.................... 62,855 32,794
Current portion of loans payable to stockholder.......... 37,094 58,832
Notes payable and current portion of long-term debt...... 180,693 154,413
Due to related parties................................... -- 144,941
--------- ---------
Total current liabilities........................ 463,789 612,942
Loans payable to stockholder, less current portion......... 58,832 --
Long-term debt, less current portion....................... 162,832 93,926
Deferred rent payable...................................... 264,032 263,163
Other long-term liabilities................................ 18,012 14,834
Stockholders' deficit:
Common stock, $.01 par value: 50,000 shares authorized;
37,775 and 40,500 shares issued and outstanding in
1995 and 1996, respectively........................... 378 405
Additional paid-in capital............................... -- 127,547
Accumulated deficit...................................... (620,864) (595,720)
--------- ---------
Total stockholders' deficit...................... (620,486) (467,768)
--------- ---------
Total liabilities and stockholders' deficit...... $ 347,011 $ 517,097
========= =========
</TABLE>
See accompanying notes.
F-98
<PAGE> 169
GILLETTE, BEILER & ASSOCIATES, P.A.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $2,752,187 $3,086,443
Patient service revenue -- related party.................. 298,543 190,376
Other income.............................................. 53,336 --
---------- ----------
Total revenues.................................... 3,104,066 3,276,819
Expenses:
Salaries and benefits -- optometrists..................... 1,832,844 1,856,888
Salaries and benefits -- other............................ 156,712 193,676
Management fees to related party.......................... 423,890 479,004
Advertising............................................... 25,236 16,187
Professional fees......................................... 55,326 12,600
General and administrative................................ 75,345 138,006
Medical supplies.......................................... 27,513 23,924
Insurance................................................. 30,116 50,552
Building and equipment rent............................... 452,695 400,586
Depreciation and amortization............................. 36,880 49,763
Interest.................................................. 41,693 30,489
---------- ----------
Total expenses.................................... 3,158,250 3,251,675
---------- ----------
Net income (loss)................................. $ (54,184) $ 25,144
========== ==========
</TABLE>
See accompanying notes.
F-99
<PAGE> 170
GILLETTE, BEILER & ASSOCIATES, P.A.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN ACCUMULATED STOCKHOLDERS'
NUMBER AMOUNT CAPITAL DEFICIT DEFICIT
------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995..................... 37,775 $378 $ -- $(565,005) $(564,627)
Distributions.............................. -- -- -- (1,675) (1,675)
Net loss................................... -- -- -- (54,184) (54,184)
------ ---- -------- --------- ---------
BALANCE, DECEMBER 31, 1995................... 37,775 378 -- (620,864) (620,486)
Purchase of minority interest.............. 2,725 27 127,547 -- 127,574
Net income................................. -- -- -- 25,144 25,144
------ ---- -------- --------- ---------
BALANCE, NOVEMBER 30, 1996................... 40,500 $405 $127,547 $(595,720) $(467,768)
====== ==== ======== ========= =========
</TABLE>
See accompanying notes.
F-100
<PAGE> 171
GILLETTE, BEILER & ASSOCIATES, P.A.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ (54,184) $ 25,144
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 36,880 49,763
Provision for bad debts................................... 14,000 17,573
Amortization of deferred rent and other................... 53,050 (12,817)
(Gain) loss on disposal of fixed assets................... (22,909) --
Changes in assets and liabilities:
Patient accounts receivable............................ (62,436) (35,903)
Due from related party................................. (10,183) (51,981)
Accrued compensation................................... 144,612 38,815
Accounts payable and accrued expenses.................. 20,077 (21,291)
Due to related parties................................. -- 144,941
--------- ---------
Net cash provided by operating activities......... 118,907 154,244
INVESTING ACTIVITIES
Purchases of property and equipment......................... (187,004) (57,543)
Proceeds from disposal of fixed assets...................... 37,909 --
--------- ---------
Net cash used in investing activities............. (149,095) (57,543)
FINANCING ACTIVITIES
Borrowings on revolving credit note......................... -- 196,012
Payments of revolving credit note........................... -- (222,627)
Proceeds from issuance of long-term debt.................... 276,737 13,179
Payments of long-term debt.................................. (167,052) (81,750)
Payments of related party debt.............................. (49,109) (37,094)
--------- ---------
Net cash provided by (used in) financing
activities.................................................. 60,576 (132,280)
--------- ---------
Increase (decrease) in cash................................. 30,388 (35,579)
Cash at beginning of period................................. 22,037 52,425
--------- ---------
Cash at end of period....................................... $ 52,425 $ 16,846
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 39,000 $ 34,000
========= =========
Goodwill recorded in connection with purchase of minority
interest.................................................. $ -- $ 127,574
========= =========
</TABLE>
See accompanying notes.
F-101
<PAGE> 172
GILLETTE, BEILER & ASSOCIATES, P.A.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. BUSINESS ORGANIZATION AND BASIS OF PRESENTATION
Gillette, Beiler & Associates, P.A., a Florida corporation, operates
professional optometry practices in 11 VisionWorks stores located in the Tampa
Bay area.
The following corporations (the Predecessor Practices) previously operated
as entities under common control:
Drs. Gillette, Beiler & Associates, P.A.
Dr. Gillette & Associates, Tampa, P.A.
Dr. Gillette & Associates, St. Petersburg, P.A.
Dr. Gillette & Associates, Palm Harbor, P.A.
Dr. Gillette & Associates, Sarasota, P.A.
Dr. Gillette & Associates, St. Petersburg East, P.A.
Dr. Gillette & Associates, North Tampa, P.A.
Dr. Gillette & Associates, South Tampa, P.A.
Dr. Gillette & Associates, #6978, P.A.
Effective November 27, 1996, the Predecessor Practices merged with Dr.
Gillette & Associates, #6965, P.A. (the Surviving Practice). On December 31,
1996, the Surviving Practice changed its name to Gillette, Beiler & Associates,
P.A. (the Company). Each outstanding share of the Predecessor Practices was
converted into shares of the Company. This transaction was accounted for as a
reorganization of companies under common control in a manner similar to that
used in a pooling of interests transaction, except for a minority interest which
was recorded under the purchase method. The accompanying financial statements
have been prepared to reflect the accounts of the Company as if the
reorganization had occurred as of the beginning of the earliest period
presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method, with the assets' useful lives estimated at five to
seven years. Routine maintenance and repairs are charged to expense as incurred,
while costs of betterments and renewals are capitalized.
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Office furniture and equipment.............................. $ 765,350 $ 822,893
Less accumulated depreciation............................... (586,107) (635,870)
--------- ---------
$ 179,243 $ 187,023
========= =========
</TABLE>
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable and short-term borrowings
reported in the financial statements reflect their fair value because of the
short-term maturity of those financial instruments. It is not practicable to
estimate the fair value of the Company's long-term debt and other noncurrent
liabilities because the Company's incremental borrowing rate cannot reasonably
be determined.
F-102
<PAGE> 173
GILLETTE, BEILER & ASSOCIATES, P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates, less
allowances and contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates and the differences are
recorded as contractual adjustments at the time the related service is rendered.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, patient service revenue -- related party was earned through
contractual arrangements between the Company and an association under common
control.
The Company does not believe that there are any credit risks associated
with receivables due from governmental agencies. Concentration of credit risk
from other payors is limited by the number of patients and payors. The Company
does not require any form of collateral from its patients or third-party payors.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquires have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.
ADVERTISING COSTS
The Company expenses advertising costs as incurred.
INCOME TAXES
The Company has elected to have its income taxed as an S corporation under
the federal Internal Revenue Code. As a result, in lieu of corporate income tax,
the Company's taxable income is passed through to the stockholders of the
Company and taxed at the individual level. Accordingly, no provision or
liability for federal income tax has been reflected in the financial statements.
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 amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INTANGIBLE ASSETS
Goodwill is being amortized over its estimated useful life of 40 years.
F-103
<PAGE> 174
GILLETTE, BEILER & ASSOCIATES, P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt and consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Notes payable under $100,000 line of credit, due on demand.
Interest due monthly at prime plus 1% (9.5% at December
31, 1995 and 9.25% at November 30, 1996). The note is
collateralized by accounts receivable..................... $ 94,475 $ 67,860
Bank term loans due in monthly installments of $663
(principal and interest) through 2000. The loans bear
interest at 12.5% and 14% and are collateralized by
certain equipment. The loans were refinanced with a bank
in 1997 and will be due on demand......................... 28,066 23,907
Notes payable to a corporation due in monthly installments
of $7,218 (principal and interest) through 2000. The notes
bear interest ranging from the prime rate plus .5% to the
prime rate plus 2% (8.75% to 10.25% at November 30, 1996)
and are collateralized by certain equipment............... 220,984 156,572
-------- ---------
343,525 248,339
Less current portion........................................ (180,693) (154,413)
-------- ---------
$162,832 $ 93,926
======== =========
</TABLE>
As of November 30, 1996, maturity of long-term debt is as follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 74,463
Year ending December 31:
1997...................................................... 79,950
1998...................................................... 41,411
1999...................................................... 41,906
2000...................................................... 10,609
--------
$248,339
========
</TABLE>
F-104
<PAGE> 175
GILLETTE, BEILER & ASSOCIATES, P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. LOANS PAYABLE TO STOCKHOLDER
Loans payable to stockholder consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to the majority stockholder of the Company due
in monthly installments of $2,005 (principal and
interest) through 1999. The note bears interest at 9.75%
and is collateralized by certain equipment. The note was
refinanced with a bank in 1997........................... $ 75,093 $ 58,832
Unsecured note payable to the majority stockholder of the
Company due in monthly principal installments of $2,083
through 1996, plus interest at the rate of prime plus 1%.
The note was fully paid in 1996.......................... 18,750 --
Note payable to the majority stockholder of the Company due
in monthly principal installments of $694 through 1996
plus interest at the rate of prime plus 2%. The note was
collateralized by certain equipment, and was fully paid
in 1996.................................................. 2,083 --
-------- --------
95,926 58,832
Less current portion....................................... (37,094) (58,832)
-------- --------
$ 58,832 $ --
======== ========
</TABLE>
5. LEASE COMMITMENTS
Future minimum lease commitments under noncancelable operating leases (with
an initial or remaining term in excess of one year) at November 30, 1996 are as
follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 38,217
Year ending December 31,
1997...................................................... 458,604
1998...................................................... 465,604
1999...................................................... 470,604
2000...................................................... 477,604
2001...................................................... 482,604
Thereafter................................................ 2,393,117
----------
$4,786,354
==========
</TABLE>
6. MALPRACTICE INSURANCE
The Company carries claims-made malpractice insurance for each of its
optometrists. This insurance provides coverage of $1 million per incident, with
a $3 million annual limit.
Management is aware of a claim pending against the Company. The claim,
which alleges medical malpractice, is currently in the discovery stage and no
trial date has been set. The Company, through its insurer, plans to vigorously
contest the case. In the opinion of management, this litigation will not have a
material adverse effect on the results of operations, financial condition or
liquidity of the Company.
Losses resulting from unreported claims cannot be estimated by management
and, therefore, are not included in the accompanying financial statements.
7. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (a related company -- Vision)
in exchange for 560,957 shares of Vision common stock and notes of $416,103. In
connection with this transaction, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.
F-105
<PAGE> 176
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
J & R Kennedy, O.D., P.A.
and Roseville Opticians, Inc.
We have audited the accompanying combined balance sheets of J & R Kennedy,
O.D., P.A. and Roseville Opticians, Inc. as of December 31, 1995 and November
30, 1996, and the related combined statements of income, stockholder's equity,
and cash flows for the year ended December 31, 1995 and the eleven-month period
ended November 30, 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 combined financial position of J & R Kennedy,
O.D., P.A. and Roseville Opticians, Inc. at December 31, 1995 and November 30,
1996, and the combined results of their operations and their cash flows for the
year ended December 31, 1995 and the eleven-month period ended November 30, 1996
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
March 21, 1997
F-106
<PAGE> 177
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 25 $ 4,761
Patient accounts receivable............................... 71,488 77,529
Due from stockholder...................................... 1,623 2,779
Inventories............................................... 104,787 107,827
Prepaid expenses and other current assets................. 7,646 5,972
-------- --------
Total current assets.............................. 185,569 198,868
Property, equipment and improvements, net................... 75,238 76,848
Noncurrent deferred tax asset............................... -- 8,309
-------- --------
Total assets...................................... $260,807 $284,025
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank overdraft............................................ $ 30,980 $ 3,547
Accounts payable and accrued expenses..................... 67,374 88,606
Taxes payable............................................. 6,993 17,006
Current deferred tax liability............................ 14,130 14,076
Current maturities of long-term debt...................... 5,271 5,751
-------- --------
Total current liabilities......................... 124,748 128,986
Long-term debt.............................................. 14,946 9,709
Noncurrent deferred tax liability........................... 322 --
Stockholder's equity:
Common stock, $1 par value: 75,000 shares authorized;
1,010 shares issued and outstanding.................... 1,010 1,010
Retained earnings......................................... 119,781 144,320
-------- --------
Total stockholder's equity........................ 120,791 145,330
-------- --------
Total liabilities and stockholder's equity........ $260,807 $284,025
======== ========
</TABLE>
See accompanying notes.
F-107
<PAGE> 178
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenue:
Net patient service revenues.............................. $296,386 $324,416
Sale of optical goods..................................... 671,309 663,095
Other..................................................... 170 74
-------- --------
Total revenue..................................... 967,865 987,585
Expenses:
Compensation to physician stockholder..................... 231,838 221,875
Salaries, wages and benefits.............................. 267,728 314,686
Cost of optical goods sold................................ 233,276 234,154
General and administrative................................ 130,904 118,589
Insurance................................................. 6,345 4,114
Building and equipment rent............................... 52,259 48,066
Depreciation and amortization............................. 10,585 12,302
Interest.................................................. 1,319 939
-------- --------
Total expenses.................................... 934,254 954,725
-------- --------
Income before income taxes.................................. 33,611 32,860
Provision for income taxes.................................. 14,856 8,321
-------- --------
Net income.................................................. $ 18,755 $ 24,539
======== ========
</TABLE>
See accompanying notes.
F-108
<PAGE> 179
J & R KENNEDY, O.D., P.A.
AND ROSEVILLE OPTICIANS, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995............................... 1,010 $1,010 $101,026 $102,036
Net income............................................. -- -- 18,755 18,755
----- ------ -------- --------
BALANCE AT DECEMBER 31, 1995............................. 1,010 1,010 119,781 120,791
Net income............................................. -- -- 24,539 24,539
----- ------ -------- --------
BALANCE AT NOVEMBER 30, 1996............................. 1,010 $1,010 $144,320 $145,330
===== ====== ======== ========
</TABLE>
See accompanying notes.
F-109
<PAGE> 180
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 18,755 $ 24,539
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 10,585 12,302
Deferred income taxes..................................... 7,863 (8,685)
Changes in assets and liabilities:
Patient accounts receivable............................ (16,354) (6,041)
Due from stockholder................................... (1,623) (1,156)
Inventories............................................ (24,425) (3,040)
Prepaid expenses and other current assets.............. (4,899) 1,674
Bank overdraft and accounts payable and accrued
expenses.............................................. 30,319 (6,201)
Taxes payable.......................................... 6,993 10,013
-------- --------
Net cash provided by operating activities......... 27,214 23,405
INVESTING ACTIVITIES
Purchases of property and equipment......................... (47,456) (13,912)
-------- --------
Net cash used in investing activities............. (47,456) (13,912)
FINANCING ACTIVITIES
Borrowings from third parties............................... 23,000 -
Repayment of borrowings from third parties.................. (2,783) (4,757)
-------- --------
Net cash provided by (used in) financing
activities...................................... 20,217 (4,757)
-------- --------
(Decrease) increase in cash................................. (25) 4,736
Cash at beginning of year................................... 50 25
-------- --------
Cash at end of year......................................... $ 25 $ 4,761
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 1,300 $ 1,000
======== ========
</TABLE>
See accompanying notes.
F-110
<PAGE> 181
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
J & R Kennedy, O.D., P.A. and Roseville Opticians, Inc. (the Company),
commonly controlled Minnesota C corporations, operate as a professional medical
practice, specializing in general optometry and as an optical retail dispensary,
respectively. The Company's primary service area is Roseville, Minnesota, and
surrounding communities in Ramsey County, Minnesota.
INVENTORIES
Inventories consist primarily of optical lenses, contact lenses and
eyeglass frames (collectively, optical goods). Inventories are stated at the
lower of cost or market, with cost determined on an average cost basis.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements are carried at cost. Depreciation is
computed using straight-line and accelerated methods, with the assets' useful
lives estimated at 5 to 10 years for equipment, furniture and fixtures and
automobiles, and 31 years for leasehold improvements. Routine maintenance and
repairs are charged to expense as incurred, while costs of betterments and
renewals are capitalized.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash reflects its fair value because of the
short-term maturity of that financial instrument. It is not practicable to
estimate the fair value of the Company's long-term debt because the Company's
incremental borrowing rate cannot reasonably be determined.
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates, and the differences are
recorded as contractual adjustments at the time the related service is rendered.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 19% and 24%, respectively, of the Company's net
patient service revenues were derived from third-party payors (Medicare,
Medicaid, and managed care contracts). The Company does not believe that there
are any credit risks associated with receivables due from governmental agencies.
Concentration of credit risk from other payers is limited by the number of
patients and payors. The Company does not require any form of collateral from
its patients or third-party payors.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquiries have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.
F-111
<PAGE> 182
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amount reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. RELATED PARTY TRANSACTIONS
The Company paid approximately $6,000 for the year ended December 31, 1995
and $7,000 for the eleven-month period ended November 30, 1996 for services
rendered to the Company by a related organization with certain common ownership.
The Company has an amount due from stockholder of $1,623 at December 31,
1995 and $2,779 at November 30, 1996. Such amounts relate to personal expenses
paid by the Company on behalf of the stockholder.
3. PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Equipment................................................... $ 191,111 $ 205,023
Furniture and fixtures...................................... 47,183 47,183
Automobiles................................................. 16,752 16,752
Leasehold improvements...................................... 18,690 18,690
--------- ---------
273,736 287,648
Less accumulated depreciation............................... (198,498) (210,800)
--------- ---------
$ 75,238 $ 76,848
========= =========
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to bank at 10% with monthly payments of $586,
including interest, due May 1999.......................... $20,217 $15,460
Less current portion........................................ (5,271) (5,751)
------- -------
$14,946 $ 9,709
======= =======
</TABLE>
F-112
<PAGE> 183
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As of November 30, 1996, the aggregate amounts of annual principal
maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 458
Year ending December 31:
1997...................................................... 5,800
1998...................................................... 6,407
1999...................................................... 2,795
-------
$15,460
=======
</TABLE>
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent:
Charitable contribution................................... $ 426 $ 446
Net operating loss carryforward........................... 5,127 14,890
-------- -------
5,553 15,336
Valuation allowance......................................... -- (1,152)
-------- -------
Total deferred tax assets......................... 5,553 14,184
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... 14,130 14,076
Noncurrent:
Depreciation.............................................. 5,875 5,875
-------- -------
Total deferred tax liabilities.................... 20,005 19,951
-------- -------
Net deferred tax liabilities...................... $(14,452) $(5,767)
======== =======
</TABLE>
Components of the income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED ELEVEN-MONTH PERIOD ENDED
DECEMBER 31, 1995 NOVEMBER 30, 1996
---------------------------- ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Federal............................ $5,337 $5,987 $11,324 $12,978 $(6,579) $6,399
State.............................. 1,656 1,876 3,532 4,028 (2,106) 1,922
------ ------ ------- ------- ------- ------
$6,993 $7,863 $14,856 $17,006 $(8,685) $8,321
====== ====== ======= ======= ======= ======
</TABLE>
F-113
<PAGE> 184
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $11,834 $5,301
Permanent differences....................................... 421 413
State taxes, net of federal benefit......................... 2,332 1,087
Change in valuation allowance............................... - 1,152
Personal service corporation status......................... 269 368
------- ------
$14,856 $8,321
======= ======
</TABLE>
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, requires a valuation allowance to reduce the deferred tax assets reported
if, based on the weight of the evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $1,152 valuation allowance at November 30, 1996 is necessary
to reduce the deferred tax assets to the amount that will more likely than not
be realized. The change in the valuation allowance for the current year is
$1,152. At December 31, 1995 and November 30, 1996, the Company has available
net operating loss carryforwards of approximately $13,000 and $37,000,
respectively, which expire in the year 2011.
6. MALPRACTICE INSURANCE
The Company carries claims-made malpractice insurance for each of its
physicians. This insurance provides coverage of $1,000,000 per incident, with a
$2,000,000 annual limit. In addition, the Company has an umbrella policy which
provides coverage of $2,000,000 per claim, with a $2,000,000 annual limit.
Management is not aware of any reported claims pending against the Company.
Losses resulting from unreported claims cannot be estimated by management and,
therefore, are not included in the accompanying combined financial statements.
7. RETIREMENT PLAN
The Company maintains an employee savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code. The plan covers substantially all
employees. Under the plan, the Company may make discretionary contributions
subject to various limits. Total Company expense related to this plan was
approximately $2,000 and $4,000 for the year ended December 31, 1995 and the
eleven-month period ended November 30, 1996, respectively.
8. SUBSEQUENT EVENTS
On December 1, 1996 and December 20, 1996, the Company renewed
noncancelable operating leases for office space. The effective date of the
leases is December 1, 1996 and they are scheduled to terminate on
F-114
<PAGE> 185
J & R KENNEDY, O.D., P.A. AND
ROSEVILLE OPTICIANS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
November 30, 2001. The former operating leases had expired as of November 30,
1996. Approximate future minimum rental commitments under the noncancelable
operating leases are as follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 4,488
Year ending December 31:
1997...................................................... 55,194
1998...................................................... 56,883
1999...................................................... 58,626
2000...................................................... 60,418
2001...................................................... 56,932
--------
$292,641
========
</TABLE>
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 115,000 shares of Vision common stock and notes of approximately
$79,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.
The combined financial statements of the Company have been prepared as
supplemental information about the association to which Vision will provide
management services following consummation of the acquisition. The Company
previously operated as a separate independent association. The historical
combined financial position, results of operations and cash flows do not reflect
any adjustments relating to the acquisition.
F-115
<PAGE> 186
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Dr. Smith and Associates, P.A. #6950,
Dr. Smith and Associates, P.A. #6958, and
Dr. Smith and Associates, P.A. #6966
We have audited the accompanying combined balance sheets of Dr. Smith and
Associates, P.A. #6950, Dr. Smith and Associates, P.A. #6958, and Dr. Smith and
Associates, P.A. #6966 (the Company) as of December 31, 1995 and November 30,
1996, and the related combined statements of income, stockholders' equity, and
cash flows for the year ended December 31, 1995 and the eleven-month period
ended November 30, 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 combined financial position of Dr. Smith and
Associates, P.A. #6950, Dr. Smith and Associates, P.A. #6958, and Dr. Smith and
Associates, P.A. #6966 at December 31, 1995 and November 30, 1996, and the
combined results of their operations and their cash flows for the year ended
December 31, 1995 and the eleven-month period ended November 30, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida
January 17, 1997
F-116
<PAGE> 187
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 23,538 $ 31,993
Patient accounts receivable, net of allowances for
doubtful accounts of approximately $4,000 and $39,000
at December 31, 1995 and November 30, 1996,
respectively........................................... 24,178 8,844
Prepaid expenses and other current assets................. -- 699
-------- --------
Total current assets.............................. 47,716 41,536
Property and equipment, net................................. 123,389 91,974
Due from stockholder........................................ 219,165 261,384
-------- --------
Total assets...................................... $390,270 $394,894
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 19,750 $ 28,200
Accrued expenses and other current liabilities............ 57,570 68,514
Amounts due under line of credit.......................... -- 14,000
Due to affiliate.......................................... 12,705 39,591
Income tax payable........................................ 1,182 --
Current portion of long-term debt......................... 38,917 39,931
Current portion of obligations under capital leases....... 26,220 25,428
-------- --------
Total current liabilities......................... 156,344 215,664
Long-term debt.............................................. 52,130 15,442
Obligations under capital leases............................ 48,717 25,469
Stockholders' equity:
Common stock, $.01 par value; 30,000 shares authorized,
and 3,000 shares issued and outstanding................ 30 30
Additional paid-in capital................................ 8,180 8,180
Retained earnings......................................... 124,869 130,109
-------- --------
Total stockholders' equity........................ 133,079 138,319
-------- --------
Total liabilities and stockholders' equity........ $390,270 $394,894
======== ========
</TABLE>
See accompanying notes.
F-117
<PAGE> 188
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Revenues:
Net patient service revenues.............................. $1,019,159 $ 990,014
Other..................................................... 18,248 14,137
---------- ----------
Total revenues.................................... 1,037,407 1,004,151
Expenses:
Compensation to physician stockholder..................... 75,000 70,000
Salaries, wages and benefits.............................. 511,033 547,622
General and administrative................................ 169,513 164,967
Medical supplies.......................................... 6,524 5,269
Building and equipment rent............................... 83,600 100,477
Depreciation and amortization............................. 35,038 35,442
Interest.................................................. 24,169 14,478
---------- ----------
Total expenses.................................... 904,877 938,255
---------- ----------
Income before income taxes.................................. 132,530 65,896
Provision for income taxes.................................. 1,182 --
---------- ----------
Net income........................................ $ 131,348 $ 65,896
========== ==========
</TABLE>
See accompanying notes.
F-118
<PAGE> 189
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
NUMBER AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995....................... 3,000 $30 $8,180 $ 28,006 $ 36,216
Net income................................... -- -- -- 131,348 131,348
Distributions................................ -- -- -- (34,485) (34,485)
----- --- ------ -------- --------
BALANCE, DECEMBER 31, 1995..................... 3,000 30 8,180 124,869 133,079
Net income................................... -- -- -- 65,896 65,896
Distributions................................ -- -- -- (60,656) (60,656)
----- --- ------ -------- --------
BALANCE, NOVEMBER 30, 1996..................... 3,000 $30 $8,180 $130,109 $138,319
===== === ====== ======== ========
</TABLE>
See accompanying notes.
F-119
<PAGE> 190
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $131,348 $ 65,896
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 35,038 35,442
Changes in operating assets and liabilities:
Patient accounts receivable, net....................... (4,178) 15,334
Prepaid expenses....................................... -- (699)
Due from stockholder................................... (62,718) (42,219)
Accounts payable....................................... 15,036 8,450
Accrued expenses and other current liabilities......... 39,320 10,944
Due to affiliate....................................... (24,203) 26,886
Income tax payable..................................... 1,182 (1,182)
-------- ---------
Net cash provided by operating activities......... 130,825 118,852
INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. (53,736) (4,027)
Other....................................................... 11,318 --
-------- ---------
Net cash used in investing activities............. (42,418) (4,027)
FINANCING ACTIVITIES
Borrowings on line of credit................................ -- 14,000
Distributions to shareholders............................... (34,485) (60,656)
Payment of capital lease obligations........................ (28,999) (24,040)
Payment of long-term debt................................... -- (35,674)
-------- ---------
Net cash used in financing activities............. (63,484) (106,370)
-------- ---------
Net increase in cash and cash equivalents................... 24,923 8,455
Cash and cash equivalents at beginning of period............ (1,385) 23,538
-------- ---------
Cash and cash equivalents at end of period........ $ 23,538 $ 31,993
======== =========
</TABLE>
See accompanying notes.
F-120
<PAGE> 191
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Dr. Smith and Associates, P.A. #6950 (P.A. #6950), a C corporation, Dr.
Smith and Associates, P.A. #6958 (P.A. #6958), an S corporation, and Dr. Smith
and Associates, P.A. #6966 (P.A. #6966), an S corporation, operate under common
ownership as a professional medical practice, specializing in general optometry.
These corporations are located in the Miami, Florida, area and are hereinafter
collectively referred to as the Company. All significant intercompany
transactions have been eliminated.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Property and equipment under
capital leases are stated at the net present value of the future minimum lease
payments at the inception of the related leases. Depreciation is computed using
straight-line and accelerated methods, with the assets' useful lives estimated
at five to seven years. Amortization expense related to capital leases is
included in depreciation and amortization in the combined statements of income.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and amounts due under line of credit reported
in the combined financial statements reflects their fair value because of the
short-term maturity of those financial instruments. It is not practicable to
estimate the fair value of the Company's long-term debt and obligations under
capital leases because the Company's incremental borrowing rate cannot
reasonably be determined.
NET PATIENT SERVICE REVENUES
Net patient service revenues are based on established billing rates, less
allowances for contractual adjustments for patients covered by Medicare,
Medicaid and various other discount arrangements. Payments received under these
programs and arrangements, which are based on predetermined rates, are generally
less than the Company's established billing rates and the differences are
recorded as contractual adjustments at the time the related service is rendered.
For the year ended December 31, 1995 and the eleven-month period ended
November 30, 1996, approximately 12% and 14%, respectively, of the Company's net
patient service revenues were derived from third-party payors. The Company does
not believe that there are any credit risks associated with receivables due from
governmental agencies. Concentration of credit risk from other payors is limited
by the number of patients and payors. The Company does not require any form of
collateral from its patients or third-party payors.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential wrong
doing. While no such regulatory inquires have been made, compliance with such
laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties and exclusion from the Medicare and Medicaid programs.
F-121
<PAGE> 192
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Income taxes for P.A. #6950 have been provided using the liability method
in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109). Under this method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
P.A. #6958 and P.A. #6966 have elected to have their income taxed under the
provisions of Subchapter S of the federal Internal Revenue Code. As a result, in
lieu of corporate tax, #6958's and #6966's taxable income is passed through to
the stockholders of #6958 and #6966 and taxed at the individual level.
Accordingly, no provision or liability for federal income tax for #6958 and
#6966 has been reflected in these combined financial statements.
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amount reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Medical equipment........................................... $ 34,751 $ 37,552
Computer equipment.......................................... 25,556 26,782
Office furniture and equipment.............................. 4,380 4,380
Equipment under capital lease............................... 244,605 244,605
--------- ---------
309,292 313,319
Less accumulated depreciation and amortization.............. (185,903) (221,345)
--------- ---------
$ 123,389 $ 91,974
========= =========
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to vendor with interest imputed at 10.75%,
payable in monthly installments of $528 through 1997
(collateralized by certain equipment)..................... $ 30,470 $ 21,450
Note payable to landlord bearing interest at prime plus 1%
(9.65% and 9.25% at December 31, 1995 and November 30,
1996, respectively), payable in monthly installments
through 1998)............................................. 60,577 33,923
-------- --------
91,047 55,373
Less current portion........................................ (38,917) (39,931)
-------- --------
$ 52,130 $ 15,442
======== ========
</TABLE>
F-122
<PAGE> 193
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As of November 30, 1996, maturity of long-term debt is as follows:
<TABLE>
<S> <C>
Month ending December 31, 1996.............................. $ 3,283
Year ending December 31:
1997...................................................... 40,031
1998...................................................... 12,059
1999...................................................... --
-------
Total............................................. $55,373
=======
</TABLE>
Interest payments approximate interest expense for the year ended December
31, 1995 and for the eleven-month period ended November 30, 1996.
4. LEASE COMMITMENTS
Future minimum lease commitments under capital leases and noncancelable
operating leases (with an initial or remaining term in excess of one year) at
November 30, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Month ending December 31, 1996.............................. $ 2,566 $ 9,000
Year ending December 31:
1997...................................................... 29,499 108,000
1998...................................................... 22,154 108,000
1999...................................................... 2,361 108,000
2000...................................................... 790 108,000
2001...................................................... -- 108,000
Thereafter................................................ -- 162,000
------- --------
Total minimum lease payments...................... 57,370 $711,000
========
Less amount representing interest........................... (6,473)
-------
Present value of minimum lease payments (including current
portion of $25,428)....................................... $50,897
=======
</TABLE>
F-123
<PAGE> 194
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
#6950's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
DEFERRED TAX ASSETS
Current:
Accrual to cash........................................... $ 8,722 $ --
Noncurrent:
Depreciation.............................................. 27,383 29,092
Valuation allowance......................................... (35,560) (24,593)
-------- --------
Total deferred tax assets......................... 545 4,499
DEFERRED TAX LIABILITIES
Current:
Accrual to cash........................................... -- 3,681
Noncurrent:
Capital lease............................................. 545 818
-------- --------
Total deferred tax liabilities.................... 545 4,499
-------- --------
Net deferred tax assets........................... $ -- $ --
======== ========
</TABLE>
Components of the income tax provision (benefit) which relate solely to
#6950 consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 NOVEMBER 30, 1996
--------------------------- --------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Federal................................. $1,182 $-- $1,182 $-- $-- $--
State................................... -- -- -- -- -- --
------ --- ------ -- --- --
$1,182 $-- $1,182 $-- $-- $--
====== === ====== == === ==
</TABLE>
Income taxes are different from the amount computed by applying the United
States statutory rate to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Income taxes at the statutory rate.......................... $ 36,678 $ 17,691
Permanent differences....................................... 332 332
S-corporation income........................................ (32,250) (8,356)
State taxes, net of federal benefit......................... 508 1,032
Change in valuation allowance............................... (4,217) (10,967)
Personal service corporation status......................... 131 268
-------- --------
$ 1,182 $ --
======== ========
</TABLE>
SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that valuation allowances of $35,560 at December 31, 1995 and
$24,593 at November 30, 1996 are necessary to
F-124
<PAGE> 195
DR. SMITH AND ASSOCIATES, P.A. #6950,
DR. SMITH AND ASSOCIATES, P.A. #6958, AND
DR. SMITH AND ASSOCIATES, P.A. #6966
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
reduce the deferred tax assets to the amount that will more likely than not be
realized. The change in the valuation allowance for the year ended December 31,
1995 was $(4,217) and for the current year is $(10,967).
6. MALPRACTICE INSURANCE
The Company is covered by medical malpractice liability insurance written
on an occurrence basis. This insurance provides coverage of $5,000,000 per
incident, with a $5,000,000 aggregate limit. Management is not aware of any
reported claims pending against the Company. Losses resulting from unreported
claims cannot be estimated by management and, therefore, are not included in the
accompanying combined financial statements.
7. LITIGATION
During 1996, the Company entered into an out-of-court settlement related to
a wrongful termination claim. Payment under the out-of-court settlement of
$25,000 is classified in general and administrative expenses in the 1996
combined statement of income.
8. RELATED PARTY TRANSACTIONS
Amounts due from stockholder and due to affiliate of the Company reflect
net advances and borrowings between the Company and their owner and the owner's
related interests, including other affiliated corporations. Advances to and
borrowings from the shareholder accrue interest at approximately 6.5%.
Compensation to stockholder reflects wages earned by the stockholder acting
in the capacity as an optometrist and officer of the Company. Other related
party compensation for the year ended December 31, 1995 and the eleven-month
period ended November 30, 1996 was approximately $48,000 and $18,000,
respectively.
9. LINE OF CREDIT
The Company has a revolving credit note of $50,000 due on demand, which
bears interest at prime plus 3% (11.65% and 11.25% at December 31, 1995 and
November 30, 1996, respectively). At November 30, 1996, $14,000 was outstanding
under this facility.
The revolving credit note is collateralized by substantially all of the
assets of the Company.
10. SUBSEQUENT EVENT
On December 1, 1996, substantially all assets and liabilities of the
Company were acquired by Vision Twenty-One, Inc. (Vision) in exchange for
approximately 255,000 shares of Vision common stock and notes of approximately
$145,000. In connection therewith, the Company entered into a 40-year business
management agreement with Vision, whereby Vision will provide substantially all
nonmedical services to the practice.
The financial statements of the Company have been prepared as supplemental
information about the associations to which Vision will provide management
services following consummation of the acquisition. The Company previously
operated as a separate independent association. The historical financial
position, results of operations and cash flows do not reflect any adjustments
relating to the acquisition.
F-125
<PAGE> 196
[INSIDE BACK COVER]
[THE INSIDE BACK COVER SETS FORTH THE COMPANY NAME AND LOGO WITH PICTURES
DEPICTING EYEGLASSES, A COLLAGE OF VARIOUS MANAGED CARE MEMBERS IN THE PROCESS
OF RECEIVING EYE CARE AT MANAGED CLINICS; A MANAGED PROVIDER; AND A TELEPHONE
OPERATOR/RECEPTIONIST TAKING CALLS.]
<PAGE> 197
============================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS, OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 6
The Company..................................... 16
The Acquisitions................................ 16
Relationships with Affiliated Providers and
Retail Optical Companies...................... 18
Use of Proceeds................................. 19
Dividend Policy................................. 19
Capitalization.................................. 20
Dilution........................................ 21
Selected Pro Forma Financial Data............... 22
Selected Financial Data......................... 23
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations.................................... 24
Business........................................ 33
Management...................................... 49
Certain Transactions............................ 56
Principal and Selling Stockholders.............. 59
Description of Capital Stock.................... 61
Shares Eligible for Future Sale................. 65
Underwriting.................................... 67
Legal Matters................................... 69
Experts......................................... 69
Additional Information.......................... 69
Index to Consolidated Financial Statements...... F-1
</TABLE>
============================================================
2,100,000 Shares
VISION
TWENTY-ONE
Common Stock
-------------------------
PROSPECTUS
-------------------------
PRUDENTIAL SECURITIES INCORPORATED
WHEAT FIRST BUTCHER SINGER
, 1997
============================================================
<PAGE> 198
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses payable by it in connection with the
Offering described in this registration statement (other than underwriting
discounts and commissions) will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 9,514
NASD filing fee............................................. 3,640
Nasdaq National Market listing fee.......................... 36,402
Printing expenses........................................... *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Fees and expenses (including legal fees) for qualifications
under state securities laws............................... *
Registrar and Transfer Agent's fees and expenses............ *
Miscellaneous............................................... *
--------
Total............................................. $900,000
========
</TABLE>
- ---------------
* To be included by amendment to the Registration Statement.
All amounts except the Securities and Exchange Commission registration fee,
the NASD filing fee and the Nasdaq National Market listing fee are estimated.
The Company intends to pay all expenses of registration with respect to shares
being sold by the Selling Shareholders hereunder, with the exception of
underwriting discounts and commissions.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0831 of the Florida Business Corporation Act ("FBCA") limits
the liability of directors of Florida corporations. Section 607.0831 provides as
follows:
1. A director is not personally liable for monetary damages to the
corporation or any other person for any statement, vote, decision, or
failure to act, regarding corporate management or policy, by a director,
unless:
a. The director breached or failed to perform his duties as a
director; and
b. The director's breach of, or failure to perform, those duties
constitutes:
(1) A violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful. A judgment or
other final adjudication against a director in any criminal
proceeding for a violation of the criminal law estops that director
from contesting the fact that his breach, or failure to perform,
constitutes a violation of the criminal law; but does not estop the
director from establishing that he had reasonable cause to believe
that his conduct was lawful or had no reasonable cause to believe
that his conduct was unlawful;
(2) A transaction from which the director derived an improper
personal benefit, either directly or indirectly;
(3) A circumstance under which the liability provisions of
Florida Statutes sec. 607.0834 (liability for unlawful distributions)
are applicable;
(4) In a proceeding by or in the right of the corporation to
procure a judgment in its favor or by or in the right of a
shareholder, conscious disregard for the best interest of the
corporation, or willful misconduct; or
II-1
<PAGE> 199
(5) In a proceeding by or in the right of someone other than the
corporation or a shareholder, recklessness or an act or omission
which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights,
safety, or property.
2. For the purposes of this section, the term "recklessness" means the
action, or omission to act, in conscious disregard of a risk;
a. Known, or so obvious that it should have been known to the
director; and
b. Known to the director, or so obvious that it should have been
known, to be so great as to make it highly probable that harm would
follow from such action or omission.
3. A director is deemed not to have derived an improper personal
benefit from any transaction if the transaction and the nature of any
personal benefit derived by the director are not prohibited by state or
federal law or regulation and, without further limitation:
a. In an action other than a derivative suit regarding a decision
by the director to approve, reject, or otherwise affect the outcome of
an offer to purchase the stock of, or to effect a merger of, the
corporation, the transaction and the nature of any personal benefits
derived by a director are disclosed or known to all directors voting on
the matter, and the transaction was authorized, approved or ratified by
at least two directors who comprise a majority of the disinterested
directors (whether or not such disinterested directors constitute a
quorum);
b. The transaction and the nature of any personal benefits derived
by a director are disclosed or known to the shareholders entitled to
vote, and the transaction was authorized, approved, or ratified by the
affirmative vote or written consent of such shareholders who hold a
majority of the shares, the voting of which is not controlled by
directors who derived a personal benefit from or otherwise had a
personal interest in the transaction; or
c. The transaction was fair and reasonable to the corporation at
the time it was authorized by the board, a committee, or the
shareholders, notwithstanding that a director received a personal
benefit.
4. The circumstances set forth in subsection 3 are not exclusive and
do not preclude the existence of other circumstances under which a director
will be deemed not to have derived an improper benefit.
Section 607.0850 of the FBCA empowers a Florida corporation, subject to
certain limitations, to indemnify its directors and officers against expenses
(including attorneys' fees, judgments, fines and certain settlements) actually
and reasonably incurred by them in connection with any suit or proceeding to
which they are a party so long as they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to a criminal action or proceeding, so long as
they had no reasonable cause to believe their conduct to have been unlawful.
The Articles of Incorporation of the Company provide that the Company shall
indemnify any person who is or was a director or officer of the Company to the
full extent permitted by Florida law. In addition, the Board of Directors of the
Company has approved the execution by the Company of indemnification agreements
with the Directors and certain officers of the Company, the form of which has
been filed as an exhibit to the Registration Statement.
The Company maintains director and officer liability insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In November 1996, the Company issued an aggregate of 2,685,318 shares of
Common Stock to Theodore Gillette, Richard Sanchez and Peter Fontaine in
connection with a reorganization of the Company. These transactions were exempt
from the registration requirements of the Securities Act pursuant to Section
4(2).
II-2
<PAGE> 200
In May 1996 and October 1996, the Company issued an aggregate of 270,331
shares of Common Stock to Bruce S. Maller, a director of the Company, as
compensation for consulting and advisory services. These transactions were
exempt from the registration requirements of the Securities Act pursuant to Rule
701.
In September 1996, the Company issued 108,132 shares of Common Stock to Dr.
Richard L. Lindstrom, a Director of the Company, as compensation for consulting
and advisory services. This transaction was exempt from the registration
requirements of the Securities Act pursuant to Rule 701.
In December 1996, the Company sold an aggregate principal amount of
$1,250,000 of its 10% Senior Subordinated Notes, Due December 19, 1999 (the
"Notes"), to certain unrelated parties in a private placement. Each Note has a
detachable Warrant exchangeable into 7,036 shares of Common Stock of the Company
at an exchange price ranging from $6.00 to $7.11 per share, or in a cashless
exchange for a reduced number of shares pursuant to a formula. This transaction
was exempt from the registration requirements of the Securities Act pursuant to
Section 4(2).
In February 1997, the Company sold a 10% Senior Subordinated Series 1997
Note, Due December 19, 1999, in the principal amount of $2,000,000 (the "Note"),
to Piper Jaffray Healthcare Fund II Limited Partnership in a private placement.
The Note has a detachable Warrant exchangeable into a maximum of 333,333 shares
of Common Stock at an exchange price ranging from $6.00 to $7.11 per share, or
in a cashless exchange for a reduced number of shares pursuant to a formula.
This transaction was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2).
In a private placement April 1997, which was amended in June 1997, the
Company issued a promissory note to Prudential Securities Group in the maximum
aggregate amount of $5,000,000 and warrants exchangeable into a maximum of
633,333 shares of Common Stock at exchange prices ranging from 80% of the
initial public offering price of the Company's Common Stock as to 533,333 of the
shares in the first tranche to 50% of the market price as to the remaining
shares in the second and third tranches. This transaction was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2).
In connection with the 1996 Acquisitions, the Company issued non-negotiable
promissory notes, as part of the purchase price, totalling approximately
$2,000,000 and issued an aggregate of 2,223,053 shares of Common Stock. These
transactions were exempt from the registration requirements of the Securities
Act pursuant to Section 4(2).
In 1996 and 1997, the Company granted options to purchase 682,667 shares of
Common Stock under the Plans to certain employees, executive officers and
affiliated professionals. These transactions were exempt from the registration
requirements of the Securities Act pursuant to Rule 701. The Company plans to
file registration statements under the Securities Act after this Offering to
register sales of shares of Common Stock under the Plans, if any.
In April 1997, the Company issued 128,541 shares of Common Stock in
connection with the Merger Agreement with Richard L. Short, D.O., P.A. This
transaction was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2).
In May 1997, the Company issued 11,411 shares of Common Stock in connection
with the acquisition of certain assets of Drs. Smith, Porter & Associates, P.A.
This transaction was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2).
In May 1997, the Company issued 169,150 shares of Common Stock in
connection with the Merger Agreement with Cochise Eye & Laser, P.C. This
transaction was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2).
In June 1997, the Company issued 136,356 shares of Common Stock in
connection with the Merger Agreement with Valley Eye Specialist pursuant to a
binding commitment existing prior to the filing of the registration statement.
This transaction was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2).
II-3
<PAGE> 201
In June 1997, the Company issued 320,000 shares of Common Stock in
connection with the acquisition of certain assets of Swigel/Wooton pursuant to a
binding commitment existing prior to the filing of the registration statement.
This transaction was exempt from the registration requirements of the securities
requirements of the Securities Act pursuant to Section 4(2).
In July 1997, the Company issued 140,201 shares of Common Stock in
connection with the Merger Agreement with Eye Institute of Southern Arizona,
P.C. pursuant to a binding commitment existing since December 1996. This
transaction was exempt from the registration of the Securities Act pursuant to
Section 4(2).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
3.1** -- Amended and Restated Articles of Incorporation of Vision
Twenty-One, Inc.
3.2** -- Bylaws of Vision Twenty-One, Inc.
4.1** -- Specimen of Vision Twenty-One, Inc. Common Stock
Certificate.
4.2** -- Promissory Note dated June 1996 from Vision Twenty-One, Inc.
to Peter Fontaine.
4.3** -- Promissory Note dated November 1996 from Vision Twenty-One,
Inc. to Peter Fontaine.
4.4** -- Promissory Note dated December 1996 from Vision Twenty-One,
Inc. to Peter Fontaine.
4.5** -- Note Purchase Agreement for 10% Senior Subordinated Notes
Due December 19, 1999 (Detachable Warrants Exchangeable Into
Common Stock) dated December 20, 1996, by and between Vision
Twenty-One, Inc. and certain purchasers.
4.6** -- Amendment No. 1 dated April 18, 1997, to that certain Note
Purchase Agreement dated December 20, 1996, by and between
Vision Twenty-One, Inc. and certain purchasers.
4.7** -- Note Purchase Agreement for 10% Senior Subordinated Series
1997 Notes Due December 19, 1999 (Detachable Warrants
Exchangeable Into Common Stock) dated February 28, 1997
between Vision Twenty-One, Inc. and Piper Jaffray Healthcare
Fund II Limited Partnership.
4.8* -- Amended and Restated Note and Warrant Purchase Agreement
dated June 1997 between Vision Twenty-One, Inc. and
Prudential Securities Group.
(The Company is not filing any instrument with respect to
long-term debt that does not exceed 10% of the total assets
of the Company and the Company agrees to furnish a copy of
such instrument to the Commission upon request.)
5.1* -- Opinion of Shumaker, Loop & Kendrick, LLP as to the Common
Stock being registered.
10.1** -- Employment Agreement dated October 1, 1996 between Vision
Twenty-One, Inc. and Theodore N. Gillette.
10.2** -- Employment Agreement dated October 1, 1996 between Vision
Twenty-One, Inc. and Richard Sanchez.
10.3** -- Employment Agreement dated September 1, 1996 between Vision
Twenty-One, Inc. and Richard T. Welch.
10.4** -- Services Agreement dated September 9, 1996 between Vision
Twenty-One, Inc. and Dr. Richard L. Lindstrom, M.D.
10.5** -- Vision Twenty-One, Inc. 1996 Stock Incentive Plan.
10.6** -- Vision Twenty-One, Inc. Affiliated Professionals Stock Plan.
10.7** -- Agreement dated May 10, 1996 between Vision Twenty-One, Inc.
and Bruce S. Maller.
</TABLE>
II-4
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
<C> <C> <S>
10.8** -- Advisory Agreement dated October 20, 1996 between Vision
Twenty-One, Inc. and Bruce S. Maller.
10.9** -- Services Agreement dated March 10, 1996 between Vision
Twenty-One, Inc. and The BSM Consulting Group.
10.10** -- Subscription Agreement dated June 4, 1996 between Vision
Twenty-One, Inc. and Peter Fontaine.
10.11** -- Promissory Note dated June 1996 from Vision Twenty-One, Inc.
to Peter Fontaine, filed as Exhibit 4.2 to this Registration
Statement and incorporated herein by reference.
10.12** -- Promissory Note dated November 1996 from Vision Twenty-One,
Inc. to Peter Fontaine, filed as Exhibit 4.3 to this
Registration Statement and incorporated herein by reference.
10.13** -- Promissory Note dated December 1996 from Vision Twenty-One,
Inc. to Peter Fontaine filed as Exhibit 4.4 to this
Registration Statement and incorporated herein by reference.
10.14** -- Note Purchase Agreement for 10% Senior Subordinated Notes
Due December 19, 1999 (Detachable Warrants Exchangeable Into
Common Stock), dated December 20, 1996, by and between
Vision Twenty-One, Inc. and certain purchasers filed as
Exhibit 4.5 to this Registration Statement and incorporated
herein by reference.
10.15** -- Amendment No. 1 dated April 18, 1997, to that certain Note
Purchase Agreement dated December 20, 1996, by and between
Vision Twenty-One, Inc. and certain purchasers filed as
Exhibit 4.6 to this Registration Statement and incorporated
herein by reference.
10.16** -- Note Purchase Agreement for 10% Senior Subordinated Series
1997 Notes Due December 19, 1999 (Detachable Warrants
Exchangeable Into Common Stock), by and between Vision
Twenty-One, Inc. and Piper Jaffray Healthcare Fund II
Limited Partnership, filed as Exhibit 4.7 to this
Registration Statement and incorporated herein by reference.
10.17** -- Amended and Restated Note and Warrant Purchase Agreement
dated June 1997 between Vision Twenty-One, Inc. and
Prudential Securities Group, Inc. filed as Exhibit 4.8 to
this Registration Statement and incorporated herein by
reference.
10.18** -- Form of Indemnification Agreement.
10.19+ -- Ancillary Provider Participation Agreement and Provider
Amendment among Humana Medical Plan, Inc., Humana Health
Plan of Florida, Inc., Humana Health Insurance of Florida,
Inc., Humana Insurance Company and Vision 21.
10.20+ -- Asset Purchase Agreement dated December 1, 1996, by and
among Gillette & Associates, #6965, P.A., Theodore N.
Gillette, O.D., Mark Sarno, O.D. and Mark Beiler, O.D. and
Vision Twenty-One, Inc.
10.21** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Gillette & Associates, #6965,
P.A.
10.22 -- Business Management Agreement dated December 1, 1996,
between Vision Twenty-One, Inc. and Gillette & Associates,
#6965, P.A.
10.23+** -- Agreement and Plan of Reorganization dated December 1, 1996,
by and among Eye Institute of Southern Arizona, P.C.,
Jeffrey I. Katz, M.D. and Barry Kusman, M.D., Vision
Twenty-One, Inc. and Vision 21 of Southern Arizona, Inc.
10.24** -- Business Management Agreement dated December 1, 1996,
between Eye Institute of Southern Arizona, P.C. and
ExcelCare, P.C. (as assigned to Vision Twenty-One, Inc.)
</TABLE>
II-5
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
<C> <C> <S>
10.25+ -- Asset Purchase Agreement dated December 1, 1996, by and
among Lindstrom, Samuelson & Hardten Ophthalmology
Associates, P.A., Richard L. Lindstrom, M.D., Thomas W.
Samuelson, M.D. and David R. Hardten, M.D. and Vision
Twenty-One, Inc.
10.26** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Lindstrom, Samuelson & Hardten
Ophthalmology Associates, P.A.
10.27** -- Business Management Agreement dated December 1, 1996,
between Vision Twenty-One, Inc. and Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A.
10.28+** -- Agreement and Plan of Reorganization dated December 1, 1996,
by and among Dr. Smith & Associates, #6950, P.A., Paul
Smith, O.D. and Vision Twenty-One, Inc.
10.30+** -- Asset Purchase Agreement dated December 1, 1996, by and
among Dr. Smith & Associates, #6958, P.A., Paul Smith, O.D.
and Vision Twenty-One, Inc.
10.31** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Dr. Smith & Associates, #6958,
P.A.
10.33+** -- Asset Purchase Agreement dated December 1, 1996, by and
among Dr. Smith & Associates, #6966, P.A., Paul Smith, O.D.
and Vision Twenty-One, Inc.
10.34** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Dr. Smith & Associates, #6966,
P.A.
10.36+ -- Managed Care Organization Asset Purchase Agreement dated
December 1, 1996, between Eye Specialists of Arizona
Network, P.C., Daniel B. Feller, M.D. and Vision Twenty-One,
Inc.
10.37** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Eye Specialists of Arizona
Network, P.C.
10.38+ -- Optical Asset Purchase Agreement dated December 1, 1996, by
and among Sharona Optical, Inc., Millennium Vision, P.C.
Daniel B. Feller, M.D. and Sharona Feller and Vision
Twenty-One, Inc.
10.39** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Sharona Optical, Inc.
10.40+ -- Agreement and Plan of Reorganization dated December 1, 1996,
by and among Daniel B. Feller, M.D., P.C., Daniel B. Feller,
M.D. and Vision Twenty-One, Inc.
10.41** -- Business Management dated December 1, 1996, between Daniel
B. Feller, M.D., P.C. and Millennium Vision, P.C. (as
assigned to Vision Twenty-One, Inc.)
10.42** -- Stock Purchase Agreement dated May 1997, between David R.
Hardten, M.D., Robert B. Kennedy, O.D., Thomas A. Knox,
Gregory W. Kraupa, O.D., John W. Lahr, O.D., Richard L.
Lindstrom, M.D., Jack W. Moore, Thomas W. Samuelson, M.D.
and Bradley D. Richter, O.D. and Vision Twenty-One, Inc.
10.43** -- Regional Services Agreement dated May 1997, between Vision
Twenty-One, Inc. and Richard L. Lindstrom, M.D.
10.44+* -- Asset Purchase Agreement dated May 1, 1997 by and among Drs.
Smith, Porter & Associates, P.A., Paul R. Smith, O.D., and
Vision Twenty-One, Inc.
10.47** -- Form of Contract Provider agreement.
10.48+ -- Joint Venture Agreement dated May 1, 1996 by and between for
Eyes Managed Care, Inc. and Vision 21 Managed Eye Care of
Tampa Bay, Inc.
11** -- Statement of Computation of Per Share Earnings.
21** -- List of the subsidiaries of Vision Twenty-One, Inc.
23.1* -- Consent of Shumaker, Loop & Kendrick, LLP (included in their
opinion filed as Exhibit 5.1).
23.2** -- Consent of Ernst & Young, LLP, independent certified public
accountants.
</TABLE>
II-6
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
<C> <C> <S>
24** -- Power of Attorney (included on signature page).
27.1** -- Financial Data Schedule for year ended December 31, 1996.
(For SEC Use Only).
27.2** -- Financial Data Schedule for three months ended March 31,
1997. (For SEC Use Only).
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed as an Exhibit with the same Exhibit number identification in
the Company's Registration Statement on Form S-1 filed on June 13, 1997 (File
No. 333-29213) and incorporated herein by reference.
+ Certain information contained in this exhibit is subject to a request for
confidential treatment. In accordance with Rule 406 promulgated under the
Securities Act of 1933, as amended, such confidential information has been
omitted herefrom and filed separately with the Securities and Exchange
Commission.
(b) Financial Statement Schedules:
SCHEDULE I -- VALUATION AND QUALIFYING ACCOUNTS
All other schedules are omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto or the schedule is not required or inapplicable
under the related instructions.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement, certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bonafide offering thereof.
II-7
<PAGE> 205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Largo, State of Florida
on July 23, 1997.
VISION TWENTY-ONE, INC.
By: /s/ THEODORE N. GILLETTE
------------------------------------
Theodore N. Gillette
Chief Executive Officer
(The Principal Executive Officer)
By: /s/ RICHARD T. WELCH
------------------------------------
Richard T. Welch
Chief Financial Officer
(The Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 23, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ THEODORE N. GILLETTE Chief Executive Officer
- --------------------------------------------------------
Theodore N. Gillette
/s/ RICHARD T. WELCH Chief Financial Officer
- --------------------------------------------------------
Richard T. Welch
* Director
- --------------------------------------------------------
Richard L. Sanchez
* Director
- --------------------------------------------------------
Peter Fontaine
* Director
- --------------------------------------------------------
Herbert U. Pegues II, M.D.
* Director
---------------------------------------------------
Bruce S. Maller
* Director
---------------------------------------------------
Richard L. Lindstrom, M.D.
* Director
---------------------------------------------------
Jeffrey Katz, M.D.
*By /s/ THEODORE N. GILLETTE as attorneys in fact pursuant to the power
---------------------------------------------- of attorney included in the Registration
Theodore N. Gillette Statement as originally filed on June 13,
1997.
*By /s/ RICHARD T. WELCH
----------------------------------------------
Richard T. Welch
</TABLE>
II-8
<PAGE> 206
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the consolidated financial statements of Vision Twenty-One,
Inc. and Subsidiaries as of December 31, 1995 and 1996, and for each of the
three years in the period ended December 31, 1996, and have issued our report
thereon dated March 22, 1997, except for Note 11, as to which the date is June
6, 1997 (included elsewhere in this Registration Statement). Our audits also
included the financial schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.
/s/ ERNST & YOUNG LLP
Tampa, Florida
June 6, 1997
S-1
<PAGE> 207
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
SCHEDULE I -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT -----------------------
BEGINNING CHARGED TO CHARGED TO BALANCE AT
OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts..... $ -- $ -- $ -- $ -- $ --
==== ==== ======== ==== ========
For the year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts..... $ -- $ -- $ -- $ -- $ --
==== ==== ======== ==== ========
For the year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts..... $ -- $ -- $685,000(1) $ -- $685,000
==== ==== ======== ==== ========
</TABLE>
- ---------------
(1) Amount represents allowance for doubtful accounts acquired in connection
with the December 1, 1996 acquisition of substantially all of the assets and
certain liabilities of 10 ophthalmology and optometry practices.
S-2
<PAGE> 208
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
<S> <C> <C>
1.1* -- Form of Underwriting Agreement.
3.1** -- Amended and Restated Articles of Incorporation of Vision
Twenty-One, Inc.
3.2** -- Bylaws of Vision Twenty-One, Inc.
4.1** -- Specimen of Vision Twenty-One, Inc. Common Stock
Certificate.
4.2** -- Promissory Note dated June 1996 from Vision Twenty-One, Inc.
to Peter Fontaine.
4.3** -- Promissory Note dated November 1996 from Vision Twenty-One,
Inc. to Peter Fontaine.
4.4** -- Promissory Note dated December 1996 from Vision Twenty-One,
Inc. to Peter Fontaine.
4.5** -- Note Purchase Agreement for 10% Senior Subordinated Notes
Due December 19, 1999 (Detachable Warrants Exchangeable Into
Common Stock) dated December 20, 1996, by and between Vision
Twenty-One, Inc. and certain purchasers.
4.6** -- Amendment No. 1 dated April 18, 1997, to that certain Note
Purchase Agreement dated December 20, 1996, by and between
Vision Twenty-One, Inc. and certain purchasers.
4.7** -- Note Purchase Agreement for 10% Senior Subordinated Series
1997 Notes Due December 19, 1999 (Detachable Warrants
Exchangeable Into Common Stock) dated February 28, 1997
between Vision Twenty-One, Inc. and Piper Jaffray Healthcare
Fund II Limited Partnership.
4.8* -- Amended and Restated Note and Warrant Purchase Agreement
dated June 1997 between Vision Twenty-One, Inc. and
Prudential Securities Group.
(The Company is not filing any instrument with respect to
long-term debt that does not exceed 10% of the total assets
of the Company and the Company agrees to furnish a copy of
such instrument to the Commission upon request.)
5.1* -- Opinion of Shumaker, Loop & Kendrick, LLP as to the Common
Stock being registered.
10.1** -- Employment Agreement dated October 1, 1996 between Vision
Twenty-One, Inc. and Theodore N. Gillette.
10.2** -- Employment Agreement dated October 1, 1996 between Vision
Twenty-One, Inc. and Richard Sanchez.
10.3** -- Employment Agreement dated September 1, 1996 between Vision
Twenty-One, Inc. and Richard T. Welch.
10.4** -- Services Agreement dated September 9, 1996 between Vision
Twenty-One, Inc. and Dr. Richard L. Lindstrom, M.D.
10.5** -- Vision Twenty-One, Inc. 1996 Stock Incentive Plan.
10.6** -- Vision Twenty-One, Inc. Affiliated Professionals Stock Plan.
10.7** -- Agreement dated May 10, 1996 between Vision Twenty-One, Inc.
and Bruce S. Maller.
10.8** -- Advisory Agreement dated October 20, 1996 between Vision
Twenty-One, Inc. and Bruce S. Maller.
10.9** -- Services Agreement dated March 10, 1996 between Vision
Twenty-One, Inc. and The BSM Consulting Group.
10.10** -- Subscription Agreement dated June 4, 1996 between Vision
Twenty-One, Inc. and Peter Fontaine.
10.11** -- Promissory Note dated June 1996 from Vision Twenty-One, Inc.
to Peter Fontaine, filed as Exhibit 4.2 to this Registration
Statement and incorporated herein by reference.
</TABLE>
<PAGE> 209
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
<S> <C> <C>
10.12** -- Promissory Note dated November 1996 from Vision Twenty-One,
Inc. to Peter Fontaine, filed as Exhibit 4.3 to this
Registration Statement and incorporated herein by reference.
10.13** -- Promissory Note dated December 1996 from Vision Twenty-One,
Inc. to Peter Fontaine filed as Exhibit 4.4 to this
Registration Statement and incorporated herein by reference.
10.14** -- Note Purchase Agreement for 10% Senior Subordinated Notes
Due December 19, 1999 (Detachable Warrants Exchangeable Into
Common Stock), dated December 20, 1996, by and between
Vision Twenty-One, Inc. and certain purchasers filed as
Exhibit 4.5 to this Registration Statement and incorporated
herein by reference.
10.15** -- Amendment No. 1 dated April 18, 1997, to that certain Note
Purchase Agreement dated December 20, 1996, by and between
Vision Twenty-One, Inc. and certain purchasers filed as
Exhibit 4.6 to this Registration Statement and incorporated
herein by reference.
10.16** -- Note Purchase Agreement for 10% Senior Subordinated Series
1997 Notes Due December 19, 1999 (Detachable Warrants
Exchangeable Into Common Stock), by and between Vision
Twenty-One, Inc. and Piper Jaffray Healthcare Fund II
Limited Partnership, filed as Exhibit 4.7 to this
Registration Statement and incorporated herein by reference.
10.17** -- Amended and Restated Note and Warrant Purchase Agreement
dated June 1997 between Vision Twenty-One, Inc. and
Prudential Securities Group, Inc. filed as Exhibit 4.8 to
this Registration Statement and incorporated herein by
reference.
10.18** -- Form of Indemnification Agreement.
10.19+ -- Ancillary Provider Participation Agreement and Provider
Amendment among Humana Medical Plan, Inc., Humana Health
Plan of Florida, Inc., Humana Health Insurance of Florida,
Inc., Humana Insurance Company and Vision 21.
10.20+ -- Asset Purchase Agreement dated December 1, 1996, by and
among Gillette & Associates, #6965, P.A., Theodore N.
Gillette, O.D., Mark Sarno, O.D. and Mark Beiler, O.D. and
Vision Twenty-One, Inc.
10.21** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Gillette & Associates, #6965,
P.A.
10.22 -- Business Management Agreement dated December 1, 1996,
between Vision Twenty-One, Inc. and Gillette & Associates,
#6965, P.A.
10.23+** -- Agreement and Plan of Reorganization dated December 1, 1996,
by and among Eye Institute of Southern Arizona, P.C.,
Jeffrey I. Katz, M.D. and Barry Kusman, M.D., Vision
Twenty-One, Inc. and Vision 21 of Southern Arizona, Inc.
10.24** -- Business Management Agreement dated December 1, 1996,
between Eye Institute of Southern Arizona, P.C. and
ExcelCare, P.C. (as assigned to Vision Twenty-One, Inc.)
10.25+ -- Asset Purchase Agreement dated December 1, 1996, by and
among Lindstrom, Samuelson & Hardten Ophthalmology
Associates, P.A., Richard L. Lindstrom, M.D., Thomas W.
Samuelson, M.D. and David R. Hardten, M.D. and Vision
Twenty-One, Inc.
10.26** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Lindstrom, Samuelson & Hardten
Ophthalmology Associates, P.A.
10.27** -- Business Management Agreement dated December 1, 1996,
between Vision Twenty-One, Inc. and Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A.
10.28+** -- Agreement and Plan of Reorganization dated December 1, 1996,
by and among Dr. Smith & Associates, #6950, P.A., Paul
Smith, O.D. and Vision Twenty-One, Inc.
</TABLE>
2
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------- -------------------
<S> <C> <C>
10.30+** -- Asset Purchase Agreement dated December 1, 1996, by and
among Dr. Smith & Associates, #6958, P.A., Paul Smith, O.D.
and Vision Twenty-One, Inc.
10.31** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Dr. Smith & Associates, #6958,
P.A.
10.33+** -- Asset Purchase Agreement dated December 1, 1996, by and
among Dr. Smith & Associates, #6966, P.A., Paul Smith, O.D.
and Vision Twenty-One, Inc.
10.34** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Dr. Smith & Associates, #6966,
P.A.
10.36+ -- Managed Care Organization Asset Purchase Agreement dated
December 1, 1996, between Eye Specialists of Arizona
Network, P.C., Daniel B. Feller, M.D. and Vision Twenty-One,
Inc.
10.37** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Eye Specialists of Arizona
Network, P.C.
10.38+ -- Optical Asset Purchase Agreement dated December 1, 1996, by
and among Sharona Optical, Inc., Millennium Vision, P.C.
Daniel B. Feller, M.D. and Sharona Feller and Vision
Twenty-One, Inc.
10.39** -- Subordinated Promissory Note dated December 1, 1996, from
Vision Twenty-One, Inc. to Sharona Optical, Inc.
10.40+ -- Agreement and Plan of Reorganization dated December 1, 1996,
by and among Daniel B. Feller, M.D., P.C., Daniel B. Feller,
M.D. and Vision Twenty-One, Inc.
10.41** -- Business Management dated December 1, 1996, between Daniel
B. Feller, M.D., P.C. and Millennium Vision, P.C. (as
assigned to Vision Twenty-One, Inc.)
10.42** -- Stock Purchase Agreement dated May 1997, between David R.
Hardten, M.D., Robert B. Kennedy, O.D., Thomas A. Knox,
Gregory W. Kraupa, O.D., John W. Lahr, O.D., Richard L.
Lindstrom, M.D., Jack W. Moore, Thomas W. Samuelson, M.D.
and Bradley D. Richter, O.D. and Vision Twenty-One, Inc.
10.43** -- Regional Services Agreement dated May 1997, between Vision
Twenty-One, Inc. and Richard L. Lindstrom, M.D.
10.44+* -- Asset Purchase Agreement dated May 1, 1997 by and among Drs.
Smith, Porter & Associates, P.A., Paul R. Smith, O.D., and
Vision Twenty-One, Inc.
10.47** -- Form of Contract Provider agreement.
10.48+ -- Joint Venture Agreement dated May 1, 1996 by and between for
Eyes Managed Care, Inc. and Vision 21 Managed Eye Care of
Tampa Bay, Inc.
11** -- Statement of Computation of Per Share Earnings.
21** -- List of the subsidiaries of Vision Twenty-One, Inc.
23.1* -- Consent of Shumaker, Loop & Kendrick, LLP (included in their
opinion filed as Exhibit 5.1).
23.2** -- Consent of Ernst & Young, LLP, independent certified public
accountants.
24** -- Power of Attorney (included on signature page).
27.1** -- Financial Data Schedule for year ended December 31, 1996.
(For SEC Use Only).
27.2** -- Financial Data Schedule for three months ended March 31,
1997. (For SEC Use Only).
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed as an Exhibit with the same Exhibit number identification in
the Company's Registration Statement on Form S-1 filed on June 13, 1997 (File
No. 333-29213) and incorporated herein by reference.
+ Certain information contained in this exhibit is subject to a request for
confidential treatment. In accordance with Rule 406 promulgated under the
Securities Act of 1933, as amended, such confidential information has been
omitted herefrom and filed separately with the Securities and Exchange
Commission.
3
<PAGE> 1
"CONFIDENTIAL TREATMENT REQUESTED BY
VISION TWENTY-ONE, INC."
EXHIBIT 10.19
ANCILLARY PROVIDER PARTICIPATION AGREEMENT
1. Parties
HUMANA MEDICAL PLAN, INC., HUMANA HEALTH PLAN OF FLORIDA, INC.
(Florida health maintenance organizations) and HUMANA HEALTH INSURANCE COMPANY
OF FLORIDA, INC. (a Florida insurance company) and HUMANA INSURANCE COMPANY (an
insurance company) and their affiliates, are collectively referred to in this
Agreement as "HUMANA", and Vision 21 an ANCILLARY PROVIDER licensed under the
laws of the State of Florida (hereinafter "PROVIDER") agree as follows:
2. Parties are Independent Contractors
In performance of the duties and obligations of each of the parties of
this Agreement and in regard to any services rendered or performed for Members
by either parry, it is mutually understood and agreed that HUMANA and PROVIDER
are at all times acting and performing as independent contractors and that
neither party shall be considered the agent, servant, or employee of, or joint
venturer with the other party.
3. Scope of the Agreement
3.1 This Agreement shall apply to health care services, as defined
in Paragraph (4) below, rendered to covered persons (hereinafter referred to as
"Members") under designated HUMANA contracts, and to all individuals covered
under designated self-
2
<PAGE> 2
insured employer and employer trust contracts whose claims are either
administered by HUMANA or where HUMANA administers the provider network for
another third party payor issuing and administering the contract. This
Agreement applies only to those contracts and to those Members designated by
HUMANA.
3.2 The joinder of these companies under the designation "HUMANA"
shall not be construed as imposing joint responsibility or a cross-guarantee.
All rights and responsibilities arising in respect to individual Member shall
be applicable to only the company which issued the contract covering the
respective Member and may not be imposed on or enforced by the other company.
Further, with respect to self-insured contracts, HUMANA'S responsibilities are
limited to those of administration claims processing. Ultimate responsibility
remains with self-insured payor.
4. PROVIDER Services
PROVIDER will provide PROVIDER Services to Members of HUMANA as a
participating PROVIDER, in consideration of the covenants, agreements, and
promises in this Agreement. For purposes of this Agreement, PROVIDER Services
shall have the meaning given in Attachment A. PROVIDER agrees to perform its
duties and obligations at all times in accordance with acceptable medical and
professional standards.
3
<PAGE> 3
5. Coverage Under HUMANA Contracts
5.1 HUMANA shall maintain an authorization procedure for PROVIDER
to verify coverage of Members under a HUMANA contract. PROVIDER agrees to
verify coverage of Members with HUMANA prior to rendering any PROVIDER
Services.
5.2 Notwithstanding Paragraph 5.1, PROVIDER understands that no
benefits for PROVIDER Services expenses, incurred by Members will be paid by
HUMANA except for PROVIDER Services covered under HUMANA'S applicable contract
at the time such services are rendered.
5.3 HUMANA reserves the right to review Members' medical records
in accordance with Paragraph (12) below to determine if the care rendered or
proposed is medically necessary and no payment will be made for medically
unnecessary PROVIDER Services.
6. Hold Harmless Clause
6.1 PROVIDER hereby agrees that in no event, including, but not
limited to non-payment by HUMANA, HUMANA insolvency or breach of this
Agreement, shall PROVIDER bill, charge, collect a deposit from, seek
compensation, remuneration or reimbursement from, or have any recourse against
Member or persons other than HUMANA acting on their behalf for services
provided pursuant to this Agreement. This provision shall not prohibit
collection of supplemental charges or copayments on HUMANA'S behalf made in
4
<PAGE> 4
accordance with the terms of this Agreement between HUMANA and Member.
6.2 PROVIDER further agrees that (1) this provision herein shall
survive the termination of this Agreement regardless of the cause giving rise
to termination and shall be construed to be for the benefit of the Member and
that (2) this provision supersedes any oral or written contrary agreement now
existing or hereafter entered into between PROVIDER and Member or persons
acting on their behalf.
6.3 Any modification, addition, or deletion to the provisions of
this section shall become effective on a date no earlier than fifteen (15) days
after the Commissioner of Insurance has received written notice of such
proposed changes.
7. PROVIDER Charges
7.1 All PROVIDER Services provided by PROVIDER under this
Agreement shall be billed to HUMANA and paid by HUMANA according to the payment
method set out in Attachment B. PROVIDER agrees to collect all deductibles and
co-payments required for PROVIDER Services directly from the Members, and
shall not waive, discount or rebate any such deductibles and co-payments.
7.2 In the event that PROVIDER establishes a rate increase for its
usual and customary charges, PROVIDER agrees that during
5
<PAGE> 5
any one year term that this Agreement is in effect, PROVIDER shall discount
these rates to HUMANA so that no higher payment shall be paid by HUMANA than it
would have paid had such rate increase not taken place.
7.3 PROVIDER agrees to notify HUMANA in writing of the date and
amount of any increase in its usual and customary charges no later than the
effective date of the increase.
7.4 HUMANA shall have the right to conduct, or have conducted by a
third party, audits and evaluations, from time to time of all billing and
financial records of PROVIDER related to the PROVIDER Services provided to any
Member.
8. Confidentiality
PROVIDER and HUMANA agree to maintain in strict confidentiality the
contents of Attachment B and agree not to disclose the contents of Attachment B
to any third party, except pursuant to a valid court order or when disclosure
of the contents of Attachment B is required by a governmental agency any
participating physician who maintains financial risk for PROVIDER Services
pursuant to a separate contract with HUMANA or any self-insured employer group
or trust or any third party administrator who is under contract with HUMANA.
6
<PAGE> 6
9. Billing Procedures
9.1 PROVIDER shall prepare and submit to HUMANA, according to the
billing procedures established by HUMANA, encounter and billing information for
Members who have received PROVIDER Services. PROVIDER shall use the standard
encounter and billing forms required by or agreed to by HUMANA.
9.2 HUMANA will deduct any non-covered service and copayment or
deductible amounts required by the applicable HUMANA contract from payments due
PROVIDER and HUMANA. Deductibles for the non-covered service and copayment
amounts will be determined on the basis of the applicable Member contract.
9.3 When any payment for PROVIDER Services has been made by HUMANA
in an amount that exceeds the maximum benefits available to a Member or
whenever HUMANA has made a payment to the PROVIDER in error for services not
covered by Members' applicable contracts, HUMANA shall have the right to
recover such payment from the PROVIDER. HUMANA reserves the right to deduct
overpaid amounts from any pending claim submitted for payment by the PROVIDER,
and PROVIDER agrees to bill directly the Member on whose behalf the overpayment
was made.
10. Records to Be Kept
10.1 PROVIDER shall maintain standard medical records on all HUMANA
Members receiving PROVIDER Services in a form and for time
7
<PAGE> 7
periods required by applicable state and federal laws, and licensing and
reimbursement entities.
10.2 PROVIDER agrees to use its best efforts to obtain
authorization from Members to release medical records to HUMANA.
10.3 In accordance with Member authorization, HUMANA shall have the
right to inspect, review, and make copies of such records upon request. HUMANA
agrees to pay cost of such copies at PROVIDER'S usual and customary charges but
not to exceed $.25 per page.
10.4 PROVIDER and HUMANA agree to maintain the confidentiality of
information contained in the medical records of Members.
11. Non-Discrimination Clause
PROVIDER agrees to provide necessary PROVIDER Services covered under
HUMANA for Members which are within the normal scope of PROVIDER'S practice.
These services shall be accessible to Members, and made available to them,
without discrimination and in accordance with accepted professional practices
and standards applicable to PROVIDER'S other patients.
12. Quality and Utilization Review Data Requested by HUMANA
12.1 PROVIDER agrees to participate in HUMANA'S utilization review
program, Humana Medical Quality Cost Management. PROVIDER
8
<PAGE> 8
agrees to comply with HUMANA policies and procedures and to provide data
requested by HUMANA in order for HUMANA to conduct quality and utilization
review activities concerning HUMANA Members.
12.2 PROVIDER agrees to obtain from Members authorization for
HUMANA'S review personnel to have access to Members during their term of
treatment and to Members' medical records, and pursuant to such authorization,
provide HUMANA'S review personnel access to Members and their medical records.
PROVIDER further agrees to provide HUMANA review personnel access to PROVIDER
and personnel during term of treatment.
12.3 PROVIDER agrees to provide quality PROVIDER Services which are
appropriate and medically necessary and to adequately document in medical
records those Services rendered to Members.
12.4 PROVIDER understands that HUMANA shall make no payment for
PROVIDER Services rendered to Members which are, in the opinion of HUMANA,
determined to be medically unnecessary. "Medical Necessity" (or "Medically
Necessary") shall mean services or supplies provided by a PROVIDER to treat an
illness or injury and which, in the opinion of HUMANA are: (1) consistent with
the symptoms, diagnosis and treatment of the condition, disease, ailment or
injury; (2) appropriate with regard to standards of good medical practice; (3)
not primarily for the convenience of the
9
<PAGE> 9
patient; and (4) the most appropriate supply or level of service which can
safely be provided to the patient.
13. Grievance Procedure
PROVIDER agrees to cooperate and participate with HUMANA in its
grievance procedure and PROVIDER will comply with all final determination
rendered by the peer review or grievance mechanism which HUMANA shall
establish.
14. Marketing
14.1 PROVIDER consents to the use of PROVIDER'S name in any
marketing and advertising literature or media presentations describing HUMANA'S
health plans, which are developed and disseminated by HUMANA to Members,
employers, the general public, and other health care providers.
14.2 PROVIDER reserves the right to review any such marketing
materials prior to their dissemination upon its request.
14.3 PROVIDER shall not advertise or utilize any marketing
material, logos, tradenames, service marks, or other materials belonging to
HUMANA without HUMANA'S written consent.
15. Term
15.1 The term of this Agreement shall be one year, commencing on
1/1/96. This Agreement shall automatically renew for subsequent
10
<PAGE> 10
one year terms unless either party gives the other party written notice of
nonrenewal at least one hundred twenty (120) days prior to the end of the
initial term or any renewal or extension thereof.
15.2 Notwithstanding Section 15.1 above, either party may terminate
this Agreement without cause by giving the other party written notice of
termination at any time at least one hundred twenty (120) days prior to the
effective termination date. Such notice shall comply with the requirements set
forth in Paragraph 21 below.
15.3 PROVIDER may terminate this Agreement for cause, but only
after written notice to HUMANA and the Florida Department of Insurance, Bureau
of Specialty Insurers, 205 East Gaines Street, Tallahassee, Florida 32399-0300
and providing at least one hundred twenty (120) days in which HUMANA may avoid
termination by curing the default.
15.4 This Agreement as it applies to Humana Medical Plan, Inc.
and Humana Health Plan of Florida, Inc. is subject to review by the Florida
Department of Insurance pursuant to Florida Statute 641.234 and shall be
cancelled upon issuance of an order by the Department pursuant to this Statute.
The issuance of an order by the Florida Department of Insurance will not effect
a termination of the entire Agreement which shall remain in full force and
effect with respect
11
<PAGE> 11
to the other Humana companies and product lines contemplated in this Agreement.
15.5 However, upon termination, PROVIDER agrees to render PROVIDER
Services to any Members under care of PROVIDER on the date of termination, and
HUMANA agrees to pay for such PROVIDER Services until such Members are
discharged or transferred from PROVIDER'S care.
16. PROVIDER'S Insurance
PROVIDER, at its sole cost and expense, shall procure and maintain for
the term of this Agreement such policies of comprehensive general liability,
professional liability, and other insurance as should be necessary to insure
PROVIDER against any claim or claims for damages arising by reason of personal
injuries or death occasioned directly or indirectly in connection with the
performance of any PROVIDER Services pursuant to this Agreement. Such policies
shall provide a minimum of one million dollars ($1,000,000) per claim.
PROVIDER shall furnish HUMANA such reasonable proof that PROVIDER has obtained
adequate insurance as shall be requested by HUMANA upon execution of this
Agreement and at any time during the term of this Agreement. PROVIDER further
agrees to and hereby does indemnify, defend, and hold harmless HUMANA from and
against any and all claims, judgements, costs, liabilities, damages, and
expenses, including reasonable attorneys'
12
<PAGE> 12
fees, whatsoever arising from any acts or omissions in the provision of
PROVIDER Services by PROVIDER under this Agreement.
17. HUMANA'S Insurance
HUMANA, at its sole cost and expense, shall procure and maintain for
the term of this Agreement, such policies of comprehensive general liability
and other insurance as shall be necessary to insure HUMANA against any claim or
claims for damages arising in connection with the performance of HUMANA'S
responsibilities under this Agreement. Such policies shall provide a minimum
of one million dollars ($1,000,000) per claim. HUMANA shall furnish PROVIDER
such reasonable proof that HUMANA has obtained adequate insurance as shall be
requested by PROVIDER upon execution of this Agreement and at any time during
the term of this Agreement. HUMANA further agrees to and hereby does
indemnify, defend, and hold harmless the PROVIDER from and against any and all
claims, judgements, costs, liabilities, damages, and expenses, including
reasonable attorneys' fees, whatsoever arising in connection with any acts or
omissions by HUMANA in the performance of its obligations under this Agreement.
18. Malpractice Claims
PROVIDER agrees to notify HUMANA in writing within ten (10) days or
such lesser period of time as required by the applicable statute of this State
of any malpractice claim filed against PROVIDER involving a HUMANA Member.
13
<PAGE> 13
19. Incorporation of Attachments
Attachments A, B, and C are incorporated by reference into, and made a
part of, this Agreement.
20. Approval
This Agreement shall not be effective or legally binding until it has
been approved by the Regional Vice President of HUMANA or designee.
21. Notice
Any notice required or desired to be given under this Agreement shall
be in writing and shall be delivered in person or mailed by Certified Mail or
delivered by other commercial means of delivery, postage pre-paid return
receipt requested, to the other party at the address set forth below or at such
other address as a party may designate by notice given in accordance with these
provisions. Any such notice shall be effective upon date of hand delivery or
date of mailing.
HUMANA: HUMANA HEALTH CARE
PLANS 5401 W. KENNEDY BLVD.,
SUITE 800 TAMPA, FLORIDA
33609 ATTN: REGIONAL
VICE-PRESIDENT
COPY TO: HUMANA INC.
P.O. BOX 1438 LOUISVILLE, KENTUCKY
40201 ATTN: LAW DEPARTMENT
14
<PAGE> 14
PROVIDER: Vision 21
7209 Bryan Dairy Road
Largo, Florida 34647
ATTN: ADMINISTRATION
__________________________
FEDERAL TAX I. D. NUMBER
22. Choice of Law
This Agreement and any rights and obligations hereunder shall be
governed by the laws of the State of Florida.
23. More Favorable Agreements
If during the term of this Agreement, the PROVIDER enters into any
contract or other arrangement under which the PROVIDER renders PROVIDER
Services at a discount rate, differential, or other allowance far a comparable
volume of admissions which is more favorable than the payment method set out in
Attachment B, then the PROVIDER shall immediately notify HUMANA, in accordance
with Paragraph 21, and HUMANA shall be entitled to such discount rate,
differential, or other allowance effective as of the effective date of such
contract or arrangement. This Paragraph shall not apply to PROVIDER Services
provided under any government program.
24. Assignment
Neither this Agreement, nor any right or obligation hereunder, may be
assigned by PROVIDER without the prior, express written consent of HUMANA.
15
<PAGE> 15
25. No Third Party Beneficiaries Created By Agreement
The parties have not created and do not intend to create by this
Agreement any rights and any third parties under this Agreement, including, but
not limited to, covered Members. The parties acknowledge and agree there are
no third party beneficiaries to this Agreement.
26. Patient Self Determination Act
The PROVIDER acknowledges and agrees to comply with the laws of
Florida respecting advance directives as defined in the Patient Self
Determination Act (P.L. 101-508). An advance directive, being for example a
living will or a durable power of attorney in which an individual makes
decisions concerning such medical care, including the right to accept or refuse
medical or surgical treatment.
27. Entire Agreement
This Agreement constitutes the entire understanding between HUMANA and
PROVIDER and supersedes and voids any previous whether oral or written, entered
into between the parties. No change, amendment, or alteration of this
Agreement shall be effective or legally binding unless executed in writing and
signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers.
16
<PAGE> 16
WITNESS: PROVIDER
/s/ By: /s/
- ---------------------------- --------------------------------
Title: President
Date:
-----------------------------
WITNESS: HUMANA
- ---------------------------- By: /s/ Scott Law
--------------------------------
Humana Medical Plan, Inc.
Humana Health Plan of
Florida, Inc.
Humana Health Insurance
Company of Florida, Inc.
Humana Insurance Company
Title: AEC Network
Date:
------------------------------
APPROVAL:
/s/ Scott Law
-----------------------------------
HUMANA Regional Vice-President
or designee
17
<PAGE> 17
ATTACHMENT A
PROVIDER agrees to provide the following services to Members of HUMANA:
All services offered by PROVIDER specifically Optometry (Eye Exams) and
Ophthalmology.
18
<PAGE> 18
PROVIDER AMENDMENT
THIS AMENDMENT is entered into by and between Humana Medical Plan,
Inc. and Humana Health Plan of Florida, Inc. (health maintenance organizations)
and Humana Insurance Company (an insurance company) and their affiliates
(hereinafter "HUMANA") and Vision 21 (hereinafter "PROVIDER").
WITNESSETH
WHEREAS, HUMANA and PROVIDER entered into a Provider Agreement
(hereinafter the "Agreement") pursuant to which PROVIDER agreed to provide
Services to HUMANA Members at negotiated rates; and
WHEREAS, HUMANA and PROVIDER desire to amend the Agreement as follows:
From the date of execution of this Amendment, the Delegation of
Quality Management Program Amendment to the Agreement is deleted in
its entirety, with the sole exception of the "Indemnification"
provision, which shall survive for a period of time no less than the
applicable Statute of Limitations.
Except as specifically amended hereby, the terms and conditions of the
Agreement remain the same.
The parties have executed this Amendment to be effective __________
HUMANA PROVIDER
By: /s/ By: /s/
--------------------------- -------------------------
Title: Executive Director Title: Sr. Vice President
------------------------ ----------------------
Date: Date:
------------------------- -----------------------
<PAGE> 19
"CONFIDENTIAL TREATMENT REQUESTED BY VISION TWENTY-ONE, INC."
ATTACHMENT B
PROVIDER shall be compensated for all covered PROVIDER services provided to
members of HUMANA under this agreement as follows:
Medicare HMO (Vision):
----------------------
Medicare VIS 703 (Premium Plan): ***PMPM
Medicare VIS 707 (Value Plan): ***PMPM
Medicare HMO (Ophthalmology):
-----------------------------
(Including Outpatient Facility and Anesthesia Services
Part A: ***PMPM
Part B: ***PMPM
Administrative Fee: ***PMPM
Commercial HMO/POS (Vision Rider - Eye Exam)
--------------------------------------------
VIS 100, 200, 202, 209: ***PMPM
VIS 300: ***PMPM
VIS 800: ***PMPM
VIS 920: ***PMPM
Commercial (Ophthalmology)
--------------------------
(Including Outpatient Facility and Anesthesia Services)
Part A: ***PMPM
Part B: ***PMPM
Administrative Fee: ***PMPM
* All Corneal Tissue (V2785) shall be reimbursed at cost. Invoice will be
attached to Claim Form.
*** CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 20
"CONFIDENTIAL TREATMENT REQUESTED BY VISION TWENTY-ONE, INC."
ATTACHMENT B-1
PROVIDER shall also be compensated for all covered PROVIDER services provided
to members of HUMANA under this agreement as follows:
1. Provisions for "Optometry only," specifically, eye
examinations shall be added to the agreement for the following
centers:
CENTER #
--------
455 501
530 560
2087 2091
2105 2174
2191 2403
2. PROVIDER shall be reimbursed for services rendered to HUMANA
members of the above specified centers as follows:
Commercial HMO/POS (Vision Rider - Eye Exam)
--------------------------------------------
VIS 100, 200, 202, 209: ***PMPM
VIS 300: ***PMPM
VIS 800: ***PMPM
VIS 920: ***PMPM
Medicare HMO (Vision)
---------------------
VIS: 703 (Premium Plan): ***PMPM
VIS: 707 (Value Plan): ***PMPM
*** CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 1
EXHIBIT 10.20
"CONFIDENTIAL TREATMENT
REQUESTED BY VISION
TWENTY-ONE, INC."
ASSET PURCHASE AGREEMENT
DATED: DECEMBER 1, 1996
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. AAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. ACQUISITION PROPOSAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5. AFFILIATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. APPLICABLE LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. ASSUMED CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8. ASSUMED OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9. AUDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11. BUSINESS MANAGEMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12. BUSINESS RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13. CASH COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14. CLAIM NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16. CLOSING DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17. CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18. COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.19. COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
1.20. COMPANY BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21. COMPANY BALANCE SHEET DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22. COMPENSATION PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23. COMPETING BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24. COMPETITOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25. CONFIDENTIAL INFORMATION MEMORANDUM. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26. CONTROLLED GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27. CORPORATION LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.28. DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.29. ELECTION PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.30. EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.31. EMPLOYEE POLICIES AND PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32. EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33. ENVIRONMENTAL LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.35. EXCHANGE ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.36. FBCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.38. GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.39. GOVERNMENTAL AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.40. INDEMNIFIED PARTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.41. INDEMNIFYING PARTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
1.42. INDEMNITY NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.43. INITIAL PUBLIC OFFERING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.44. INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.45. INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.46. LEASE ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.47. LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.48. IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.49. MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.50. OPTOMETRIC ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.51. NON-OPTOMETRIC ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.52. NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.53. OPTOMETRIST EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.55. PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.56. PERMITTED ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.57. PERSONAL PROPERTY LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.58. PRACTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.59. PREPAID ITEMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.60. PROFESSIONAL EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.61. PROPOSED PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
1.62. PROPRIETARY RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.63. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.64. REAL PROPERTY LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.65. REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.66. RELATED ACQUISITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.67. SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.68. SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.69. SECURITIES ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.70. STATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.71. TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.72. TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.73. THIRD PARTY CLAIM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.74. TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.75. VISION 21 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. PURCHASE AND SALE OF NON-OPTOMETRIC ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1. PURCHASE AND SALE OF NON-OPTOMETRIC ASSETS. . . . . . . . . . . . . . . . . . . . . . 7
2.2. NO SALE OF OPTOMETRIC ASSETS; OTHER EXCLUDED ASSETS . . . . . . . . . . . . . . . . . 9
2.3. ASSUMPTION OF OBLIGATIONS AND LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 9
2.4. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5. THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6. PURCHASE PRICE ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7. SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
2.8. ALLOCATION OF PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPTOMETRIST . . . . . . . . . . . . . . . . . . . . . 11
3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. . . . . . . . . . . . . . . . . . . . . 11
3.2. CONTINUITY OF BUSINESS ENTERPRISE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3. AUTHORIZATION AND VALIDITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4. COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5. CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7. LIABILITIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8. EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. CASH COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . 13
B. COMPENSATION PLANS. . . . . . . . . . . . . . . . . . . . . . . 13
C. EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 14
D. EMPLOYEE POLICIES AND PROCEDURES. . . . . . . . . . . . . . . . 14
E. UNWRITTEN AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . 14
F. LABOR COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . 14
G. UNIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
H. ALIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.9. EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A. IDENTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 15
B. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 15
C. EXAMINATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. PROHIBITED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . 15
E. CLAIMS AND LITIGATION. . . . . . . . . . . . . . . . . . . . . . 16
F. QUALIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 16
G. FUNDING STATUS. . . . . . . . . . . . . . . . . . . . . . . . . 16
H. EXCISE TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 16
I. MULTIEMPLOYER PLANS. . . . . . . . . . . . . . . . . . . . . . . 16
J. PENSION BENEFIT GUARANTY CORPORATION. . . . . . . . . . . . . . 16
K. RETIREES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
L. OTHER COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . 16
3.10. ABSENCE OF CERTAIN CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C>
3.11. TITLE; LEASED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A. REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . 18
B. PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . 18
C. LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12. COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
A. COMMITMENTS; DEFAULTS. . . . . . . . . . . . . . . . . . . . . . 19
B. NO CANCELLATION OR TERMINATION OF COMMITMENT. . . . . . . . . . 20
3.13. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.14. PROPRIETARY RIGHTS AND INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.15. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
A. FILING OF TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . 22
B. PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . . . . . 22
C. NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR
AUDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
D. NO EXTENSION OF LIMITATION PERIOD. . . . . . . . . . . . . . . . 22
E. ALL WITHHOLDING REQUIREMENTS SATISFIED. . . . . . . . . . . . . 23
F. FOREIGN PERSON. . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.17. FINDER'S FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.18. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19. CONDITION OF FIXED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.20. DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.21. BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22. OWNERSHIP INTERESTS OF INTERESTED PERSONS; AFFILIATIONS. . . . . . . . . . . . . . . . 24
3.23. INVESTMENTS IN COMPETITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.24. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
A. ENVIRONMENTAL LAWS. . . . . . . . . . . . . . . . . . . . . . . 25
B. PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
C. SUPERFUND LIST. . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C> <C>
3.25. CERTAIN PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.26. MEDICAL WASTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.27. MEDICARE AND MEDICAID PROGRAMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.28. FRAUD AND ABUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.29. PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.30. PROHIBITIONS ON THE CORPORATE PRACTICE OF OPTOMETRY. . . . . . . . . . . . . . . . . . 27
3.31. ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.32. CONSISTENT TREATMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.33. ACCOUNTS RECEIVABLE/PAYABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.35. INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.36. TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.37. LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.38. CONTRACT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.39. PREPAID ITEMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.40. COMPLETENESS OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.41. DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4. REPRESENTATIONS AND WARRANTIES OF THE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1. VALIDITY; OPTOMETRIST CAPACITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2. NO VIOLATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3. CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4. CERTAIN PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.5. FINDER'S FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
vii
<PAGE> 9
<TABLE>
<S> <C> <C>
4.6. OWNERSHIP OF INTERESTED PERSONS; AFFILIATIONS. . . . . . . . . . . . . . . . . . . . . 31
4.7. INVESTMENTS IN COMPETITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.8. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.9. PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10. STAFF PRIVILEGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.11. INTENTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. REPRESENTATIONS AND WARRANTIES OF VISION 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.1. ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2. CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.4. AUTHORIZATION AND VALIDITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.5. COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.7. FINDER'S FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8. CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9. VISION 21 FINANCIAL STATEMENTS; . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10. LIABILITIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.11. COMPLIANCE WITH LAWS.
5.12. INSOLVENCY PROCEEDINGS.
5.13. EMPLOYMENT OF COMPANY'S EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6. SECURITIES LAW MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1. INVESTMENT REPRESENTATIONS AND COVENANTS OF OPTOMETRIST. . . . . . . . . . . . . . . . 35
6.2. CURRENT PUBLIC INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
viii
<PAGE> 10
<TABLE>
<S> <C> <C>
7. COVENANTS OF THE COMPANY AND THE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.1. CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2. BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3. ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4. NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.5. APPROVALS OF THIRD PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6. EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7. CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.8. CAPITAL ASSETS; PAYMENTS OF LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . 39
7.9. MORTGAGES, LIENS AND GUARANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10. ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11. DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.12. REQUIREMENTS TO EFFECT THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . 40
7.13. OPTOMETRIST ACCOUNTS PAYABLE AND OPTOMETRIST RETAINED EQUITY. . . . . . . . . . . . . 40
7.14. OPTOMETRIST EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.15. OPTOMETRIST EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.17. DELIVERY OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.18. ASSIGNMENT OF FEES FOR OPTOMETRY SERVICES. . . . . . . . . . . . . . . . . . . . . . . 41
8. COVENANTS OF VISION 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1. CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.2. NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3. LICENSES AND PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
ix
<PAGE> 11
<TABLE>
<S> <C> <C>
8.4. RELEASE OF OPTOMETRIST FROM PRACTICE LIABILITIES. . . . . . . . . . . . . . . . . . . 42
9. COVENANTS OF VISION 21, THE COMPANY AND THE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1. FILINGS; OTHER ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2. AMENDMENT OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3. FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4. RELEASE OF OPTOMETRIST FROM PRACTICE LIABILITIES. . . . . . . . . . . . . . . . . . . 45
10. CONDITIONS PRECEDENT OF VISION 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.2. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3. LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.4. PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.5. NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.6. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. . . . . . . . . . . . . . . . . . . . . . 45
10.7. CERTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.8. CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.9. DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.10. FINANCIAL AUDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.11. MEDICARE AUDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.12. EXEMPTION UNDER STATE SECURITIES LAWS. . . . . . . . . . . . . . . . . . . . . . . . . 46
10.13. ASSIGNMENT OF PROFESSIONAL EMPLOYEES' RIGHTS IN ACCOUNTS RECEIVABLE. . . . . . . . . . 46
11. CONDITIONS PRECEDENT OF THE COMPANY AND THE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.1. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
x
<PAGE> 12
<TABLE>
<S> <C> <C>
11.2. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3. LEGAL OPINIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4. PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. . . . . . . . . . . . . . . . . . . . . . 47
11.6. CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7. NO CHANGE IN VOTING OR OWNERSHIP CONTROL. . . . . . . . . . . . . . . . . . . . . . . 47
11.8. NO MATERIAL ADVERSE CHANGE; DELIVERY OF AMENDED CONFIDENTIAL INFORMATION
MEMORANDUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.1. DELIVERIES OF THE COMPANY AND THE OPTOMETRIST. . . . . . . . . . . . . . . . . . . . . 47
12.2. DELIVERIES OF VISION 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.3. RELEASE OF ESCROW MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13. POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.1. FURTHER INSTRUMENTS OF TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.2. PRACTICE ADVISORY COUNCIL; LOCAL ADVISORY COUNCIL; NATIONAL APPEALS COUNCIL. . . . . . 51
14. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
14.1. INDEMNIFICATION BY THE COMPANY AND OPTOMETRIST. . . . . . . . . . . . . . . . . . . . 52
14.2. INDEMNIFICATION BY VISION 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
14.3. CONDITIONS OF INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.4. REMEDIES NOT EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14.5. COSTS, EXPENSES AND LEGAL FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
14.6. INDEMNIFICATION LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
xi
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
14.7. TAX BENEFITS; INSURANCE PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
14.8. PAYMENT OF INDEMNIFICATION OBLIGATION. . . . . . . . . . . . . . . . . . . . . . . . . 56
15. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
15.1. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
15.2. EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16. OPTOMETRIST EMPLOYMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16.1. OPTOMETRIST EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16.2. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17. NON-COMPETITION AND CONFIDENTIALITY COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
17.1. OPTOMETRIST AND COMPANY NON-COMPETITION COVENANT. . . . . . . . . . . . . . . . . . . 59
17.2. OPTOMETRIST AND COMPANY CONFIDENTIALITY COVENANT. . . . . . . . . . . . . . . . . . . 61
17.3. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
18. DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
18.1. MEDIATION AND ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19.1. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19.2. REMEDIES NOT EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19.3. PARTIES BOUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
19.4. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
19.5. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
19.6. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . 64
19.7. CONFIDENTIALITY AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
xii
<PAGE> 14
<TABLE>
<S> <C> <C>
19.8. REFORMATION CLAUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.9. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.10. ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.11. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.12. ANNOUNCEMENTS AND PRESS RELEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.13. NO TAX REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.14. NO RIGHTS AS STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.15. MULTIPLE COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.16. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.17. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.18. FORM OF TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
xiii
<PAGE> 15
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of December
1, 1996, is by and among GILLETTE & ASSOCIATES, #6965, P.A., a Florida
professional association (the "Company"), THEODORE N. GILLETTE, MARK SARNO, and
MARK BEILER (collectively, the "Optometrist"), and VISION 21, INC., a Florida
corporation ("Vision 21").
R E C I T A L S
A. Optometrist is an optometrist licensed to practice
optometry in the State (as defined herein) and currently conducts an optometry
practice through the Company.
B. Optometrist owns all of the issued and outstanding shares
of capital stock of the Company.
C. Vision 21 provides business management services and
facilities for eye care professionals and related businesses.
D. The Company desires to sell, assign and transfer all of its
assets to the extent permitted by law and Vision 21 desires to purchase, assume
and acquire such assets and assume certain liabilities of the Company in
exchange for capital stock of Vision 21 and other consideration, all as more
specifically provided herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
1.1. AAA. The term "AAA" shall mean the American
Arbitration Association.
1.2. Accountants. The term "Accountants" shall mean
the accounting firm for Vision 21.
1.3. Accounts Receivable. The term "Accounts
Receivable" shall have the meaning set forth in Section 2.1(b).
1.4. Acquisition Proposal. The term "Acquisition
Proposal" shall have the meaning set forth in Section 3.31.
1
<PAGE> 16
1.5. Affiliate. The term "Affiliate" with respect to
any person or entity shall mean a person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by or is under
common control with, such person or entity.
1.6. Applicable Laws. The term "Applicable Laws"
shall have the meaning set forth in Section 19.8.
1.7. Assumed Contracts. The term "Assumed Contracts"
shall have the meaning set forth in Section 2.1(e).
1.8. Assumed Obligations. The term "Assumed
Obligations" shall have the meaning set forth in Section 2.3.
1.9. Audit. The term "Audit" shall have the meaning
set forth in Section 3.6.
1.10. Business. The term "Business" shall have the
meaning set forth in Section 19.1(b)(i).
1.11. Business Management Agreement. The term
"Business Management Agreement" shall mean the Business Management Agreement
entered into between the Company and Vision 21 at the Closing.
1.12. Business Records. The term "Business Records"
shall have the meaning set forth in Section 2.1(g).
1.13. Cash Compensation. The term "Cash Compensation"
shall have the meaning set forth in Section 3.8(a).
1.14. Claim Notice. The term "Claim Notice" shall have
the meaning set forth in Section 14.3(a).
1.15. Closing. The term "Closing" shall mean the
consummation of the transactions contemplated by this Agreement.
1.16. Closing Date. The term "Closing Date" shall mean
December 1, 1996, or such other date as mutually agreed upon by the parties.
1.17. Code. The term "Code" shall mean the Internal
Revenue Code of 1986, as amended.
1.18. Commitments. The term "Commitments" shall have
the meaning set forth in Section 3.12(a).
2
<PAGE> 17
1.19. Common Stock. The term "Common Stock" or "Vision
21 Common Stock" shall mean the common stock, par value $.01 per share, of
Vision 21.
1.20. Company Balance Sheet. The term "Company Balance
Sheet" shall have the meaning set forth in Section 3.6.
1.21. Company Balance Sheet Date. The term "Company
Balance Sheet Date" shall have the meaning set forth in Section 3.6.
1.22. Compensation Plans. The term "Compensation
Plans" shall have the meaning set forth in Section 3.8(b).
1.23. Competing Business. The term "Competing
Business" shall have the meaning set forth in Section 17.1(b).
1.24. Competitor. The term "Competitor" shall mean any
person or entity which, individually or jointly with others, whether for its
own account or for that of any other person or entity, owns, or holds any
ownership or voting interest in any person or entity engaged in, the practice
of optometry, the operation of out patient eye surgical facilities, the
operation of refractive surgery centers and the operation of optical shops;
provided, however, that such term shall not include any Affiliate of Vision 21
or any entity with which Vision 21 has an agreement similar to the Business
Management Agreement in effect.
1.25. Confidential Information Memorandum. The term
"Confidential Information Memorandum" shall mean that certain disclosure
memorandum distributed by Vision 21 to the Company and Optometrist dated as of
September 27, 1996, and any amendments or revisions thereto.
1.26. Controlled Group. The term "Controlled Group"
shall have the meaning set forth in Section 3.9(f).
1.27. Corporation Law. The term "Corporation Law"
shall mean the statutes, regulations and laws governing business corporations
and professional associations in the State.
1.28. Damages. The term "Damages" shall have the
meaning set forth in Section 14.1.
1.29. Election Period. The term "Election Period"
shall have the meaning set forth in Section 16.3(a).
1.30. Employee Benefit Plans. The term "Employee
Benefit Plans" shall have the meaning set forth in Section 3.9(a).
3
<PAGE> 18
1.31. Employee Policies and Procedures. The term
"Employee Policies and Procedures" shall have the meaning set forth in Section
3.8(d).
1.32. Employment Agreements. The term "Employment
Agreements" shall have the meaning set forth in Section 3.8(c).
1.33. Environmental Laws. The term "Environmental
Laws" shall have the meaning set forth in Section 3.24(a).
1.34. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.35. Exchange Act. The term "Exchange Act" shall mean
the Securities Exchange Act of 1934, as amended.
1.36. FBCA. The term "FBCA" shall mean the Florida
Business Corporation Act.
1.37. Financial Statements. The term "Financial
Statements" shall have the meaning set forth in Section 3.6.
1.38. GAAP. The term "GAAP" shall mean generally
accepted accounting principles, applied on a consistent basis with prior
periods, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity or other practices and procedures as
may be approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of the determination.
1.39. Governmental Authority. The term "Governmental
Authority" shall mean any national, state, provincial, local or tribunal
governmental, judicial or administrative authority or agency.
1.40. Indemnified Party. The term "Indemnified Party"
shall have the meaning set forth in Section 14.3(a).
1.41. Indemnifying Party. The term "Indemnifying
Party" shall have the meaning set forth in Section 14.3(a).
1.42. Indemnity Notice. The term "Indemnity Notice"
shall have the meaning set forth in Section 14.3(d).
4
<PAGE> 19
1.43. Initial Public Offering. The term "Initial
Public Offering" shall mean the potential initial underwritten public offering
of Vision 21 Common Stock contemplated by Vision 21.
1.44. Insurance Policies. The term "Insurance
Policies" shall have the meaning set forth in Section 3.13.
1.45. Inventory. The term "Inventory" shall have the
meaning set forth in Section 2.1(a).
1.46. Lease Assignments. The term "Lease Assignments"
shall have the meaning set forth in Section 11.3(j).
1.47. Leased Property. The term "Leased Property"
shall have the meaning set forth in Section 2.1(d).
1.48. IRS. The term "IRS" shall mean the Internal
Revenue Service.
1.49. Material Adverse Effect. The term "Material
Adverse Effect" shall mean a material adverse effect on the Non-optometric
Assets and the Company's business, operations, condition (financial or
otherwise) or results of operations, taken as a whole, considering all relevant
facts and circumstances.
1.50. Non-optometric Assets. The term "Non-optometric
Assets" shall mean all of the assets of the Company except for the Optometric
Assets, as such assets are more fully described in Section 2.1.
1.51. Note. The term "Note" shall mean the
subordinated promissory note, to be delivered to the Optometrist at the
Closing.
1.52. Optometric Assets. The term "Optometric Assets"
shall have the meaning set forth in Section 2.2.
1.53. Optometrist Employee. The term "Optometrist
Employee" shall mean those licensed optometrists who are employees of the
Company, but are not shareholders.
1.54. Optometrist Employment Agreement. The term
"Optometrist Employment Agreement" shall mean the Optometrist Employment
Agreement to be executed between Optometrist and the Company, and between any
Optometrist Employee and the Company.
1.55. Payors. The term "Payors" shall have the meaning
set forth in Section 3.27.
5
<PAGE> 20
1.56. Permitted Encumbrances. The term "Permitted
Encumbrances" shall have the meaning set forth in Section 3.11(b).
1.57. Personal Property Leases. The term "Personal
Property Leases" shall have the meaning set forth in Section 2.1(c).
1.58. Practice. The term "Practice" shall mean the
optometry and all other vision related health-care practices conducted from
time to time by the Company prior to and after the Closing Date.
1.59. Prepaid Items. The term "Prepaid Items" shall
have the meaning set forth in Section 2.1(m).
1.60. Professional Employee. The term "Professional
Employee" shall mean any Optometrist Employee.
1.61. Proposed Purchase Price Adjustment. The term
"Proposed Purchase Price Adjustment" shall have the meaning set forth in
Section 2.6(b).
1.62. Proprietary Rights. The term "Proprietary
Rights" shall have the meaning set forth in Section 3.14.
1.63. Purchase Price. The term "Purchase Price" shall
mean the consideration set forth in Section 2.4 of this Agreement.
1.64. Real Property Leases. The term "Real Property
Leases" shall have the meaning set forth in Section 2.1(d).
1.65. Registration Statement. The term "Registration
Statement" shall have the meaning set forth in Section 9.1.
1.66. Related Acquisitions. The term "Related
Acquisitions" shall mean the pending acquisitions by Vision 21 with third
parties which are expected to be completed simultaneously with this
Transaction.
1.67. SEC. The term "SEC" shall mean the Securities
and Exchange Commission.
1.68. Securities. The term "Securities" shall mean the
Note and the shares of Vision 21 Common Stock which shall be delivered to the
Company under the terms of the Note.
1.69. Securities Act. The term "Securities Act" shall
mean the Securities Act of 1933, as amended.
6
<PAGE> 21
1.70. State. The term "State" shall mean the State in
which the Company is incorporated.
1.71. Tangible Personal Property. The term "Tangible
Personal Property" shall have the meaning set forth in Section 2.1(f).
1.72. Tax Returns. The term "Tax Returns" shall have
the meaning set forth in Section 3.15(a).
1.73. Third Party Claim. The term "Third Party Claim"
shall have the meaning set forth in Section 14.3(a).
1.74. Transaction. The term "Transaction" shall mean
the purchase and sale of the Non- optometric Assets and the assumption of the
Assumed Obligations pursuant to this Agreement.
1.75. Vision 21 Financial Statements. The term "Vision
21 Financial Statements" shall have the meaning set forth in Section 5.8.
2. PURCHASE AND SALE OF NON-OPTOMETRIC ASSETS.
2.1. Purchase and Sale of Non-optometric Assets.
Subject to the terms and conditions herein set forth, and in reliance upon the
representations and warranties set forth herein, the Company agrees to sell,
convey, assign, transfer and deliver to Vision 21, and Vision 21 agrees to
purchase, assume, accept and acquire, the assets consisting of all the assets
(other than the Optometric Assets specified in Section 2.2 hereof) owned by the
Company as of the Closing Date, of every kind, character and description,
whether tangible, real, personal, or mixed, and wheresoever located, whether
carried on the books of the Company or not carried on the books of the Company
due to having been expended, fully depreciated, or otherwise (the
"Non-optometric Assets"), including without limitation the following (except to
the extent that any of the following are specifically enumerated as Optometric
Assets in Section 2.2 hereof) to the extent permitted by applicable law:
(a) All of the inventory owned by the Company ("Inventory");
(b) All of the accounts receivable or other rights to receive
payment owing to the Company ("Accounts Receivable");
(c) All of the Company's rights in, to and under all leases of
supplies, instruments, equipment, furniture, machinery and other items of
tangible personal property ("Personal Property Leases"), including, without
limitation, the Personal Property Leases described on Schedule 2.1(c);
7
<PAGE> 22
(d) All of the Company's rights as a lessee in, to and under
all real property lease agreements (such real property lease agreements are
hereinafter referred to as "Real Property Leases" and the parcels of real
property in which the Company has a leasehold interest and that are subject to
the Real Property Leases are hereinafter referred to as "Leased Property"),
including, without limitation, estates created by, and rights conferred under,
the Real Property Leases described on Schedule 2.1(d), and any and all estates,
rights, titles and interests in, to and under all warehouses, storage
facilities, buildings, works, structures, fixtures, landings, constructions in
progress, improvements, betterments, installations, and additions constructed
or located on or affixed to the Leased Property;
(e) All of the Company's rights in, to and under all contracts,
agreements, leases, insurance policies, purchase orders and commitments (the
"Assumed Contracts"), including, without limitation, the Assumed Contracts
described on Schedule 2.1(e);
(f) All tangible personal property (including supplies,
instruments, equipment, furniture and machinery) owned by the Company
("Tangible Personal Property"), including, without limitation, the Tangible
Personal Property described on Schedule 2.1(f);
(g) All books and records of the Company, including, without
limitation, all credit records, payroll records, computer records, computer
programs, contracts, agreements, operating manuals, schedules of assets,
correspondence, books of account, files, papers, books and all other public and
confidential business records (together the "Business Records"), whether such
Business Records are in hard copy form or are electronically or magnetically
stored;
(h) All franchises, licenses, permits, certificates, approvals
and other governmental authorizations necessary to own and operate any of the
other Non-optometric Assets, a complete and correct list of which is set forth
on Schedule 2.1(h);
(i) All (i) United States and foreign patents, patent
applications, trademarks, trademark applications and registrations, service
marks, service mark applications and registrations, copyrights, copyright
applications and registrations and trade names of the Company; (ii) proprietary
data and technical, manufacturing know-how and information (and all materials
embodying such information) of the Company; (iii) developments, discoveries,
inventions, ideas and trade secrets of the Company; and (iv) rights to sue for
past infringement;
(j) All of the Company's right, title and interest in, to and
under all telephone numbers used in connection with the Practice, including all
extensions thereto;
(k) All rights in, to and under all representations,
warranties, covenants and guaranties made or provided by third parties to or
for the benefit of the Company with respect to any of the other Non-optometric
Assets;
8
<PAGE> 23
(m) All cash in registers or petty cash drawers (which shall on
the Closing Date be at least ninety percent (90%) of the average daily cash
balance held in such locations in the twelve (12) month period preceding the
Closing Date); and
(n) All of the Company's prepaid expenses, prepaid insurance,
deposits and other similar items ("Prepaid Items").
If and to the extent the assignment of any personal property lease,
real property lease, contract, agreement, purchase order, work order,
commitment, license, permit, certificate or approval listed on the foregoing
Schedules shall require the consent of another party thereto, then (i) such
personal property lease, real property lease, contract, agreement, purchase
order, work order, commitment, license, permit, certificate or approval shall
constitute a Personal Property Lease, Real Property Lease, Assumed Contract or
License, as the case may be, only upon and subject to receipt of such consent;
(ii) such personal property lease, contract, agreement, purchase order, work
order, commitment, license, permit, certificate or approval shall not be a
Personal Property Lease, Real Property Lease, Assumed Contract or License, as
the case may be, if and for so long as the attempted assignment would
constitute a breach thereof; and (iii) the Company shall cooperate fully with
Vision 21 (or Vision 21's successor-in-interest) in seeking such consent or
reasonable arrangement designed to provide to Vision 21 (or such
successor-in-interest) the benefits, claim or rights arising thereunder.
2.2. No Sale of Optometric Assets; Other Excluded
Assets. The Company shall not sell, convey, assign, transfer or deliver to
Vision 21, and Vision 21 shall not be obligated to purchase, accept or acquire
(or make any payments or otherwise discharge any liability or obligation of the
Company with respect to), the Optometric Assets of the Company as set forth on
Schedule 2.2 and those other assets listed on the other Schedules attached
hereto which by law cannot be acquired by Vision 21 which shall also be deemed
to include (a) life insurance policies covering the life of any employee of the
Company, and (b) personal effects listed on Schedule 2.2(b); and (c) cash and
cash equivalents in banks, certificates of deposit, commercial paper and
securities owned by the Company (but excluding cash held in registers or petty
cash drawers on the Closing Date); and (d) those assets of which the entire
costs of maintenance are deemed to be "Practice Expenses" as defined in the
Business Management Agreement.
2.3. Assumption of Obligations and Liabilities. At
the Closing, Vision 21 shall assume and agree to pay or perform, promptly as
they become due, only those obligations and liabilities of the Company
expressly set forth on Schedule 2.3 (the "Assumed Obligations") which shall
exclude the Business Management Agreement. Except for the Assumed Obligations,
Vision 21 shall not assume or be deemed to have assumed and shall not be
responsible for any other obligation or liability of the Company, direct or
indirect, known or unknown, absolute or contingent, including without
limitation (i) any and all obligations regarding any foreign, Federal, state or
local income, sales, use, franchise or other tax liabilities, (ii) any and all
obligations or liabilities relating to any fees or expenses of the Company's or
Optometrists' counsel, accountants or other experts incident to the negotiation
and preparation of any of the
9
<PAGE> 24
documents contemplated herein and consummation of the transactions contemplated
thereby, and (iii) any and all liabilities relating to or arising from the
provision of optometric services (or failure to provide optometric services)
prior to the Closing Date.
2.4. Purchase Price. Vision 21 agrees that, subject
to the terms and conditions of this Agreement, and in full consideration for
the aforesaid sale, transfer, conveyance, assignment and delivery of the Non-
optometric Assets of the Company to Vision 21, and the acceptance by Vision 21
of such Non-optometric Assets and the assumption of the Assumed Obligations of
the Company by Vision 21, Vision 21 shall deliver to the Company at the Closing
the consideration (the "Purchase Price") set forth in Schedule 2.4A which shall
be paid pursuant to a Note in substantially the form attached hereto and made a
part hereof as Exhibit 2.4B.
2.5. The Closing. The Closing shall take place on the
Closing Date at the offices of Shumaker, Loop & Kendrick, LLP, 101 E. Kennedy
Boulevard, Suite 2800, Tampa, Florida 33602 or at such other location in the
State as the parties shall mutually agree.
2.6. Purchase Price Adjustments.
(a) The Purchase Price shall be subject to
adjustment to the extent that Current Assets (as defined herein) or Current
Liabilities Assumed (as defined herein) materially differ from the amounts
customarily arising in the ordinary course of business of the Company as of
November 30, 1996. The term "Current Assets" shall mean petty cash, Accounts
Receivable, prepaid expenses, Inventory, supplies and other current assets
(excluding cash in banks, certificates of deposit, other cash equivalents,
current portion of capital leases and prepaid Income Taxes). The term "Current
Liabilities Assumed" shall mean the audited balances as of November 30, 1996 of
trade accounts payable, accrued payroll, accrued payroll taxes, accrued
benefits, and other current liabilities (excluding notes payable, current
portion of capital leases and long-term debt and income and franchise taxes and
accrued shareholder expenses). The adjustment shall be settled in cash (which
shall be set-off from moneys due the Company pursuant to the Business
Management Agreement) or Vision 21 Common Stock at Vision 21's option. The
parties also agree that to the extent the adjustments materially impact the
goodwill created by the transaction, there shall be an adjustment for the
related impact of net income created by the change in amortization of such
goodwill and the Purchase Price shall be increased or reduced to reflect the
impact on net income settled in cash or Vision 21 Common Stock at Vision 21's
option.
(b) Within sixty (60) days following the Closing
Date, Vision 21 shall present to the Optometrist its Purchase Price adjustment
(the "Proposed Purchase Price Adjustment") calculated in accordance with
Section 2.6(a) hereof. The Optometrist shall, within thirty (30) days after
the delivery by Vision 21 of the Proposed Purchase Price Adjustment, complete
his review thereof. In the event that the Optometrist believes that the
Proposed Purchase Price Adjustment has not been prepared on the basis set forth
in Section 2.6(a) or otherwise contests any item set forth therein, the
Optometrist shall, on or before the last day of
10
<PAGE> 25
such 30 day period, so object to Vision 21 in writing, setting forth a specific
description of the nature of the objection and the corresponding adjustments
the Optometrist believes should be made. If no objection is received by Vision
21 on or before the last day of such 30 day period, then the Proposed Purchase
Price Adjustment delivered by Vision 21 shall be final. If an objection has
been made and Vision 21 and the Optometrist are unable to resolve all of their
disagreements with respect to the proposed adjustments within 15 days following
the delivery of the Optometrist's objection, the dispute shall be submitted to
arbitration as provided in Section 18.1 except that the arbitrator shall be
instructed to deliver his determination of the dispute to the parties no later
than 30 days after the arbitration hearing. Vision 21 shall provide to the
Optometrist and his accountants full access to all relevant books, records and
work papers utilized in preparing the Proposed Purchase Price Adjustment.
2.7. Subsequent Actions. If, at any time after the
Closing Date, Vision 21 shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Vision 21 its
right, title or interest in, to or under any of the rights, properties or
assets of the Company acquired or to be acquired by Vision 21 as a result of,
or in connection with, the Transaction, or otherwise to carry out this
Agreement, the officers and directors of Vision 21 shall, at the sole cost and
expense of Vision 21, be authorized to execute and deliver, in the name and on
behalf of the Company, such deeds, bills of sale, assignments and assurances,
and to take and do, in the name and on behalf of the Company, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in Vision 21 or otherwise to carry out this Agreement.
2.8. Allocation of Purchase Price. The Purchase Price
shall be allocated among the Non- optometric Assets as set forth on Schedule
2.8. Each of Vision 21, the Company and the Optometrist covenants and agrees
that he or it shall not take a position that is in any way inconsistent with
the terms of this Section 2.8 on any income tax return, before any governmental
agency charged with the collection of any income tax or in any judicial
proceeding.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
OPTOMETRIST. The Company and the Optometrist, jointly and severally, represent
and warrant to Vision 21 that the following are true and correct as of the date
hereof, and shall be true and correct through the Closing Date as if made on
that date; when used in this Section 3, the term "best knowledge" shall mean in
the case of the Company the best knowledge of those individuals listed on
Schedule 3:
3.1. Organization and Good Standing; Qualification.
The Company is a professional association duly organized, validly existing and
in good standing under the laws of the State, with all requisite corporate
power and authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company is not duly qualified and
11
<PAGE> 26
licensed to do business in any other jurisdiction. The Company does not have
any assets, employees or offices in any state other than the State. Except as
set forth on Schedule 3.1, neither the Company, the Optometrist nor any
Professional Employee owns, directly or indirectly, any of the capital stock of
any other corporation or any equity, profit sharing, participation or other
interest in any corporation, partnership, joint venture or other entity that is
engaged in a business that is a Competitor.
3.2. Continuity of Business Enterprise. Except as set
forth on Schedule 3.2, and except as contemplated by this Agreement, there has
not been any sale, distribution or spin-off of significant assets of the
Company or any of its Affiliates other than in the ordinary course of business
within the two (2) year period preceding the date of this Agreement.
3.3. Authorization and Validity. The execution,
delivery and performance by the Company of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby to be performed by the Company, have been duly
authorized by the Company. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
Company has obtained, in accordance with applicable law and its Articles or
Certificate of Incorporation and Bylaws, the approval of its stockholders
necessary for the consummation of the transactions contemplated hereby.
3.4. Compliance. Except as disclosed on Schedule 3.4,
the execution and delivery of the documents contemplated hereunder and the
consummation of the transactions contemplated thereby by the Company will not
(i) violate any provision of the Company's organizational documents, (ii)
violate any material provision of or result in the breach of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under, any mortgage, lien, lease, contract,
license, instrument or any other agreement to which the Company is a party,
(iii) result in the creation or imposition of any material lien, charge,
pledge, security interest or other material encumbrance upon any property of
the Company or (iv) violate or conflict with any order, award, judgment or
decree or other material restriction or to the best of the Company's knowledge
violate or conflict with any law, ordinance or regulation to which the Company
or its property is subject.
3.5. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by the Company or the
consummation by such party of the transactions contemplated thereby, except for
those consents or approvals set forth on Schedule 3.5.
3.6. Financial Statements. The Company has furnished
to Vision 21 its unaudited balance sheet and related unaudited statements of
income, retained earnings and cash
12
<PAGE> 27
flows for its prior three (3) full fiscal years, and its unaudited interim
balance sheet for the fiscal period ended September 30, 1996 (the "Company
Balance Sheet", and the date thereof shall be referred to as the "Company
Balance Sheet Date") and related unaudited statements of income, retained
earnings and cash flows for the twelve months then ended (all collectively,
with the related notes thereto, the "Financial Statements"). The Financial
Statements fairly present the financial condition and results of operations of
the Company as of the dates and for the periods indicated except as otherwise
indicated in the Financial Statements. The Company and the Optometrist
expressly warrant that they will have prior to the Closing fairly, accurately
and completely provided all necessary information requested in or relevant to
the preparation of the audit to be conducted by the Accountants or their
designees prior to Closing (the "Audit"). The cost of the Audit shall be paid
by Vision 21 and all materials prepared by Vision 21's Accountants in
connection with the Audit shall be solely the property of Vision 21.
3.7. Liabilities and Obligations. Except as set forth
on Schedule 3.7, the Financial Statements reflect all liabilities of the
Company, accrued, contingent or otherwise that would be required to be
reflected thereon, or in the notes thereto, prepared in accordance with GAAP,
except for liabilities and obligations incurred in the ordinary course of
business since the Company Balance Sheet Date. Except as set forth in the
Financial Statements or on Schedule 3.7, the Company is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and the Company does not know of any valid basis for the assertion of
any other claims or liabilities of any nature or in any amount.
3.8. Employee Matters.
a. Cash Compensation. Schedule 3.8(a)
contains a complete and accurate list of the names, titles and annual cash
compensation as of the Closing Date, including without limitation wages,
salaries, bonuses (discretionary and formula) and other cash compensation (the
"Cash Compensation") of all employees of the Company. In addition, Schedule
3.8(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of employees of the Company during the current fiscal year
and the immediately preceding fiscal year and (ii) any promised increases in
Cash Compensation of employees of the Company that have not yet been effected.
b. Compensation Plans. Schedule 3.8(b)
contains a complete and accurate list of all compensation plans, arrangements
or practices (the "Compensation Plans") sponsored by the Company or to which
the Company contributes on behalf of its employees, other than Employment
Agreements listed on Schedule 3.8(c) and Employee Benefit Plans listed on
Schedule 3.9(a). The Compensation Plans include without limitation plans,
arrangements or practices that provide for performance awards, and stock
ownership or stock options. The Company has provided or made available to
Vision 21 a copy of each written Compensation Plan and a written description
of each unwritten Compensation Plan. Except as
13
<PAGE> 28
set forth on Schedule 3.8(b), each of the Compensation Plans can be terminated
or amended at will by the Company.
c. Employment Agreements. Except as set
forth on Schedule 3.8(c), the Company is not a party to any employment
agreement ("Employment Agreements") with respect to any of its employees.
Employment Agreements include without limitation employee leasing agreements,
employee services agreements and non-competition agreements.
d. Employee Policies and Procedures.
Schedule 3.8(d) contains a complete and accurate list of all employee manuals
and all material policies, procedures and work-related rules (the "Employee
Policies and Procedures") that apply to employees of the Company. The Company
has provided or made available to Vision 21 a copy of all written Employee
Policies and Procedures and a written description of all material unwritten
Employee Policies and Procedures.
e. Unwritten Amendments. Except as
described on Schedule 3.8(b), 3.8(c), or 3.8(d), no material unwritten
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans or Employee Policies and
Procedures.
f. Labor Compliance. To the best
knowledge of the Company and the Optometrist, the Company has been and is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except for any such failures to be in
compliance that, individually or in the aggregate, would not result in a
Material Adverse Effect, and the Company is not liable for any arrearages of
wages or penalties for failure to comply with any of the foregoing. The
Company has not, to the best of Optometrist's and the Company's knowledge,
engaged in any unfair labor practices or discriminated on the basis of race,
color, religion, sex, national origin, age, disability or handicap in its
employment conditions or practices that would, individually or in the
aggregate, result in a Material Adverse Effect. Except as set forth on
Schedule 3.10(f), there are no (i) unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the actual knowledge of the
Company and the Optometrist, threatened against the Company before any federal,
state or local court, board, department, commission or agency (nor, to the best
knowledge of the Company and the Optometrist, does any valid basis therefor
exist) or (ii) existing or, to the actual knowledge of the Company, threatened
labor strikes, disputes, grievances, controversies or other labor troubles
affecting the Company (nor, to the best knowledge of the Company and the
Optometrist, does any valid basis therefor exist).
g. Unions. The Company has never been a
party to any agreement with any union, labor organization or collective
bargaining unit. No employees of the Company are represented by any union,
labor organization or collective bargaining unit. Except as set forth on
Schedule 3.8(g), to the actual knowledge of the Company, none of the
14
<PAGE> 29
employees of the Company has threatened to organize or join a union, labor
organization or collective bargaining unit.
h. Aliens. All employees of the Company
are, to the best knowledge of the Company, citizens of, or are authorized in
accordance with federal immigration laws to be employed in, the United States.
3.9. Employee Benefit Plans.
a. Identification. Schedule 3.9(a)
contains a complete and accurate list of all employee benefit plans (within the
meaning of Section 3(3) of ERISA sponsored by the Company or to which the
Company contributes on behalf of its employees and all employee benefit plans
previously sponsored or contributed to on behalf of its employees within the
three (3) years preceding the date hereof (the "Employee Benefit Plans"). The
Company has provided or made available to Vision 21 copies of all plan
documents, determination letters, pending determination letter applications,
trust instruments, insurance contracts, administrative services contracts,
annual reports, actuarial valuations, summary plan descriptions, summaries of
material modifications, administrative forms and other documents that
constitute a part of or are incident to the administration of the Employee
Benefit Plans. In addition, the Company has provided or made available to
Vision 21 a written description of all existing practices engaged in by the
Company that constitute Employee Benefit Plans. Except as set forth on
Schedule 3.9(a) and subject to the requirements of the Code and ERISA, each of
the Employee Benefit Plans can be terminated or amended at will by the Company.
Except as set forth on Schedule 3.9(a), no unwritten amendment exists with
respect to any Employee Benefit Plan. Except as set forth on Schedule
3.9(b)-(l), each of the following paragraphs is true and correct.
b. Administration. To the best knowledge
of the Company and the Optometrist, each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, result in a Material Adverse Effect. The
Company and the Optometrist have (i) made all necessary filings with respect to
such Employee Benefit Plans, including the timely filing of Form 5500 if
applicable, and (ii) made all necessary filings, reports and disclosures
pursuant to and have complied with all requirements of the IRS Voluntary
Compliance Resolution Program, if applicable, with respect to all profit
sharing retirement plans and pension plans in which employees of the Company
participate.
c. Examinations. Except as set forth on
Schedule 3.9(c), the Company has not received any notice that any Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency.
d. Prohibited Transactions. To the best
knowledge of the Company and the Optometrist, no prohibited transactions
(within the meaning of Section 4975
15
<PAGE> 30
of the Code or Sections 406 and 407 of ERISA) have occurred with respect to any
Employee Benefit Plans.
e. Claims and Litigation. No pending or,
to the actual knowledge of the Company and the Optometrist, threatened, claims,
suits, or other proceedings exist with respect to any Employee Benefit Plan
other than normal benefit claims filed by participants or beneficiaries.
f. Qualification. As set forth in more
detail on Schedule 3.9(f), the Company has received a favorable determination
letter or ruling from the IRS for each of the Employee Benefit Plans intended
to be qualified within the meaning of Section 401(a) of the Code and/or
tax-exempt within the meaning of Section 501(a) of the Code. Except as set
forth on Schedule 3.9(e), no proceedings exist or, to the actual knowledge of
the Company have been threatened that could result in the revocation of any
such favorable determination letter or ruling.
g. Funding Status. To the best knowledge
of the Company and the Optometrist, no accumulated funding deficiency (within
the meaning of Section 412 of the Code), whether or not waived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning of Section 412(n)(6)(B) of the Code) in
which the Company is a member ("Controlled Group"). With respect to each
Employee Benefit Plan subject to Title IV of ERISA, the assets of each such
plan are at least equal in value to the present value of accrued benefits
determined on an ongoing basis as of the date hereof. The Company does not
sponsor any Employee Benefit Plan described in Section 501(c)(9) of the Code.
None of the Employee Benefit Plans are subject to actuarial assumptions.
h. Excise Taxes. Neither the Company nor
any member of a Controlled Group has any liability to pay excise taxes with
respect to any Employee Benefit Plan under applicable provisions of the Code or
ERISA.
i. Multiemployer Plans. Neither the
Company nor any member of a Controlled Group is or ever has been obligated to
contribute to a multiemployer plan within the meaning of Section 3(37) of
ERISA.
j. Pension Benefit Guaranty Corporation.
None of the Employee Benefit Plans are subject to the requirements of Title IV
of ERISA.
k. Retirees. The Company has no
obligation or commitment to provide medical, dental or life insurance benefits
to or on behalf of any of its employees who may retire or any of its former
employees who have retired except as may be required pursuant to the
continuation of coverage provisions of Section 4980B of the Code and Sections
501 through 508 of ERISA.
l. Other Compensation. Except as set
forth on Schedule 3.8(a), 3.8(b), 3.8(c), 3.8(d) and 3.9(a), neither the
Company, the Optometrist nor any Professional
16
<PAGE> 31
Employee is a party to any compensation or debt arrangement with any person
relating to the provision of healthcare related services other than
arrangements with the Company or the Optometrist.
3.10. Absence of Certain Changes. Except as set forth
on Schedule 3.10 or as contemplated by this Agreement, since the Company
Balance Sheet Date, the Company has not:
a. suffered a Material Adverse Effect,
whether or not caused by any deliberate act or omission of the Company or the
Optometrist;
b. contracted for the purpose of
acquiring any capital asset having a cost in excess of $5,000 or made any
single expenditure in excess of $5,000;
c. incurred any indebtedness for borrowed
money (other than short-term borrowings in the ordinary course of business), or
issued or sold any debt securities;
d. incurred or discharged any material
liabilities or obligations except in the ordinary course of business;
e. paid any amount on any indebtedness
prior to the due date, forgiven or cancelled any claims or any debt in excess
of $5,000, or released or waived any rights or claims except in the ordinary
course of business;
f. mortgaged, pledged or subjected to any
security interest, lien, lease or other charge or encumbrance any of its
properties or assets (other than statutory liens arising in the ordinary course
of business or other liens that do not materially detract from the value or
interfere with the use of such properties or assets);
g. suffered any damage or destruction to
or loss of any assets (whether or not covered by insurance) that has,
individually or in the aggregate, resulted in a Material Adverse Effect;
h. acquired or disposed of any assets
having an aggregate value in excess of $5,000, except in the ordinary course of
business;
i. written up or written down the
carrying value of any of its assets, other than accounts receivable in the
ordinary course of business;
j. changed the costing system or
depreciation methods of accounting for its assets in any material respect;
k. lost or terminated any employee,
patient, customer or supplier that has, individually or in the aggregate,
resulted in a Material Adverse Effect;
17
<PAGE> 32
l. increased the compensation of any
director, officer, key employee or consultant, except as disclosed on Schedule
3.8(a);
m. increased the compensation of any
employee (except for increases in the ordinary course of business consistent
with past practice) or hired any new employee who is expected to receive
annualized compensation of at least $15,000;
n. made any payments to or loaned any
money to any person or entity referred to in Section 3.22;
o. formed or acquired or disposed of any
interest in any corporation, partnership, joint venture or other entity;
p. redeemed, purchased or otherwise
acquired, or sold, granted or otherwise disposed of, directly or indirectly,
any of its capital stock or securities, or agreed to change the terms and
conditions of any such capital stock, securities or rights;
q. entered into any agreement providing
for total payments in excess of $5,000 in any twelve (12) month period with any
person or group, or modified or amended in any material respect the terms of
any such existing agreement, except in the ordinary course of business;
r. entered into, adopted or amended any
Employee Benefit Plan, except as contemplated hereby or the other agreements
contemplated hereby; or
s. entered into any other commitment or
transaction or experienced any other event that would materially interfere with
its performance under this Agreement or any other agreement or document
executed or to be executed pursuant to this Agreement, or otherwise has,
individually or in the aggregate, resulted in a Material Adverse Effect.
3.11. Title; Leased Assets.
a. Real Property. The Company does not
own any interest (other than leasehold interests referred to on Schedule
3.11(c)) in real property. The leased real property referred to on Schedule
3.11(c) constitutes the only real property necessary for the conduct of the
Company's business.
b. Personal Property. Except as set
forth on Schedule 3.11(b), the Company and/or the Optometrist has good, valid
and marketable title to all the personal property constituting the
Non-optometric Assets. The personal property constituting the Non-optometric
Assets constitute the only personal property necessary for the conduct of the
Company's business (except for the Optometric Assets). Upon consummation of
the transactions contemplated hereby, such interest in the Non-optometric
Assets shall be free and clear of all
18
<PAGE> 33
security interests, liens, claims and encumbrances, other than those set forth
on Schedule 3.11(b) (the "Permitted Encumbrances") and statutory liens arising
in the ordinary course of business or other liens that do not materially
detract from the value or interfere with the use of such properties or assets.
c. Leases. A list and brief description
of (i) all leases of real property and (ii) leases of personal property
involving rental payments within any twelve (12) month period in excess of
$12,000, in either case to which the Company is a party, either as lessor or
lessee, are set forth on Schedule 3.11(c). All such leases are valid and, to
the knowledge of the Company, enforceable in accordance with their respective
terms except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
3.12. Commitments.
a. Commitments; Defaults. Except as set
forth on Schedule 3.12 or as otherwise disclosed pursuant to this Agreement,
the Company is not a party to nor bound by, nor are the Non-optometric Assets
or the assets or the business of the Company bound by, whether or not in
writing, any of the following (collectively, "Commitments"):
i) partnership or joint
venture agreement;
ii) guaranty or suretyship,
indemnification or contribution agreement or performance bond;
iii) debt instrument, loan
agreement or other obligation relating to indebtedness for borrowed money or
money lent or to be lent to another;
iv) contract to purchase real
property;
v) agreement with dealers or
sales or commission agents, public relations or advertising agencies,
accountants or attorneys (other than in connection with this Agreement and the
transactions contemplated hereby) involving total payments within any twelve
(12) month period in excess of $2,000 and which is not terminable on thirty
(30) days' notice or without penalty;
vi) agreement relating to any
material matter or transaction in which an interest is held by a person or
entity that is an Affiliate of the Company or the Optometrist;
vii) agreement for the
acquisition of services, supplies, equipment, inventory, fixtures or other
property involving more than $2,000 in the aggregate;
viii) powers of attorney;
19
<PAGE> 34
ix) contracts containing
non-competition covenants;
x) agreement providing for the
purchase from a supplier of all substantially all of the requirements of the
Company of a particular product or services;
xi) agreements regarding
clinical research;
xii) agreements with Payors and
contracts to provide optometric or health care services; or
xiii) any other agreement or
commitment not made in the ordinary course of business or that is material to
the business, operations, condition (financial or otherwise) or results of
operations of the Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Vision 21. Except as set forth on Schedule 3.12
and to the Company's best knowledge, there are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that,
with the giving of notice or lapse of time or both, would constitute defaults
by the Company or, to the best knowledge of the Company, any other party to a
material Commitment, and no penalties have been incurred nor are amendments
pending, with respect to the material Commitments, except as described on
Schedule 3.12. The Commitments are in full force and effect and are valid and
enforceable obligations of the Company, and to the best knowledge of the
Company, are valid and enforceable obligations of the other parties thereto, in
accordance with their respective terms, and no defenses, off-sets or
counterclaims have been asserted or, to the best knowledge of the Company, may
be made by any party thereto (other than the Company), nor has the Company
waived any rights thereunder, except as described on Schedule 3.12. Except as
set forth on Schedule 3.12, no consents or approvals are required under the
terms of any agreement listed on Schedule 3.12 in connection with the
transactions contemplated herein, including, without limitation, the transfer
of any such agreement pursuant to this Agreement.
b. No Cancellation or Termination of
Commitment. Except as disclosed pursuant to this Agreement or contemplated
hereby and except where such default would not have a Material Adverse Effect
on the Practice, (i) neither the Company nor the Optometrist has received
notice of any plan or intention of any other party to any Commitment to
exercise any right to cancel or terminate any Commitment, and the Company does
not know of any fact that would justify the exercise of such a right; and (ii)
neither the Company nor the Optometrist currently contemplates, or has reason
to believe any other person currently contemplates, any amendment or change to
any Commitment.
3.13. Insurance. The Company, the Optometrist and each
Professional Employee carries property, liability, malpractice, workers'
compensation and such other types
20
<PAGE> 35
of insurance pursuant to the insurance policies listed and briefly described on
Section 3.13 (the "Insurance Policies"). The Insurance Policies are all of the
insurance policies of the Company, the Optometrist and each Professional
Employee relating to the business of the Company and the Non-optometric Assets.
All of the Insurance Policies are issued by insurers of recognized
responsibility, and, to the best knowledge of the Company, are valid and
enforceable policies, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. Except as set forth in Schedule 3.13, no
consent or approval is required for, and no other impediment or restriction
exists that will prohibit or limit, the transfer of any such Insurance Policies
included within the Non-optometric Assets in accordance with the terms of this
Agreement. All Insurance Policies shall be maintained in force without
interruption up to and including the Closing Date. True, complete and correct
copies of all Insurance Policies have been provided or made available to Vision
21. Except as set forth on Schedule 3.13, neither the Company nor the
Optometrist has received any notice or other communication from any issuer of
any Insurance Policy cancelling such policy, materially increasing any
deductibles or retained amounts thereunder, and to the actual knowledge of the
Company, no such cancellation or increase of deductibles, retainages or
premiums is threatened. Except as set forth on Schedule 3.13, neither the
Company, the Optometrist nor any Professional Employee has any outstanding
claims, settlements or premiums owed against any Insurance Policy, and the
Company, the Optometrist and each Professional Employee has given all notices
or has presented all potential or actual claims under any Insurance Policy in
due and timely fashion. Except as set forth on Schedule 3.13, since January 1,
1994, neither the Company, the Optometrist nor any Professional Employee has
filed a written application for any professional liability insurance coverage
which has been denied by an insurance agency or carrier, and the Company, the
Optometrist and each Professional Employee has been continuously insured for
professional malpractice claims for at least the past seven (7) years (or such
shorter periods of time that any Professional Employee has been licensed to
practice optometry). Schedule 3.13 also sets forth a list of all claims under
any Insurance Policy in excess of $10,000 per occurrence filed by the Company,
the Optometrist and each Professional Employee since January 1, 1994.
3.14. Proprietary Rights and Information. Set forth on
Schedule 3.14 is a true and correct description of the following ("Proprietary
Rights"):
a. all trademarks, trade-names, service
marks and other trade designations, including common law rights, registrations
and applications therefor, and all patents and applications therefor currently
owned, in whole or in part, by the Company, and all licenses, royalties,
assignments and other similar agreements relating to the foregoing to which the
Company is a party (including the expiration date thereof if applicable); and
b. all agreements relating to technology,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other healthcare providers), or which it licenses or authorizes others to use.
21
<PAGE> 36
The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, such ownership or use does not conflict,
infringe or violate the rights of any other person. Except as disclosed on
Schedule 3.14, no consent of any person will be required for the use thereof by
Vision 21 upon consummation of the transactions contemplated hereby and the
Proprietary Rights are freely transferable. No claim has been asserted by any
person to the ownership of or for infringement by the Company of the
proprietary right of any other person, and the Company does not know of any
valid basis for any such claim. To the best knowledge of the Company and the
Optometrist, the Company has the right to use, free and clear of any adverse
claims or rights of others, all trade secrets, customer lists and proprietary
information required for the marketing of all merchandise and services formerly
or presently sold or marketed by it.
3.15. Taxes.
a. Filing of Tax Returns. The Company
has duly and timely filed (in accordance with any extensions duly granted by
the appropriate governmental agency, if applicable) with the appropriate
governmental agencies all federal, state, local or foreign income, excise,
corporate, franchise, property, sales, use, payroll, withholding, provider,
value added and other tax returns and reports (collectively the "Tax Returns")
required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns or
reports are complete and accurate in all material respects and properly reflect
the taxes of the Company for the periods covered thereby.
b. Payment of Taxes. Except for such
items as the Company may be disputing in good faith by proceedings in
compliance with applicable law, which are described on Schedule 3.15, (i) the
Company has paid all taxes, penalties, assessments and interest that have
become due with respect to any Tax Returns that it has filed and has properly
accrued on its books and records for all of the same that have not yet become
due, and (ii) the Company is not delinquent in the payment of any tax,
assessment or governmental charge.
c. No Pending Deficiencies,
Delinquencies, Assessments or Audits. Except as set forth on Schedule 3.15,
the Company has not received any notice that any tax deficiency or delinquency
has been asserted against the Company. There is no unpaid assessment, proposal
for additional taxes, deficiency or delinquency in the payment of any of the
taxes of the Company that could be asserted by any taxing authority. There is
no taxing authority audit of the Company pending, or to the actual knowledge of
the Company, threatened, and the results of any completed audits are properly
reflected in the Financial Statements. The Company has not, to its best
knowledge, violated any federal, state, local or foreign tax law.
d. No Extension of Limitation Period.
The Company has not granted an extension to any taxing authority of the
limitation period during which any tax liability may be assessed or collected.
22
<PAGE> 37
e. All Withholding Requirements
Satisfied. All monies required to be withheld by the Company and paid to
governmental agencies for all income, social security, unemployment insurance,
sales, excise, use, and other taxes have been collected or withheld and paid to
the respective governmental agencies.
f. Foreign Person. Neither the Company
nor the Optometrist is a foreign person, as such term is referred to in Section
1445(f)(3) of the Code.
3.16. Compliance with Laws. The Company has not
failed, and neither the Company nor the Optometrist is aware of any failure by
the Optometrist or any Professional Employee to comply with all applicable
laws, regulations and licensing requirements relating to the operation of the
Practice or failure to file with the proper authorities all necessary
statements and reports except where the failure to so comply or file would not,
individually or in the aggregate, result in a Material Adverse Effect. There
are no existing violations by the Company, and neither the Company nor the
Optometrist is aware of any existing violations by the Optometrist or any
Professional Employee of any federal, state or local law or regulation that
could, individually or in the aggregate, result in a Material Adverse Effect.
The Company, the Optometrist and each Professional Employee possesses all
necessary licenses, franchises, permits and governmental authorizations for the
conduct of the Company's business as now conducted, all of which are listed
(with expiration dates, if applicable) on Schedule 3.16. Except as set forth
on Schedule 3.16, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded by any such licenses, franchises, permits or
government authorizations, except for any such default, breach or violation
that would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth on Schedule 3.16, since January 1, 1993, neither
the Company, the Optometrist nor, to the knowledge of the Company based on a
certificate in writing obtained from each Professional Employee, any
Professional Employee has received any notice from any federal, state or other
governmental authority or agency having jurisdiction over its, his or her
properties or activities, or any insurance or inspection body, that its, his or
her operations or any of its, his or her properties, facilities, equipment, or
business practices fail to comply with any applicable law, ordinance,
regulation, building or zoning law, or requirement of any public or
quasi-public authority or body, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
3.17. Finder's Fee. Except as set forth on Schedule
3.17, the Company has not incurred any obligation for any finder's, brokers or
agent's fee in connection with the transactions contemplated hereby.
3.18. Litigation. Except as described on Schedule 3.18
or otherwise disclosed pursuant to this Agreement, there are no legal actions
or administrative proceedings or investigations instituted, to the actual
knowledge of the Company or the Optometrist, which affect or could affect the
Practice, the Non-optometric Assets or the operation, business, condition
(financial or otherwise), or results of operations of the Company which (i) if
successful could, individually or in the aggregate, have a Material Adverse
Effect or (ii) could adversely
23
<PAGE> 38
affect the ability of the Company or the Optometrist to effect the transactions
contemplated hereby. Neither the Company nor the Optometrist is (a) subject to
any continuing court or administrative order, judgment, writ, injunction or
decree applicable specifically to the Non-optometric Assets, the Company or to
its business, assets, operations or employees or (b) in default with respect to
any such order, judgment, writ, injunction or decree. The Company has no
knowledge of any valid basis for any such action, proceeding or investigation.
Except as set forth on Schedule 3.18, all medical malpractice claims asserted,
general liability incidents and incident reports have been submitted to the
Company's insurer therefor. All claims made or threatened against the Company
in excess of its deductible are covered under its Insurance Policies.
3.19. Condition of Fixed Assets. All of the fixtures,
structures and equipment reflected in the Financial Statements and used by the
Company in its business, are in good condition and repair, subject to normal
wear and tear, and conform in all material respects with all applicable
ordinances, regulations and other laws, and the Company has no actual knowledge
of any latent defects therein.
3.20. Distributions and Repurchases. No distribution,
payment or dividend of any kind has been declared or paid by the Company on any
of its capital stock since the Company Balance Sheet Date. No repurchase of
any of the Company's capital stock has been approved, effected or is pending,
or is contemplated by the Board of Directors of the Company.
3.21. Banking Relations. Set forth on Schedule 3.21 is
a complete and accurate list of all borrowing and investing arrangements that
the Company has with any bank or other financial institution, indicating with
respect to each relationship the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the
person or persons authorized in respect thereof.
3.22. Ownership Interests of Interested Persons;
Affiliations. Except as set forth on Schedule 3.22, no officer, supervisory
employee or director of the Company, or their respective spouses, children or
Affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier of the Company or any
organization that has a material contract or arrangement with the Company.
Except as may be disclosed pursuant to this Agreement, neither the Company, nor
any of its directors, officers, employees or consultants, nor any Affiliate of
such person is, or within the last three (3) years was, a party to any
contract, lease, agreement or arrangement, including, but not limited to, any
joint venture or consulting agreement with any optometrist, hospital, pharmacy,
home health agency or other person which is in a position to make or influence
referrals to, or otherwise generate business for, the Company.
3.23. Investments in Competitors. Except as disclosed
on Schedule 3.23, neither the Company nor the Optometrist owns directly or
indirectly any interests or has any investment in any person that is a
Competitor of the Company.
24
<PAGE> 39
3.24. Environmental Matters.
a. Environmental Laws. To the best
knowledge of the Company and the Optometrist, neither the Company nor any of
the Non-optometric Assets (including the leased real property described on
Schedule 3.11(c)) are currently in violation of, or subject to any existing,
pending or, to the actual knowledge of the Company threatened, investigation or
inquiry by any governmental authority or to any remedial obligations under, any
federal, state or local laws or regulations pertaining to health or the
environment ("Environmental Laws"), except for any such violations,
investigations or inquiries that would not, individually or in the aggregate,
result in a Material Adverse Effect.
b. Permits. The Company is not required
to obtain, and has no knowledge of any reason Vision 21 will be required to
obtain, any permits, licenses or similar authorizations to occupy, operate or
use any buildings, improvements, fixtures and equipment owned or leased by the
Company by reason of any Environmental Laws.
c. Superfund List. To the best knowledge
of the Company, none of the Non- optometric Assets (including the Company's
leased real property described on Schedule 3.11(c)) are on any federal or state
"Superfund" list or subject to any environmentally related liens, except such
liens as would not, individually or in the aggregate, result in a Material
Adverse Effect.
3.25. Certain Payments. Neither the Company nor any
director, officer or employee of the Company acting for or on behalf of the
Company, has paid or caused to be paid, directly or indirectly, in connection
with the business of the Company:
a. to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or
b. any contribution to any political
party or candidate (other than from personal funds of directors, officers or
employees not reimbursed by their respective employers or as otherwise
permitted by applicable law).
3.26. Medical Waste. With respect to the generation,
transportation, treatment, storage, and disposal, or other handling of medical
waste, to the best knowledge of the Company and the Optometrist, the Company
has complied with all material federal, state or local laws or regulations
pertaining to medical waste.
3.27. Medicare and Medicaid Programs. The Company, the
Optometrist and each Professional Employee is qualified for participation in
the Medicare and Medicare programs and is party to provider agreements for such
programs which are in full force and effect with no events of default having
occurred thereunder. The Company, the Optometrist and each Professional
Employee has timely filed all claims or other reports required to be filed
prior to the Closing Date with respect to the purchase of services by
third-party payors ("Payors"),
25
<PAGE> 40
including but not limited to Medicare and Medicaid programs, except where the
failure to file would not, individually or in the aggregate, result in a
Material Adverse Effect. All such claims or reports are complete and accurate
in all material respects. The Company, the Optometrist and each Professional
Employee has paid or has properly recorded on the Financial Statements all
actually known and undisputed refunds, discounts or adjustments which have
become due pursuant to such claims, and neither the Company, the Optometrist
nor any Professional Employee has any material liability to any Payor with
respect thereto, except as has been reserved for in the Company Balance Sheet.
There are no pending appeals, overpayment determinations, adjustments,
challenges, audits, litigation, or notices of intent to reopen Medicare and/or
Medicaid claims determinations or other reports required to be filed by the
Company, the Optometrist or any Professional Employee in order to be paid by a
Payor for services rendered. Neither the Company, nor any of its directors,
officers, employees, consultants or the Optometrist has been convicted of, or
pled guilty or nolo contendere to, patient abuse or neglect, or any other
Medicare or Medicaid program-related offense. Neither the Company, nor its
directors, officers, the Optometrist, or to the best of the Company's
knowledge, its employees or consultants, has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs, including but not limited to, defrauding a government program, loss
of a license to provide health services, and failure to provide quality care.
3.28. Fraud and Abuse. To the best knowledge of the
Company and the Optometrist, the Company, its officers and directors, the
Professional Employees, and the other persons and entities providing
professional services for the Company, have not engaged in any activities which
are prohibited under 42 U.S.C. Section Section 1320- 7, 7a or 7b or 42 U.S.C.
Section 1395nn (subject to the exceptions set forth in such legislation), or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following:
a. knowingly and willfully making or
causing to be made a false statement or representation of a material fact in
any application for any benefit or payment;
b. knowingly and willfully making or
causing to be made a false statement or representation of a material fact for
use in determining rights to any benefit or payment;
c. failure to disclose knowledge by a
Medicare or Medicaid claimant of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to fraudulently secure such benefit or payment;
d. knowingly and willfully offering,
paying, soliciting or receiving any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind (i) in return for referring an individual to a person for the furnishing
or arranging for the furnishing of any item or service for which payment may be
26
<PAGE> 41
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering, or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service, or item for which payment may
be made in whole or in part by Medicare or Medicaid; and
e. referring a patient for designated
health services (as defined in 42 U.S.C. Section 1395nn) to or providing
designated health services to a patient upon a referral from an entity or
person with which the Optometrist or the Professional Employee or an immediate
family member has a financial relationship, and to which no exception under 42
U.S.C. Section 1395nn applies.
3.29. Payors. Schedule 3.29 sets forth a true, correct
and complete list of the names and addresses of each Payor, including any
private pay patient as a single payor, of the Company's services which
accounted for more than 10% of the revenues of the Company in the three (3)
previous fiscal years. Except as set forth on Schedule 3.29, the Company has
good relations with such Payors and none of such Payors has notified the
Company that it intends to discontinue its relationship with the Company or to
deny any claims submitted to such Payor for payment.
3.30. Prohibitions on the Corporate Practice of
Optometry. To the best of the Company's and the Optometrist's knowledge, the
actions, transactions or relationships arising from, and contemplated by this
Agreement, do not violate any law, rule or regulation relating to the corporate
practice of optometry. The Company and the Optometrist accordingly agree that
the Company and the Optometrist will not, in an attempt to void or nullify any
document contemplated herein or any relationship involving Vision 21, the
Company or the Optometrist, sue, claim, aver, allege or assert that any such
document contemplated herein or any such relationship violates any law, rule or
regulation relating to the corporate practice of optometry and expressly
warrant that this Section is valid and enforceable by Vision 21, and recognize
that Vision 21 has relied upon the statements herein in closing this
Transaction.
3.31. Acquisition Proposals. Except for the
negotiations, offers and agreements with Vision 21 and its representatives, the
Company has not received during the twelve (12) month period preceding the date
of this Agreement any proposal or offer (including, without limitation, any
proposal or offer of its stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, the Company (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") nor has the Company or any of its employees, agents, representatives
or stockholders engaged in any negotiations concerning, or provided any
confidential information or data to, or had any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitated any effort or
attempted to make or implement an Acquisition Proposal.
3.32. Consistent Treatment of Expenses. The Company
has, in presenting information concerning the Company's expenses to Vision 21
for the purpose of determining the
27
<PAGE> 42
Company's value, separated out those expenses which shall be borne by the
Company in a manner which is consistent with the treatment of expenses which
shall be the responsibility of the Company pursuant to the Business Management
Agreement.
3.33. Accounts Receivable/Payable. The Accounts
Receivable of the Company relating to the ownership and operation of the
Practice reflected on the Company Balance Sheet, to the extent uncollected on
the date hereof, are, and the accounts receivable of the Company relating to
the ownership and operation of the Practice to be reflected on the books of the
Company on the Closing Date will be, valid, existing and collectible within six
months from the Closing Date (taking into consideration the allowance for
doubtful accounts set forth in the Financial Statements) using reasonably
diligent collection methods taking into account the size and nature of the
receivable, and represent amounts due for goods sold and delivered or services
performed. There are not, and on the date of Closing there will not be, any
refunds, discounts, set-offs, defenses, counterclaims or other adjustments
payable or assessable with respect to the Accounts Receivable. The Company has
collected Accounts Receivable only in the ordinary course and has not changed
collection procedures or methods nor accelerated the pace of such collection
efforts in anticipation of the transactions contemplated in this Agreement.
The Company has paid accounts payable in the ordinary course and has not
changed payment procedures or methods nor delayed the timing of such payments
in anticipation of the transactions contemplated in this Agreement.
3.34. Projections. There is no fact, development or
threatened development with respect to the markets, products, services,
clients, patients, facilities, personnel, vendors, suppliers, operations,
assets or prospects of the Practice which are known to the Company or the
Optometrist which would materially adversely affect the projected fiscal year
1997 earnings of the Company disclosed to Vision 21 by Optometrist, other than
such conditions as may affect as a whole the economy or the practice of
optometry generally.
3.35. Inventory. Except as set forth on Schedule 3.35,
to the best of the Company's and the Optometrist's knowledge: (i) the
Inventory is in its originally manufactured condition, fit for the use for
which it was intended, free from any known defect and in a quantity and quality
usable in the ordinary course of business; (ii) the Inventory does not contain
material amounts of items that are slow-moving, obsolete or of below-standard
quality; (iii) the qualities and quantities of Inventory are reasonable and
warranted in the present and anticipated circumstances of the Practice; and
(iv) there has been no decrease in the physical Inventory since the Company
Balance Sheet Date other than in the ordinary course of business.
3.36. Tangible Personal Property. Except as set forth
on Schedule 3.36, the Company's Tangible Personal Property is in good operating
condition, working order and repair (normal wear and tear excepted) and is
fully suitable for the uses for which it is employed in the conduct of the
Practice.
3.37. Leases. With respect to each of the Real
Property Leases and Personal Property Leases, except as set forth on Schedule
3.37:
28
<PAGE> 43
(a) such lease is legal, valid, binding, enforceable
and in full force and effect;
(b) such lease will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing;
(c) no party to such lease is in material breach or
default, and no event has occurred that, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification or
acceleration thereunder;
(d) no party to such lease has repudiated in writing
any provision thereof;
(e) there are no disputes, oral agreements or
forbearance programs in effect as to such lease; and
(f) The Company has performed and satisfied in full
each material obligation to be performed by the Company under such lease.
3.38. Contract Rights. Except as set forth on Schedule
3.38, each of the Assumed Contracts is valid and enforceable and is in full
force and effect, and there is no material default or existing condition that,
with the giving of notice or the passage of time, would constitute such a
default by any parties thereto. The Company has performed and satisfied in
full each material obligation required to be performed by the Company under
each Assumed Contract. If services are to be provided to the Company under any
of such Assumed Contracts, such services have been and are being performed
satisfactorily and in a timely manner, substantially in accordance with the
terms of such Assumed Contract.
3.39. Prepaid Items. Except as described on Schedule
3.13, each of the Prepaid Items may be transferred to Vision 21 without the
necessity of obtaining any consent or approval.
3.40. Completeness of Assets. The Non-optometric
Assets, together with the Optometric Assets, include all the properties used to
conduct the Practice as presently conducted.
3.41. Disclosure. To the best of the Company's and the
Optometrist's knowledge, no representation, warranty or statement made by the
Company or the Optometrist in this Agreement or any of the exhibits or
schedules hereto, or any agreements, certificates, documents or instruments
delivered or to be delivered to Vision 21 in accordance with this Agreement or
the other documents contemplated herein, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company and the
Optometrist do not know of any fact or condition (other than general economic
conditions or legislative or administrative changes in health-care
29
<PAGE> 44
delivery) which materially adversely affects, or in the future may materially
affect, the condition, properties, assets, liabilities, business, operations or
prospects of the Practice which has not been set forth herein or in the
Schedules provided herewith.
4. REPRESENTATIONS AND WARRANTIES OF THE OPTOMETRIST. The
Optometrist represents and warrants to Vision 21 that the following are true
and correct as of the date hereof, and shall be true and correct through the
Closing Date as if made on that date:
4.1. Validity; Optometrist Capacity. This Agreement,
the Optometrist Employment Agreement, and each other agreement contemplated
hereby or thereby have been, or will be as of the Closing Date, duly executed
and delivered by the Optometrist and constitute or will constitute legal, valid
and binding obligations of the Optometrist, enforceable against the Optometrist
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The Optometrist has legal
capacity to enter into and perform this Agreement and his Optometrist
Employment Agreement.
4.2. No Violation. Except as set forth on Schedule
4.2, neither the execution, delivery or performance of this Agreement, other
agreements of the Optometrist contemplated hereby or thereby, nor the
consummation of the transactions contemplated hereby or thereby, will (a)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, indenture or other
instrument under which the Optometrist is bound or to which any of his property
or the shares of common stock of the Company are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon any of his property or the shares of common stock of the Company or (b) to
the best knowledge of the Optometrist, violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body.
4.3. Consents. Except as may be required under the
Exchange Act, the Securities Act, the Corporation Law and state securities
laws, or otherwise disclosed pursuant to this Agreement, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, or any other person is required to authorize, or
is required in connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of the Optometrist.
4.4. Certain Payments. The Optometrist has not paid
or caused to be paid, directly or indirectly, in connection with the business
of the Company:
a. to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or
30
<PAGE> 45
b. any contribution to any political
party or candidate (other than from personal funds not reimbursed by the
Company or as otherwise permitted by applicable law).
4.5. Finder's Fee. Except as set forth on Schedule
4.5, the Optometrist has not incurred any obligation for any finder's, broker's
or agent's fee in connection with the transactions contemplated hereby.
4.6. Ownership of Interested Persons; Affiliations.
Except as set forth on Schedule 4.6, neither the Optometrist nor his spouse,
children or Affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier of the Company
or any organization that has a material contact or arrangement with the
Company. Neither the Optometrist nor any of his Affiliates is, or with the
last three (3) years was, a party to any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement with any optometrist, hospital, pharmacy, home health agency or other
person which is in a position to make or influence referrals to, or otherwise
generate business for, the Company.
4.7. Investments in Competitors. Except as disclosed
on Schedule 4.7, the Optometrist does not own directly or indirectly any
interests or have any investment in any person that is a Competitor of the
Company.
4.8. Litigation. Except as disclosed on Schedule 4.8,
there are no claims, actions, suits, proceedings (arbitration or otherwise) or
investigations pending or, to the Optometrist's knowledge, threatened against
the Optometrist at law or at equity in any court or before or by any
Governmental Authority, and, to the Optometrist's knowledge, there are no, and
have not been any, facts, conditions or incidents that may result in any such
actions, suits, proceedings (arbitration or otherwise) or investigations.
Except as set forth on Schedule 4.10, there have been no disciplinary,
revocation or suspension proceedings or similar types of claims, actions or
proceedings, hearings or investigations against the Optometrist or the Company.
4.9. Permits. To the best of the Optometrist's
knowledge, the Optometrist has all permits, licenses, orders and approvals of
all Governmental Authorities necessary to perform the services performed by the
Optometrist in connection with the conduct of the Practice. All such permits,
licenses, orders and approvals are in full force and effect and no suspension
or cancellation of any of them is pending or threatened. To the best of the
Optometrist's knowledge, none of such permits, licenses, orders or approvals
will be adversely affected by the consummation of the transactions contemplated
herein. The Optometrist is a participating optometrist, as such term is
defined by the Medicare and Medicaid programs, and the Optometrist has not been
disciplined, sanctioned or excluded from either the Medicare or Medicaid
program and has not been subject to any plan of correction imposed by any
professional review body.
31
<PAGE> 46
4.10. Staff Privileges. Schedule 4.10 lists all
hospitals at which the Optometrist has full staff privileges. Such staff
privileges have not been revoked, surrendered, suspended or terminated, and to
the Optometrist's knowledge, there are no, and have not been any, facts,
conditions or incidents that may result in any such revocation, surrender,
suspension or termination.
4.11. Intentions. Except as set forth on Schedule
4.11, the Optometrist intends to continue practicing optometry on a full-time
basis for at least the next five (5) years with the Company and does not know
of any fact or condition that materially adversely affects, or in the future
may materially adversely affect, his ability or intention to practice optometry
on a full-time basis for the next five (5) years with the Company.
5. REPRESENTATIONS AND WARRANTIES OF VISION 21. Vision 21
represents and warrants to the Company and the Optometrist that the following
are true and correct as of the date hereof and shall be true and correct as of
the Closing Date; when used in this Section 5, the term "best knowledge" shall
mean the best knowledge of those individuals listed on Schedule 5:
5.1. Organization and Good Standing. Vision 21 is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Florida, with all requisite corporation power and
authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. At or prior to Closing, Vision 21 will be
qualified to do business as a foreign corporation in the jurisdictions listed
on Schedule 5.1.
5.2. Capitalization. The authorized capital stock of
Vision 21 consists of 50,000,000 shares of Vision 21 Common Stock, of which
5,465,673 shares are issued and outstanding. Immediately prior to the Closing,
the authorized capital stock of Vision 21 will consist of 50,000,000 shares of
Vision 21 Common Stock, of which 5,465,673 shares will be issued and
outstanding.
5.3. Corporate Records. The copies of the Articles of
Incorporation and Bylaws, and all amendments thereto, of Vision 21 that have
been delivered or made available to the Company and the Optometrist are true,
correct and complete copies thereof, as in effect on the date hereof. The
minute books of Vision 21, copies of which have been delivered or made
available to the Company and the Optometrist, contain accurate minutes of all
meetings of, and accurate consents to all actions taken without meetings by,
the Board of Directors (and any committees thereof) and the stockholders of
Vision 21, since its formation.
5.4. Authorization and Validity. The execution,
delivery and performance by Vision 21 of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by Vision 21. This
Agreement and each other agreement contemplated hereby to be executed by Vision
21 have been or will be as of the Closing Date duly executed and delivered by
32
<PAGE> 47
Vision 21 and constitute or will constitute legal, valid and binding
obligations of Vision 21, enforceable against Vision 21 in accordance with
their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
5.5. Compliance. The execution and delivery of the
documents contemplated hereunder and the consummation of the transactions
contemplated thereby by Vision 21 shall not (i) violate any provision of Vision
21's organizational documents, (ii) violate any material provision of or result
in the breach of or entitle any party to accelerate (whether after the giving
of notice or lapse of time or both) any material obligation under, any
mortgage, lien, lease, contract, license, instrument or any other agreement to
which Vision 21 is a party, (iii) result in the creation or imposition of any
material lien, charge, pledge, security interest or other material encumbrance
upon any property of Vision 21 or (iv) violate or conflict with any order,
award, judgment or decree or other material restriction or to the best of
Vision 21's knowledge violate or conflict with any law, ordinance or regulation
to which Vision 21 or its property is subject.
5.6. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by Vision 21 or the consummation
by such party of the transactions contemplated thereby, except for those
consents or approvals set forth on Schedule 5.6.
5.7. Finder's Fee. Except as disclosed on Schedule
5.7, Vision 21 has not incurred any obligation for any finder's, broker's or
agent's fee in connection with the transactions contemplated hereby.
5.8. Capital Stock. The issuance and delivery by
Vision 21 of shares of Vision 21 Common Stock in connection with the Note have
been duly and validly authorized by all necessary corporate action on the part
of Vision 21. The shares of Vision 21 Common Stock to be issued in connection
with the Note, when issued in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable and will not have been issued
in violation of any preemptive rights, rights of first refusal or similar
rights of any of Vision 21's stockholders, or any federal or state law,
including, without limitation, the registration requirements of applicable
federal and state securities laws.
5.9. Vision 21 Financial Statements; Confidential
Information Memorandum. The balance sheet of Vision 21 as of September 30,
1996 and the related statements of income of Vision 21 for the first nine (9)
months of Vision 21's 1996 fiscal year, without giving effect to the Related
Acquisitions, including the costs incurred during such fiscal year associated
with any Registration Statement, shall be contained in the Confidential
Information Memorandum to be provided to the Optometrist and the Company by
Vision 21 prior to the Closing (collectively, with the related notes thereto,
the "Vision 21 Financial Statements"). The Vision 21 Financial Statements (a)
fairly present the financial condition and
33
<PAGE> 48
results of operations of Vision 21, without giving effect to the Related
Acquisitions, as of the dates and for the periods indicated; and (b) have been
prepared in conformity with GAAP (subject to normal year-end adjustments and
the absence of notes for any unaudited interim financial statement), except as
otherwise indicated in the Vision 21 Financial Statements. Subject to the
foregoing and the other qualifications contained elsewhere in this Agreement,
to the best knowledge of Vision 21, the Confidential Information Memorandum, as
amended on December 17, 1996, is true and correct in all material respects.
5.10. Liabilities and Obligations. Except as disclosed
on Schedule 5.10, the Vision 21 Financial Statements shall reflect all material
liabilities of Vision 21, accrued, contingent or otherwise, that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with GAAP. Except as set forth on Schedule 5.10 or in the Vision
21 Financial Statements, Vision 21 is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity,
and Vision 21 does not know of any valid basis for the assertion of any other
claims or liabilities of any nature or in any amount.
5.11. Compliance with Laws. Vision 21 has not failed
to comply with any applicable laws, regulations and licensing requirements or
failed to file with the proper authorities any necessary statements and reports
except where the failure to so comply or file would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no existing
violations by Vision 21 of any federal, state or local law or regulation that
could, individually or in the aggregate, result in a Material Adverse Effect.
Vision 21 possesses all necessary licenses, franchises, permits and
governmental authorizations for the conduct of Vision 21's business as now
conducted and after the Closing, as contemplated in this Agreement. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government
authorizations, except for any such default, breach or violation that would
not, individually or in the aggregate, have a Material Adverse Effect. Since
January 1, 1993, Vision 21 has not received any notice from any federal, state
or other governmental authority or agency having jurisdiction over its
properties or activities, or any insurance or inspection body, that its
operations or any of its properties, facilities, equipment, or business
practices fail to comply with any applicable law, ordinance, regulation,
building or zoning law, or requirement of any public or quasi-public authority
or body, except where failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect.
5.12. Insolvency Proceedings. Vision 21 is not
currently under the jurisdiction of a Federal or state court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
5.13. Employment of Company's Employees. Vision 21
does not currently intend to change the existing composition or employment
terms of any of the non-professional personnel which have employment
arrangements with the Company on the effective date of this
34
<PAGE> 49
Agreement (except as is necessary for Vision 21 to employ such individuals
pursuant to the Business Management Agreement). Vision 21 reserves the right,
however, to change the number, composition or employment terms of such non-
professional personnel in the future.
6. SECURITIES LAW MATTERS.
6.1. Investment Representations and Covenants of
Optometrist.
a. Optometrist understands that the
Securities will not be registered under the Securities Act or any state
securities laws on the grounds that the issuance of the Securities is exempt
from registration pursuant to Section 4(2) of the Securities Act under the
Securities Act and applicable state securities laws, and that the reliance of
Vision 21 on such exemptions is predicated in part on the Optometrist's
representations, warranties, covenants and acknowledgements set forth in this
Section.
b. Except as disclosed on Schedule 6.1(b)
attached hereto, Optometrist represents and warrants that Optometrist is an
"accredited investor" or "sophisticated investor" as defined under the
Securities Act and state "Blue Sky" laws, or that Optometrist has utilized, to
the extent necessary to be deemed a sophisticated investor under the Securities
Act and State "Blue Sky" laws, the assistance of a professional advisor.
c. Optometrist represents and warrants
that the Securities to be acquired by Optometrist upon consummation of the
transactions described in this Agreement will be acquired by Optometrist for
Optometrist's own account, not as a nominee or agent, and without a view to
resale or other distribution within the meaning of the Securities Act and the
rules and regulations thereunder, except as contemplated in this Agreement, and
that Optometrist will not distribute any of the Securities in violation of the
Securities Act. All Securities shall bear a restrictive legend in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAWS."
In addition, the Securities shall bear any legend required by the
securities or "Blue Sky" laws of any state where Optometrist resides as well as
any other legend deemed appropriate by Vision 21 or its counsel.
d. Optometrist represents and warrants
that the address set forth below Optometrist's name on Schedule 6.1(d) is
Optometrist's principal residence.
e. Optometrist (i) acknowledges that the
Securities issued to Optometrist at the Closing must be held indefinitely by
Optometrist unless subsequently
35
<PAGE> 50
registered under the Securities Act or an exemption from registration is
available, (ii) is aware that any routine sales of Securities made pursuant to
Rule 144 under the Securities Act may be made only in limited amounts and in
accordance with the terms and conditions of that Rule and that in such cases
where the Rule is not applicable, compliance with some other registration
exemption will be required, (iii) is aware that Rule 144 is not currently
available for use by Optometrist for resale of any of the Securities to be
acquired by Optometrist upon consummation of the transactions described in this
Agreement, and (iv) acknowledges and agrees that the transfer of the Securities
shall be further restricted by the "lock-up" provisions contained in the
Registration Rights Agreement in the form of Exhibit 14(e), whereby Optometrist
shall be treated as an "affiliate" of Vision 21 under Rule 144.
f. Optometrist represents and warrants to
Vision 21 that Optometrist, either alone or together with the assistance of
Optometrist's own professional advisor, has such knowledge and experience in
financial and business matters such that Optometrist is capable of evaluating
the merits and risks of Optometrist's investment in any of the Securities to be
acquired by Optometrist upon consummation of the transactions described in this
Agreement.
g. Optometrist confirms that Optometrist
has received and read the Confidential Information Memorandum of Vision 21
dated September 27, 1996 and the December 17, 1996 Supplement thereto.
Optometrist also confirms that Optometrist has had the opportunity to ask
questions of and receive answers from Vision 21 concerning the terms and
conditions of Optometrist's investment in the Securities, and the Optometrist
has received to Optometrist's satisfaction, such additional information, in
addition to that set forth herein, about Vision 21's operations and the terms
and conditions of the offering as Optometrist has requested.
h. In order to ensure compliance with the
provisions of paragraph (c) hereof, Optometrist agrees that after the Closing
Optometrist will not sell or otherwise transfer or dispose of Securities or any
interest therein (unless such shares have been registered under the Securities
Act) without first complying with either of the following conditions, the
expenses and costs of satisfaction of which shall be fully borne and paid for
by Optometrist:
i) Vision 21 shall have
received a written legal opinion from legal counsel, which opinion and counsel
shall be satisfactory to Vision 21 in the exercise of its reasonable judgment,
or a copy of a "no-action" or interpretive letter of the Securities and
Exchange Commission specifying the nature and circumstances of the proposed
transfer and indicating that the proposed transfer will not be in violation of
any of the registration provisions of the Securities Act and the rules and
regulations promulgated thereunder; or
ii) Vision 21 shall have
received an opinion from its own counsel to the effect that the proposed
transfer will not be in violation of any of the registration provisions of the
Securities Act and the rules and regulations promulgated thereunder.
36
<PAGE> 51
Optometrist also agrees that the certificates or instruments representing the
Securities to be issued to Optometrist pursuant to this Agreement may contain a
restrictive legend noting the restrictions on transfer described in this
Section and required by federal and applicable state securities laws, and that
appropriate "stop-transfer" instructions will be given to Vision 21's transfer
agent, if any, provided that this Section 6.1(h) shall no longer be applicable
to any Securities following their transfer pursuant to a registration statement
effective under the Securities Act or in compliance with Rule 144 or if the
opinion of counsel referred to above is to the further effect that transfer
restrictions and the legend referred to herein are no longer required in order
to establish compliance with any provisions of the Securities Act.
i. Optometrist understands that although
an Initial Public Offering is contemplated by Vision 21, there are no
assurances that an Initial Public Offering will occur or if it does occur that
it will be successful.
j. Optometrist agrees that he shall be
considered an "affiliate" of Vision 21 for purposes of Rule 144 and agrees to
the restrictions and limitations imposed by Rule 144 on affiliates.
Optometrist further agrees that he shall be considered an affiliate of Vision
21 for Rule 144 purposes even if he does not meet the technical definition of
"affiliate" under Rule 144.
6.2. Current Public Information. At all times
following the registration of any of Vision 21's securities under the
Securities Act or Exchange Act pursuant to which Vision 21 becomes subject to
the reporting requirements of the Exchange Act, Vision 21 shall use
commercially reasonable efforts to comply with the requirements of Rule 144
under the Securities Act, as such Rule may be amended from time to time (or any
similar rule or regulation hereafter adopted by the SEC) regarding the
availability of current public information to the extent required to enable any
holder of shares of Common Stock to sell such shares without registration under
the Securities Act pursuant to Rule 144 (or any similar rule or regulation).
7. COVENANTS OF THE COMPANY AND THE OPTOMETRIST. The Company
and the Optometrist, jointly and severally, agree that between the date hereof
and the Closing (with respect to the Company's covenants, the Optometrist
agrees to use his best efforts to cause the Company to perform):
7.1. Consummation of Agreement. The Company and the
Optometrist shall use their best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and conditions;
provided, however, that this covenant shall not require the Company or the
Optometrist to make any expenditures that are not expressly set forth in this
Agreement or otherwise contemplated herein.
7.2. Business Operations. The Company shall operate
its business in the ordinary course. The Company and the Optometrist shall use
their best efforts to preserve the
37
<PAGE> 52
business of the Company intact. Neither the Company nor the Optometrist shall
take any action that would, individually or in the aggregate, result in a
Material Adverse Effect.
7.3. Access. The Company and the Optometrist shall,
at reasonable times during normal business hours and on reasonable notice,
permit Vision 21 and its authorized representatives, including without
limitation, the Accountants, reasonable access to, and make available for
inspection, all of the assets and business of the Company, including its
employees, customers and suppliers, and permit Vision 21 and its authorized
representatives to inspect and, at Vision 21's sole cost and expense, make
copies of all documents, records (other than patient optometric records) and
information with respect to the affairs of the Company, including, without
limitation, the Financial Statements, as Vision 21 and its representatives may
request, all for the sole purpose of permitting Vision 21 to become familiar
with the business and assets and liabilities of the Company.
7.4. Notification of Certain Matters. The Company and
the Optometrist shall promptly inform Vision 21 in writing of (a) any notice
of, or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by the Company or the
Optometrist subsequent to the date of this Agreement and prior to the Closing
Date under any Commitment material to the Company's condition (financial or
otherwise), operations, assets, liabilities or business and to which it is
subject; or (b) any material adverse change in the Company's condition
(financial or otherwise), operations, assets, liabilities or business.
7.5. Approvals of Third Parties. As soon as
practicable after the date hereof, the Company and the Optometrist shall secure
all necessary approvals and consents of landlords with respect to the real
property described on Schedule 2.1(d) to the consummation of the transactions
contemplated hereby and shall use their best efforts to secure all necessary
approvals and consents of other third parties to the consummation of the
transactions contemplated hereby; provided, however, that this covenant shall
not require the Company or the Optometrist to make any material expenditures
that are not expressly set forth in this Agreement or otherwise contemplated
herein.
7.6. Employee Matters. Except as set forth in
Schedule 3.8(a) or as otherwise contemplated by this Agreement, the Company
shall not, without the prior written approval of Vision 21, except as required
by law:
a. increase the cash compensation of the
Optometrist or any other employees of the Company (other than in the ordinary
course of business and consistent with past practice);
b. adopt, amend or terminate any
Compensation Plan;
c. adopt, amend or terminate any
Employment Agreement;
38
<PAGE> 53
d. adopt, amend or terminate any
Employee Policies and Procedures;
e. adopt, amend or terminate any
Employee Benefit Plan;
f. take any action that could deplete the
assets of any Employee Benefit Plan, other than payment of benefits in the
ordinary course to participants and beneficiaries;
g. fail to pay any premium or
contribution due or with respect to any Employee Benefit Plan;
h. fail to file any return or report
with respect to any Employee Benefit Plan;
i. institute, settle or dismiss any
employment litigation except as could not, individually or in the aggregate,
result in a Material Adverse Effect;
j. enter into, modify, amend or terminate
any agreement with any union, labor organization or collective bargaining unit;
or
k. take or fail to take any action with
respect to any past or present employee of the Company that would, individually
or in the aggregate, result in a Material Adverse Effect.
7.7. Contracts. Except with Vision 21's prior written
consent, the Company shall not assume or enter into any contract, lease,
license, obligation, indebtedness, commitment, purchase or sale except in the
ordinary course of business that is material to the Company's business, nor
will it waive any material right or cancel any material contract, debt or
claim.
7.8. Capital Assets; Payments of Liabilities. The
Company shall not, without the prior written approval of Vision 21 (a) acquire
or dispose of any capital asset having a fair market value of $5,000 or more,
or acquire or dispose of any capital asset outside of the ordinary course of
business or (b) discharge or satisfy any lien or encumbrance or pay or perform
any obligation or liability other than (i) liabilities and obligations
reflected in the Financial Statements or (ii) current liabilities and
obligations incurred in the usual and ordinary course of business since the
Company Balance Sheet Date and, in either case (i) or (ii) above, only as
required by the express terms of the agreement or other instrument pursuant to
which the liability or obligation was incurred.
7.9. Mortgages, Liens and Guaranties. The Company
shall not, without the prior written approval of Vision 21, enter into or
assume any mortgage, pledge, conditional sale or other title retention
agreement, permit any security interest, lien, encumbrance or claim
39
<PAGE> 54
of any kind to attach to any of its assets (other than statutory liens arising
in the ordinary course of business and other liens that do not materially
detract from the value or interfere with the use of such assets), whether now
owned or hereafter acquired, or guarantee or otherwise become contingently
liable for any obligation of another, except obligations arising by reason of
endorsement for collection and other similar transactions in the ordinary
course of business, or make any capital contribution or investment in any
person.
7.10. Acquisition Proposals. The Company and the
Optometrist agree that from the date of this Agreement through the earlier of
the Closing Date or January 1, 1997, (a) neither the Optometrist nor the
Company nor any of its officers and directors shall, and the Optometrist and
the Company shall direct and use their best efforts to cause the Company's
employees, agents, and representatives not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
Acquisition Proposal or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; (b) the Optometrist and
the Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing and each will take the necessary steps to
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 7.10; and (c) the Optometrist and
the Company will notify Vision 21 immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company or the Optometrist.
7.11. Distributions and Repurchases. No distribution,
payment or dividend of any kind will be declared or paid by the Company with
respect of its capital stock, nor will any repurchase of any of the Company's
capital stock be approved or effected.
7.12. Requirements to Effect the Transaction. The
Company and the Optometrist shall use their best efforts to take, or cause to
be taken, all actions necessary to effect the Transaction under applicable law.
7.13. Optometrist Accounts Payable and Optometrist
Retained Equity. The Company shall, and the Optometrist shall cause the
Company, to pay in a timely manner the accounts payable of the Optometrist.
Except as contemplated herein, the Company shall not, and the Optometrist shall
not permit the Company to, make payment of all or any portion of any retained
equity of the Company at any time prior to Closing.
7.14. Optometrist Employment Agreements. The Company
and the Optometrist shall cause, at or immediately prior to Closing, each
Optometrist Employee (except for those non-shareholder Optometrist Employees
identified on Schedule 7.14) who is then an employee of the Company and
Optometrist agrees at or immediately prior to Closing (i) to terminate his
employment agreement, if any, with the Company by mutual consent without any
liability therefor on the part of the Company and (ii) to enter into a new
Optometrist
40
<PAGE> 55
Employment Agreement with the Company in accordance with the terms of the
Business Management Agreement.
7.15. Termination of Retirement Plans. Prior to
Closing, the Optometrist shall cause the Company to take all steps necessary to
discontinue benefits accruals under any Employee Benefit Plan that is intended
to be a qualified employee retirement plan under Section 401(a) of the Code (a
"Retirement Plan") effective as of Closing or as soon thereafter as may be
practical.
Subsequent to Closing, the Company and Vision 21 shall
review the extent to which the Company can resume contributions to the
Retirement Plan without violating the qualification requirements of Sections
410(b) and 401(a)(4) of the Code, taking into account any employees of Vision
21 who would be "leased employees" of the Company under Section 414(n) of the
Code. If Vision 21 and the Company mutually agree that such qualification
requirements can be satisfied, the Company may elect to continue the Retirement
Plan and make contributions in accordance with its terms, provided that the
Company shall agree to cover at its own expense any Vision 21 employees who are
leased employees if such coverage is required to maintain the tax-qualified
status of the Retirement Plan.
7.16. Delivery of Schedules. The Company and the
Optometrist shall deliver to Vision 21 all schedules required to be delivered
by them prior to the Closing.
7.17. Assignment of Fees for Optometry Services. On or
prior to the Closing Date, the Company shall obtain an irrevocable assignment
from all Professional Employees of any and all of their rights to receive
payment for the provision of optometry services which are part of the Accounts
Receivable to Vision 21 existing on the Closing Date, except for those fees
specified and set forth on Schedule 7.17. Each Professional Employee shall
undertake to endorse any payments received on account of such services to the
order of Vision 21 and to take such other action as may be necessary to confirm
to Vision 21 the rights to collect and retain for its own account such Accounts
Receivable. The Company shall cause its Professional Employees to agree that
such security interest of such lender(s) is intended to be a first priority
security interest and is superior to any right, title or interest which may be
asserted by such Professional Employees with respect to the Accounts Receivable
or the proceeds thereof. In the event that the assignment of rights described
in this Section shall be deemed, for any reason, to be ineffective as an
outright assignment, the Company shall cause each Professional Employee to
agree that such Professional Employee shall be deemed, effective as of the
Closing Date, to have granted to Vision 21 a first priority lien on and
security interest in and to any and all interests of such Professional Employee
in any of the Accounts Receivable, and all proceeds with respect thereto, to
secure the collection by Vision 21 of all Accounts Receivable, and this
Agreement shall be deemed to be a security agreement to the extent necessary to
give effect to the foregoing. The Company shall cause each Professional
Employee to execute and deliver, all such financing statements as the Company
or Vision 21 may request in order to perfect such security interest. The
Company shall not suffer any Professional
41
<PAGE> 56
Employee to grant any other lien on or security interest in or to such Accounts
Receivable or any proceeds thereof.
8. COVENANTS OF VISION 21. Vision 21 agrees that between the
date hereof and the Closing:
8.1. Consummation of Agreement. Vision 21 shall use
its best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and conditions and take all corporate and
other actions necessary to approve the Transaction; provided, however, that
this covenant shall not require Vision 21 to make any expenditures that are not
expressly set forth in this Agreement or otherwise contemplated herein.
8.2. Notification of Certain Matters. Vision 21 shall
promptly inform the Company and the Optometrist in writing of (a) any notice
of, or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by Vision 21 subsequent
to the date of this Agreement and prior to the Closing Date under any Vision 21
Commitment material to Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business and to which it is subject; or (b)
any material adverse change in Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business.
8.3. Licenses and Permits. Vision 21 shall use its
best efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, statute, rule, regulation or ordinance, or otherwise
necessary or desirable to consummate the Transaction or provide the services
contemplated by the Business Management Agreement and to conduct the intended
business of Vision 21.
8.4. Release of Optometrist From Practice Liabilities.
Vision 21 shall use its best efforts to obtain from third party creditors the
release of Optometrist from any personal liabilities relating to the Practice
which are identified on Schedule 8.4 and assumed by Vision 21 pursuant to the
terms of this Agreement.
9. COVENANTS OF VISION 21, THE COMPANY AND THE OPTOMETRIST.
Vision 21, the Company and the Optometrist agree as follows:
9.1. Filings; Other Action.
a. Vision 21, the Company and the
Optometrist shall cooperate to promptly prepare and file at Vision 21's expense
with the SEC, a Registration Statement on Form S-1 (or other appropriate form)
to be filed by Vision 21 in connection with any Initial Public Offering of
Vision 21 (including the prospectus constituting a part thereof, the
"Registration Statement"). Vision 21 shall obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, and the Company and the
Optometrist shall furnish all information concerning the Company, the
42
<PAGE> 57
Non-optometric Assets and the Optometrist as may be reasonably requested in
connection with any such action.
b. Each of the Company, the Optometrist
and Vision 21 represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in a Registration
Statement, by exhibit or otherwise, will, at the time the Registration
Statement and each amendment and supplement thereof, if any, becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Company, the Optometrist, and Vision 21 shall
agree as to the information and documents supplied by the Company and the
Optometrist for inclusion in the Registration Statement and shall indicate such
information and documents in a letter to be delivered at least ten (10) days
prior to the initial filing of the Registration Statement with the SEC. The
Company and the Optometrist shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act.
c. The Optometrist and the Company shall,
upon request, furnish Vision 21 with all information concerning himself,
itself, their respective partners, the Company's subsidiaries, directors,
officers, and stockholders, and including financial statements with respect to
the same, any consents (and information necessary to obtain such consents) and
such other matters as may be reasonably requested by Vision 21 in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application made
by or on behalf of each such party or any of the Company's subsidiaries to any
governmental entity in connection with the Transaction, any Initial Public
Offering and the other transactions contemplated by this Agreement.
9.2. Amendment of Schedules. Each party hereto agrees
that, with respect to the representations and warranties of such party
contained in this Agreement, such party shall have the continuing obligation
until the Closing to attach, supplement or amend promptly the Schedules with
respect to any matter that would have been or would be required to be set forth
or described in the Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein; provided
that no amendment or supplement to a Schedule that constitutes or reflects a
material adverse change to the Company or the Non-optometric Assets may be made
unless Vision 21 consents to such amendment or supplement, and no amendment or
supplement to a Schedule that constitutes or reflects a material adverse change
to Vision 21 may be made unless the Company and the Optometrist consent to such
amendment or supplement. For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth in
Sections 10.1 and 11.1 have been fulfilled, the Schedules hereto shall be
deemed to be the Schedules as amended or supplemented pursuant to this Section
9.2. In the event that the Company is required to amend or supplement a
Schedule in accordance with this Section 9.2 and Vision 21 does not consent to
such amendment or supplement, or Vision 21 is required to amend or supplement a
Schedule in accordance with this Section 9.2 and the Company and the
Optometrist do not consent, this
43
<PAGE> 58
Agreement shall be deemed terminated by mutual consent as set forth in Section
15.1(d) or Section 15.1(e) as appropriate.
9.3. Fees and Expenses.
a. Vision 21 shall pay all costs of the
Audit of the Company's Financial Statements and financial records by Vision
21's auditors (or auditors designated by Vision 21's auditors). All items
prepared by Vision 21's auditors in connection with the Audit ("Prepared Audit
Materials") shall be for use solely by Vision 21; provided, however, that the
Company may utilize the Prepared Audit Materials solely in connection with its
review of Vision 21's calculation of the Purchase Price. The Prepared Audit
Materials shall not be deemed to include those items which customarily remain
the property of auditors such as their working papers and memos.
b. In the event the Transaction is not
consummated, the Company and Optometrist shall not be entitled to copies or
originals of the Prepared Audit Materials unless the Company or Optometrist pay
for or reimburses Vision 21 for all expenses of the auditor in connection with
the Audit in advance of receiving the Prepared Audit Materials (either from
Vision 21 or its auditor). For purposes of this Agreement, Audit expenses
shall include all expenses related to the Audit as well as expenses incurred to
present the financial statements in accordance with GAAP and all schedules
related thereto.
c. Each of the Company and Vision 21
shall pay the costs and expenses of their own legal counsel with respect to
legal services rendered in connection with the preparation and negotiation of
this Agreement and the transactions contemplated hereby.
d. In the event that an Initial Public
Offering does not take place for any reason whatsoever, Vision 21 (but not the
Company or the Optometrist) shall have sole responsibility for the payment of
all legal fees (except as set forth in Section 9.3(c)), accounting fees (except
as set forth in Section 9.3(c)), underwriters' expenses and other fees, costs
and expenses associated solely in connection with the preparation of any
Registration Statement relating to such Initial Public Offering.
e. If any Initial Public Offering is
consummated as contemplated by this Agreement, all legal fees, audit fees,
printing costs, filing fees, blue sky fees and underwriters' discounts and fees
associated solely with the Initial Public Offering shall be paid by Vision 21
from the proceeds of the Initial Public Offering, except for those expenses,
fees and underwriters' discounts related to any shares sold by the Optometrist.
9.4. Release of Optometrist From Practice Liabilities.
Vision 21 shall use its best efforts to obtain the release of the Optometrist
from any liabilities relating to the Practice of which the Optometrist and the
Company are jointly obligated which are set forth on Schedule 9.4.
44
<PAGE> 59
10. CONDITIONS PRECEDENT OF VISION 21. Except as may be waived
in writing by Vision 21, the obligations of Vision 21 hereunder are subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions precedent:
10.1. Representations and Warranties. The
representations and warranties of the Company and the Optometrist contained
herein shall have been true and correct in all material respects when initially
made and shall be true and correct in all material respects as of the Closing
Date.
10.2. Covenants. The Company and the Optometrist shall
have performed and complied in all material respects with all covenants
required by this Agreement to be performed and complied with by the Company or
the Optometrist prior to the Closing Date.
10.3. Legal Opinion. Counsel to the Company and the
Optometrist shall have delivered to Vision 21 their opinions, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 10.3 which
Vision 21, Vision 21's counsel, the underwriters of the Initial Public Offering
and their counsel shall be permitted to rely upon.
10.4. Proceedings. No action, proceeding or order by
any court or governmental body or agency shall have been threatened orally or
in writing, asserted, instituted or entered to restrain or prohibit the
carrying out of the transactions contemplated hereby.
10.5. No Material Adverse Change. No material adverse
change in the condition (financial or otherwise), operations, assets,
liabilities or business of the Company shall have occurred since the Company
Balance Sheet Date, whether or not such change shall have been caused by the
deliberate act or omission of the Company or the Optometrist.
10.6. Government Approvals and Required Consents. The
Company, the Optometrist and Vision 21 shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Company or any of its
employees are a party).
10.7. Certification. Neither the Company nor the
Optometrist shall have received any notice of or been made a party to any
judicial or administrative proceeding, or threatened to so be made a party, in
any action or proceeding that seeks to deny the continued use or receipt of any
necessary permit, license, authorization, certification or approval under the
Medicare and Medicaid programs to provide optometry services.
10.8. Closing Deliveries. Vision 21 shall have
received all documents and agreements, duly executed and delivered in form
reasonably satisfactory to Vision 21, referred to in Section 12.1.
45
<PAGE> 60
10.9. Due Diligence. Vision 21 shall have completed to
its satisfaction a due diligence review of the Company and the Optometrist.
10.10. Financial Audit. Vision 21 shall have approved
in Vision 21's sole discretion an audit of the Company and the Practice which
audit shall have been performed by an accounting firm designated by Vision 21
at the sole expense of Vision 21.
10.11. Medicare Audit. Vision 21 shall have approved in
Vision 21's sole discretion a Medicare audit of the Company and the Practice
which audit shall be at the sole expense of Vision 21.
10.12. Exemption Under State Securities Laws. The
transfer of Vision 21's Securities to the Optometrist as contemplated in this
Agreement shall qualify for one or more exemptions from registration under the
State's securities laws. Vision 21 shall pay all filing fees in connection
with any filing required to qualify the transfer of the Securities for such
exemption(s).
10.13. Assignment of Professional Employees' Rights in
Accounts Receivable. The Company shall have caused the Professional Employees
to assign any and all of their rights with respect to Accounts Receivable to
Vision 21 and shall cause such Professional Employees to execute such other
agreements and instruments as contemplated in Section 7.18.
11. CONDITIONS PRECEDENT OF THE COMPANY AND THE OPTOMETRIST.
Except as may be waived in writing by the Company and the Optometrist, the
obligations of the Company and the Optometrist hereunder are subject to
fulfillment at or prior to the Closing Date of each of the following conditions
precedent:
11.1. Representations and Warranties. The
representations and warranties of Vision 21 contained herein shall be true and
correct in all respects when initially made and shall be true and correct in
all material respects as of the Closing Date.
11.2. Covenants. Vision 21 shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by it prior to the Closing
Date.
11.3. Legal Opinions. Counsel to Vision 21 shall have
delivered to the Company and the Optometrist their opinion, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 11.3.
11.4. Proceedings. No action, proceeding or order by
any court or governmental body or agency shall have been threatened in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
46
<PAGE> 61
11.5. Government Approvals and Required Consents. The
Company, the Optometrist and Vision 21 shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Company or any of its
employees are a party).
11.6. Closing Deliveries. The Company and the
Optometrist shall have received all documents, instruments and agreements, duly
executed and delivered in form reasonably satisfactory to the Company, referred
to in Section 12.2.
11.7. No Change in Voting or Ownership Control. There
shall have been no changes in the voting or ownership control of Vision 21 from
the date first above written to the Closing Date.
11.8. No Material Adverse Change; Delivery of Amended
Confidential Information Memorandum. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of Vision 21 shall have occurred since the end of the last fiscal period
reported in the Vision 21 Financial Statements, whether or not such change
shall have been caused by the deliberate act or omission of Vision 21. Vision
21 shall deliver an amended Confidential Information Memorandum updating the
information contained in the initial Confidential Information Memorandum on or
before December 17, 1996, and the Company and the Optometrist shall have the
right not to close the transactions contemplated in this Agreement if they
determine, based upon their review of the amended Confidential Information
Memorandum, that a material adverse change has occurred with respect to the
condition (financial or otherwise), operations, assets, liabilities or business
of Vision 21.
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS.
12.1. Deliveries of the Company and the Optometrist.
At or prior to December 24, 1996, the Company and the Optometrist shall deliver
to Vision 21, c/o Shumaker, Loop & Kendrick, LLP, counsel to Vision 21, the
following, all of which shall be in a form reasonably satisfactory to Vision 21
and shall be held by Shumaker, Loop & Kendrick, LLP in escrow pending Closing,
pursuant to an escrow agreement or letter in form and substance mutually
acceptable to the parties hereto:
a. a copy of resolutions of the Board of
Directors of the Company authorizing (i) the execution, delivery and
performance of this Agreement and all related documents and agreements, and
(ii) the consummation of the Transaction, certified by the Secretary of the
Company as being true and correct copies of the originals thereof subject to no
modifications or amendments;
b. a certificate of the President of the
Company, and of the Optometrist, dated the Closing Date, as to the truth and
correctness of the representations and warranties of the Company and the
Optometrist contained herein, on and as of the Closing Date;
47
<PAGE> 62
c. a certificate of the President of the
Company, and of the Optometrist, dated the Closing Date, (i) as to the
performance of and compliance in all material respects by the Company and the
Optometrist with all covenants contained herein on and as of the Closing Date
and (ii) certifying that all conditions precedent of the Company and the
Optometrist to the Closing have been satisfied;
d. a certificate of the Secretary of the
Company certifying as to the incumbency of the directors and officers of each
such corporation and as to the signatures of such directors and officers who
have executed documents delivered pursuant to the Agreement on behalf of each
such corporation;
e. a certificate, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the state of
incorporation for the Company establishing that the Company is in existence,
has paid all franchise or similar taxes, if any, and, if applicable, otherwise
is in good standing to transact business in its state of organization;
f. certificates, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the states in
which the Company is qualified to do business, to the effect that the Company
is qualified to do business and, if applicable, is in good standing as a
foreign corporation in each of such states;
g. an opinion of counsel to the Company
and Optometrists dated as of the Closing Date, in form and substance
satisfactory to Vision 21, which Vision 21, Vision 21's counsel and the
underwriters of any Initial Public Offering and their counsel are permitted to
rely upon and which shall include an opinion, subject to normal and customary
exceptions that to the best of their knowledge the transactions and
arrangements contemplated by this Agreement are in conformity with State laws,
rules and regulations governing the practice of optometry.
h. such appropriate documents of
transfer, including bills of sale, endorsements, assignments, drafts, checks or
other instruments, as to all of the Non-optometric Assets, and any other
appropriate instruments in such reasonable or customary form as shall be
requested by Vision 21 and its counsel;
i. such instruments satisfactory to
Vision 21 that all liens, claims, pledges, security interests and other
encumbrances on all of the Non-optometric Assets have been released;
j. all authorizations, consents, permits
and licenses referenced in Section 3.5;
k. the executed Business Management
Agreement in substantially the form attached hereto as Exhibit 12.1 (k), as
revised in accordance with changes reasonably deemed necessary or advisable by
legal counsel retained by Vision 21 in the State to address regulatory and
compliance issues;
48
<PAGE> 63
l. an executed Optometrist Employment
Agreement between the Company and the Optometrist in substantially the form
attached hereto as Exhibit 12.1 (l);
m. an executed Optometrist Employment
Agreement between the Company and each Optometrist Employee who is then an
employee of the Company in substantially the form attached hereto as Exhibit
12.1 (m);
n. an executed Registration Rights
Agreement between Vision 21 and the Optometrist in substantially the form
attached hereto as Exhibit 12.1 (n) (the "Registration Rights Agreement");
o. a non-foreign affidavit, as such
affidavit is referred to in Section 1445 (b) (2) of the Code, of the
Optometrist, signed under a penalty of perjury and dated as of the Closing
Date, to the effect that the Optometrist is a United States citizen or a
resident alien (and thus not a foreign person) and providing the Optometrist's
United States taxpayer identification number;
p. an assignment to Vision 21 of each
lease for real property described on Schedule 2.1(d) (the "Lease Assignments"),
or if desired by Vision 21, a new lease or leases between the landlords under
such leases and Vision 21 in form and substance reasonably satisfactory to
Vision 21; and
q. such other instrument or instruments
of transfer prepared by Vision 21 as shall be necessary or appropriate, as
Vision 21 or its counsel shall reasonably request, to carry out and effect the
purpose and intent of this Agreement.
12.2. Deliveries of Vision 21. At or prior to December
24, 1996, Vision 21 shall deliver to the Company and the Optometrist, c/o
Shumaker, Loop & Kendrick, LLP, counsel to Vision 21, the following, all of
which shall be in a form reasonably satisfactory to the Company and the
Optometrist and shall be held by Shumaker, Loop & Kendrick, LLP in escrow
pending Closing, pursuant to an escrow agreement or letter in form and
substance mutually acceptable to the parties hereto:
a. a copy of the resolutions of the Board
of Directors of Vision 21 authorizing (i) the execution, delivery and
performance of this Agreement, and all related documents and agreements, and
(ii) the consummation of the Transaction, certified by Vision 21's Secretary as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
b. a certificate of an officer of Vision
21 dated the Closing Date as to the truth and correctness of the
representations and warranties of Vision 21 contained herein, on and as of the
Closing Date;
49
<PAGE> 64
c. a certificate of an officer of Vision
21 dated the Closing Date, (i) as to the performance and compliance of Vision
21 with all covenants contained herein on and as of the Closing Date and (ii)
certifying that all conditions precedent of Vision 21 to the Closing have been
satisfied;
d. a certificate, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the State of
Florida establishing that Vision 21 is in existence, has paid all franchise or
similar taxes, if any, and, if applicable, otherwise is in good standing to
transact business in such state;
e. certificates (or photocopies thereof),
dated within ten (10) days prior to the Closing Date, of the Secretary of State
of each state in which Vision 21 is qualified to do business, to the effect
that Vision 21 is qualified to do business and, if applicable, is in good
standing as a foreign corporation in each of such states;
f. an opinion of Shumaker, Loop &
Kendrick, LLP, counsel to Vision 21, dated as of the Closing Date, pursuant to
Section 11.3;
g. the executed Registration Rights
Agreement;
h. the executed Lease Assignments;
i. the Note in the original principal
amount set forth in this Agreement;
j. the Agreement to Continue Practice
After Transfer Event and Stock Pledge; and
k. such other instrument or instruments
of transfer, prepared by the Company or the Optometrist as shall be necessary
or appropriate, as the Company, the Optometrist or their counsel shall
reasonable request, to carry out and effect the purpose and intent of this
Agreement.
12.3. Release of Escrow Materials. Shumaker, Loop &
Kendrick, LLP shall release the agreements, certificates, instruments,
documents and other materials described in Sections 12.1 and 12.2 to the
appropriate parties to effectuate the transactions contemplated in this
Agreement only after all such materials have been delivered by all applicable
parties (or the parties receiving such documents have waived in writing such
delivery requirement) and after counsel for the Optometrist and the Company
have sent written notice to Shumaker, Loop & Kendrick, LLP stating that the
Optometrist and the Company have reviewed the amended Confidential Information
Memorandum and have decided, based upon such review, to consummate the
transactions contemplated in this Agreement. In the event that the Optometrist
and the Company elect not to consummate the transactions contemplated in this
Agreement based upon their review of the amended Confidential Information
Memorandum, and counsel for the
50
<PAGE> 65
Optometrist and the Company informs Shumaker, Loop & Kendrick, LLP in writing
as to such decision, Shumaker, Loop & Kendrick, LLP shall promptly return the
foregoing materials to the parties sending such materials.
13. POST CLOSING MATTERS.
13.1. Further Instruments of Transfer. From and after
the Closing Date, at the request of Vision 21 and at Vision 21's sole cost and
expense, the Optometrist and the Company shall deliver any further instruments
of transfer and take all reasonable action as may be necessary or appropriate
to carry out the purpose and intent of this Agreement.
13.2. Practice Advisory Council; Local Advisory
Council; National Appeals Council. Vision 21 and the Company shall establish a
practice advisory council composed of delegates from Vision 21 and the Company
which shall advise Vision 21 and the Company and determine certain issues as
more fully described in the Business Management Agreement. Vision 21 shall
also establish a local advisory council composed of delegates from certain
practice groups acquired by Vision 21 in connection with the Related
Acquisitions. Such delegates shall be appointed from practice groups which are
located in a market area to be identified by Vision 21 and in which the Company
is located. The local advisory council board shall advise Vision 21 and the
practice groups within the market area as to policy and strategy issues and
shall determine certain types of issues and disputes between Vision 21 and such
practice groups which issues and disputes are identified in the Business
Management Agreement and other management agreements entered into between
Vision 21 and practice groups. The Company shall have the right to appoint one
(1) member to a local advisory council who shall serve an initial two (2) year
term. After the initial two-year term, election of members to the local
advisory council shall be in accordance with by-laws which shall be adopted and
amended by the local advisory council. Vision 21 shall also establish a
national appeals council which shall have, among other duties and
responsibilities, the power to adopt and amend its by-laws, to review and
approve as limited herein certain decisions of the local advisory councils, and
to resolve deadlocks among the members of such local advisory councils.
14. REMEDIES.
14.1. Indemnification by the Company and Optometrist.
Subject to the terms and conditions of this Agreement, the Company and the
Optometrist, jointly and severally, agree to indemnify, defend and hold Vision
21 and its directors, officers, members, managers, employees, agents, attorneys
and affiliates harmless from and against all losses, claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, reasonable
attorneys' fees and expenses (collectively, "Damages") asserted against or
incurred by such entities and individuals (including, but not limited to, any
reduction in payments to or revenues of the Company) arising out of or
resulting from:
51
<PAGE> 66
a. a breach of any representation,
warranty or covenant of the Company or the Optometrist contained herein or in
any schedule or certificate delivered hereunder;
b. any liability under the Securities
Act, the Exchange Act or any other federal or state "Blue Sky" or securities
law or regulation, at common law or otherwise, (i) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact relating to
the Optometrist or the Company (including its subsidiaries, if any), and
provided to Vision 21 or its counsel by the Company or the Optometrist,
specifically for inclusion in a Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, (ii)
arising out of or based upon any omission or alleged omission to state therein
a material fact relating to the Optometrist or the Company (including its
subsidiaries, if any) required to be stated therein or necessary to make the
statements therein not misleading, and not provided to Vision 21 or its counsel
by the Company or the Optometrist, provided, however, that such indemnity shall
not inure to the benefit of Vision 21 to the extent that such untrue statement
(or alleged untrue statement) was made, in, or omission (or alleged omission)
occurred in, any preliminary prospectus, and such information was not so
included by Vision 21 and properly delivered to shareholders of Vision 21 who
acquire Vision 21 Common Stock in any Initial Public Offering;
c. any filings, reports or disclosures
made pursuant to the IRS Voluntary Compliance Resolution Program, if
applicable; and
d. any liability arising from any alleged
unlawful sale or offer to sell or transfer any of the Common Stock by
Optometrist.
14.2. Indemnification by Vision 21. Subject to the
terms and conditions of this Agreement, Vision 21 hereby agrees to indemnify,
defend and hold the Company and the Optometrist harmless from and against all
damages asserted against or incurred by it or him arising out of or resulting
from:
a. a breach by Vision 21 of any
representation, warranty or covenant of Vision 21 contained therein or in any
schedule or certificate delivered hereunder;
b. any liability under the Securities
Act, the Exchange Act or any other federal or state "Blue Sky" or securities
law or regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
Vision 21, contained in any preliminary prospectus, Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to Vision 21 (including its subsidiaries),
required to be stated therein or necessary to make the statements therein not
misleading; and
52
<PAGE> 67
c. any filings, reports or disclosures
made pursuant to the IRS Voluntary Compliance Resolution Program, if
applicable.
Notwithstanding anything in this Section 14.2, Vision 21 shall not be
liable for any Damages resulting from any matter not disclosed to Vision 21 by
any of the third parties to be acquired by Vision 21 in connection with the
Related Acquisitions.
14.3. Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
a. A party claiming indemnification under
this Agreement (an "Indemnified Party") shall promptly (and, in any event, at
least ten (10) days prior to the due date for any responsive pleadings, filings
or other documents) (i) notify the party from whom indemnification is sought
(the "Indemnifying Party") of any third-party claim or claims asserted against
the Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying
Party a written notice ("Claim Notice") describing in reasonable detail the
nature of the Third Party Claim, a copy of all papers served with respect to
such claim (if any), an estimate of the amount of damages attributable to the
Third Party Claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. Except as set forth in Section 14.6, the
failure to promptly deliver a Claim Notice shall not relieve the Indemnifying
Party of its obligations to the Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of such claim. Within thirty (30) days after
receipt of any Claim Notice (the "Election Period"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article 14 with
respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
b. If the Indemnifying Party notifies the
Indemnified Party within the Election Period that the Indemnifying Party elects
to assume the defense of the Third Party Claim, then the Indemnifying Party
shall have the right to defend, at its sole cost and expense, such Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or settled at the
discretion of the Indemnifying Party in accordance with this Section 14.3(b).
The Indemnifying Party shall have full control of such defense and proceedings,
including any compromise or settlement thereof. The Indemnified Party is
hereby authorized, at the sole cost and expense of the Indemnifying Party (but
only if the Indemnified Party is entitled to indemnification hereunder), to
file, during the Election Period, any motion, answer or other pleadings that
the Indemnified Party shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party (it being understood and agreed that if an Indemnified Party
takes any such action that is prejudicial and causes a final adjudication that
is adverse to the Indemnifying Party, the Indemnifying Party shall be relieved
of its obligations hereunder with respect to such Third Party Claim). If
requested by the Indemnifying Party, the
53
<PAGE> 68
Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to Section 14.3(b) and shall bear its own costs and expenses with
respect to such participation; provided, however, that if the named parties to
any such action (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party, and the Indemnified Party has been advised by
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the Indemnifying Party, then
the Indemnified Party may employ separate counsel at the expense of the
Indemnifying Party, and upon written notification thereof, the Indemnifying
Party shall not have the right to assume the defense of such action on behalf
of the Indemnified Party; provided further that the Indemnifying Party shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Party, which firm shall be designated in writing by the Indemnified
Party.
c. If the Indemnifying Party fails to
notify the Indemnified Party within the Election Period that the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 14.3(b), or if
the Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 14.3(b) but fails diligently and promptly to prosecute or settle the
Third Party Claim, then the Indemnified Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party (if the Indemnified
Party is entitled to indemnification hereunder), the Third Party Claim by all
appropriate proceedings, which proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or settled. The
Indemnified Party shall have full control of such defense and proceedings,
provided, however, that the Indemnified Party may not enter into, without the
Indemnifying Party's consent, which shall not be unreasonably withheld, any
compromise or settlement of such Third Party Claim. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article 14 and if such
dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party
shall not be required to bear the costs and expenses of the Indemnifying
Party's defense pursuant to this Section or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party shall reimburse the Indemnifying Party in full for all costs and expenses
of such litigation. The Indemnifying Party may participate in, but not control
any defense or settlement controlled by the Indemnified Party pursuant to this
Section 14.3(c), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation; provided, however, that if the
named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and the Indemnifying Party
has been advised by counsel that there may be one or more legal defenses
available to the Indemnified Party, then the Indemnifying Party may employ
separate counsel and upon written notification thereof, the Indemnified Party
54
<PAGE> 69
shall not have the right to assume the defense of such action on behalf of the
Indemnifying Party.
d. In the event any Indemnified Party
should have a claim against any Indemnifying Party hereunder that does not
involve a Third Party Claim, the Indemnified Party shall transmit to the
Indemnifying Party a written notice (the "Indemnity Notice") describing in
reasonable detail the nature of the claim, an estimate of the amount of damages
attributable to such claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not
notify the Indemnified Party within sixty (60) days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim, the claim
specified by the Indemnified Party in the Indemnity Notice shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed such claim, as provided above, such dispute shall be resolved
by mediation or arbitration as provided in Section 18.1 if the parties do not
reach a settlement of such dispute within thirty (30) days after notice of a
dispute is given.
e. Payments of all amounts owing by an
Indemnifying Party pursuant to this Article 14 relating to a Third Party Claim
shall be made within thirty (30) days after the latest of (i) the settlement of
such Third Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of such Third Party Claim or (iii) the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 14.3(d) shall be made within thirty (30)
days after the later of (i) the expiration of the sixty (60) day Indemnity
Notice period or (ii) the expiration of the period for appeal, if any, of a
final adjudication or arbitration of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
14.4. Remedies Not Exclusive. The remedies provided in
this Agreement shall not be exclusive of any other rights or remedies available
to one party against the other, either at law or in equity. This Article 14
regarding indemnification shall survive Closing.
14.5. Costs, Expenses and Legal Fees. Each party
hereto agrees to pay the costs and expenses (including attorneys' fees and
expenses) incurred by the other parties in successfully (a) enforcing any of
the terms of this Agreement, or (b) proving that another party breached any of
the terms of this Agreement.
14.6. Indemnification Limitations. Notwithstanding the
provisions of Sections 14.1 and 14.2, (a) no party shall be required to
indemnify another party with respect to a breach of a representation, warranty
or covenant unless the claim for indemnification is brought within two (2)
years after the Closing Date, except that a claim for indemnification for a
breach of the representations and warranties contained in Sections 3.1, 3.2.,
3.3, 3.11, 3.14, 3.20, 4.3, 4.5, 4.8, 5.1, 5.2, 5.3, 5.4 and 6.1 may be made at
any time, and a claim for indemnification for a breach of the representations
and warranties contained in Sections 3.9, 3.15, 3.17, 3.18, 3.24, 3.25, 3.26,
3.27, 3.28, 3.30, 4.1, 4.4, 4.6, 5.6 and 5.7 may be made
55
<PAGE> 70
at any time within the applicable statute of limitations; (b) indemnification
based upon Sections 14.1(b) through (d) and 14.2(b) may be made at any time
within the applicable statute of limitations; and (c) the Optometrist shall not
be required to indemnify Vision 21 pursuant to Section 16.1 unless, and to the
extent that, the aggregate amount of Damages incurred by Vision 21 shall exceed
an amount equal to two percent (2%) of the total Purchase Price; and (c) the
Optometrist shall not be required to indemnify Vision 21 with respect to a
breach of a representation, warranty or covenant for Damages in excess of the
aggregate Purchase Price received by the Optometrist (other than pursuant to a
requirement to indemnify Vision 21 under Sections 3.27 or 3.28, or unless the
breach involves an intentional breach or fraud by the Optometrist or the
Company which shall be unlimited).
14.7. Tax Benefits; Insurance Proceeds. The total
amount of any indemnity payments owed by one party to another party to this
Agreement shall be reduced by any correlative tax benefit received by the party
to be indemnified or the net proceeds received by the party to be indemnified
with respect to recovery from third parties or insurance proceeds and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
14.8. Payment of Indemnification Obligation. In the
event that the Optometrist has an indemnification obligation to Vision 21
hereunder, subject to Vision 21's approval as set forth below, the Optometrist
may satisfy such obligation by transferring to Vision 21 such number of shares
of Vision 21 Common Stock owned by the Optometrist having an aggregate fair
market value (which is prior to any Initial Public Offering based upon the
valuation given at Closing hereof or after an Initial Public Offering the fair
market value at such time based on the last reported sale price of Vision 21
Common Stock on a principal national securities exchange or other exchange on
which the Vision 21 Common Stock is then listed or the last quoted ask price on
any over-the-counter market through which the Vision 21 Common Stock is then
quoted on the last trading day immediately preceding the day on which the
Optometrist transfers shares of Vision 21 Common Stock to Vision 21 hereunder)
equal to the indemnification obligation, provided that each of the following
conditions are satisfied:
a. The Optometrist shall transfer to
Vision 21 good, valid and marketable title to the shares of Vision 21 Common
Stock, free and clear of all adverse claims, security interests, liens, claims,
proxies, options, stockholders' agreements and encumbrances;
b. The Optometrist shall make such
representation and warranties as to title to the stock, absences of security
interests, liens, claims, proxies, stockholders' agreements and other
encumbrances and other matters as reasonably requested by Vision 21; and
c. The other terms and conditions of any
transaction contemplated pursuant to this Section and the effects thereof,
including any legal or tax consequences, shall be reasonably satisfactory to
Vision 21.
56
<PAGE> 71
15. TERMINATION.
15.1. Termination. This Agreement may be terminated
and the Transaction may be abandoned:
a. at any time prior to the Closing Date
by mutual agreement of all parties;
b. at any time prior to the Closing Date
by Vision 21 if any representation or warranty of the Company or the
Optometrist contained in this Agreement or in any certificate or other document
executed and delivered by the Company or the Optometrist pursuant to this
Agreement is or becomes untrue or breached in any material respect or if the
Company or the Optometrist fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
c. at any time prior to the Closing Date
by the Company if any representation or warranty of Vision 21 contained in this
Agreement is or becomes untrue in any material respect or if Vision 21 fails to
comply in any material respect with any covenant or agreement contained herein,
and any such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt or written notice thereof;
d. at any time prior to the Closing Date
by the Company in the event of the failure of any of the conditions precedent
set forth in Article 13 of this Agreement;
e. at any time prior to the Closing Date
by Vision 21 in the event of the failure of any of the conditions precedent set
forth in Article 12 of this Agreement;
f. by Vision 21 if at any time prior to
the Closing Date, Vision 21 deems termination to be advisable, provided,
however, that if Vision 21 exercises its right to terminate this Agreement
under this subsection, Vision 21 shall reimburse the Company and the
Optometrist for all reasonable attorneys' and accountants' fees incurred by the
Company and the Optometrist in connection with this Agreement; provided that
Vision 21 shall only reimburse the Company and the Optometrist up to an
aggregate maximum amount of One Hundred Thousand and No/100 Dollars
($100,000.00) for such fees; or
g. by Vision 21 or the Company if the
Transaction shall not have been consummated by December 16, 1996.
15.2. Effect of Termination. In the event this
Agreement is terminated pursuant to Section 15.1, Vision 21, the Company and
the Optometrist, shall each be entitled to pursue, exercise and enforce any and
all remedies, rights, powers and privileges available at law or in equity,
subject to the limitations set forth in Section 15.1. In the event of a
termination of this Agreement under the provisions of this Article 15, a party
not then in
57
<PAGE> 72
material breach of this Agreement shall stand fully released and discharged of
any and all obligations under this Agreement.
16. OPTOMETRIST EMPLOYMENT AGREEMENT.
16.1. Optometrist Employment Agreement. The parties
acknowledge that in accordance with the terms of this Agreement, Optometrist,
as employee, and the Company, as employer, have entered into the Optometrist
Employment Agreement and that Vision 21 is entitled to enforce such Optometrist
Employment Agreement as an intended third party beneficiary. Optometrist and
Vision 21 acknowledge that Vision 21 would suffer severe harm in the event of
Optometrist's resignation prior to the expiration of the five (5) year term of
such Optometrist Employment Agreement (without first obtaining the written
consent of Vision 21) or a breach or default of Optometrist's obligations under
such Optometrist Employment Agreement, and Optometrist, the Company and Vision
21 agree that Vision 21 shall be entitled to recover from Optometrist any and
all damages incurred by Vision 21 caused by such resignation, breach or
default. Notwithstanding the foregoing, Vision 21 shall not be entitled to
recover its damages caused by such resignation, breach or default if such
resignation, breach or default was caused by: (i) the death or disability of
Optometrist, (ii) circumstances not caused by an act or omission of Optometrist
and which circumstances are beyond his control, or (iii) loss of Optometrist's
license to practice as an optometrist, unless such loss of license is due to an
act or omission of Optometrist. Notwithstanding the foregoing, Optometrist
shall have no obligation to pay the damages contemplated in this Section 16.1
if (a) the Business Management Agreement has been terminated pursuant to a
material breach by Vision 21, or (b) Optometrist cures any such breach or
default of the Optometrist Employment Agreement within a period of thirty (30)
days after notice from Vision 21 of such breach or default.
16.2. Survival. The parties acknowledge and agree that
this Article 16 shall survive the Closing of the transactions contemplated
herein.
17. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.
17.1. Optometrist and Company Non-Competition Covenant.
a. The Optometrist and the Company
recognize that the covenants of the Optometrist and the Company contained in
this Section 17.1 are an essential part of this Agreement and that, but for the
agreement of the Optometrist and the Company to comply with such covenants,
Vision 21 would not have entered into this Agreement. The Optometrist and the
Company acknowledge and agree that the Optometrist's and the Company's
covenants not to compete are necessary to ensure the continuation of the
Management Business (as defined below) and are necessary to protect the
reputation of Vision 21, and that irreparable and irrevocable harm and damage
will be done to Vision 21 if the Optometrist or the Company compete with the
Management Business or Vision 21. The Optometrist and the Company accordingly
agree that for the periods set forth in the Business Management Agreement the
Optometrist and the Company shall not:
58
<PAGE> 73
i) directly or indirectly,
either as principal, agent, independent contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner or in any other
individual or representative capacity whatsoever, either for the Optometrist's
or the Company's own benefit or for the benefit of any other person or entity
knowingly (A) hire, attempt to hire, contact or solicit with respect to hiring
any employee of Vision 21 (or of any of its direct or indirect subsidiaries) or
(B) induce or otherwise counsel, advise or encourage any employee of Vision 21
(or of any of its direct or indirect subsidiaries) to leave the employment of
Vision 21;
ii) act or serve, directly or
indirectly, as a principal, agent, independent contractor, consultant,
director, officer, employee, employer or advisor or in any other position or
capacity with or for, or acquire a direct or indirect ownership interest in or
otherwise conduct (whether as stockholder, partner, investor, joint venturer,
or as owner of any other type of interest), any Competing Management Business
as such term is defined herein; provided, however, that this clause (ii) shall
not prohibit the Optometrist or the Company from being the owner of up to 1% of
any class of outstanding securities of any company or entity if such class of
securities is publicly traded; or
iii) directly or indirectly,
either as principal, agent, independent, contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner or in any other
individual or representative capacity whatsoever, either for the Optometrist's
or the Company's own benefit or for the benefit of any other person or entity,
call upon or solicit any customers or clients of the Management Business;
provided however, that the Optometrist may send out a general notice to the
customers or clients of the Management Business announcing the termination of
his arrangement with Vision 21 and may advertise in a general manner without
violating this covenant. The parties hereto acknowledge and agree that for
purposes of this Section, patients which have in the past received optometric
care from the Company and/or shall in the future receive optometric care from
the Company are not deemed to be customers or clients of the Management
Business.
b. For the purposes of this Section 17.1,
the following terms shall have the meaning set forth below:
i) "Management Business" shall
mean management and administration of the non-optometric and non-medical
aspects of medical, ophthalmology and optometry practices.
ii) "Competing Management
Business" shall mean an individual, business, corporation, association, firm,
undertaking, company, partnership, joint venture, organization or other entity
that either (A) conducts a business substantially similar to the Management
Business within the State, or (B) provides or sells a service which is the same
or substantially similar to, or otherwise competitive with the services
provided by the Management Business within the State; provided, however, that
"Competing Management Business" shall not include Vision 21, or the
Optometrist's internal management and
59
<PAGE> 74
administration of the Optometrist's or the Company's optometric practice or
participation in the management and administration of a optometrist group in
which the Optometrist or the Company devote a significant amount of time to the
practice of optometry.
c. Should any portion of this Section
17.1 be deemed unenforceable because of the scope, duration or territory
encompassed by the undertakings of the Optometrist or the Company hereunder,
and only in such event, then the Optometrist, the Company and Vision 21 consent
and agree to such limitation on scope, duration or territory as may be finally
adjudicated as enforceable by a court of competent jurisdiction after the
exhaustion of all appeals.
d. This covenant shall be construed as an
agreement ancillary to the other provisions of this Agreement, and the
existence of any claim or cause of action of the Optometrist or the Company
against Vision 21, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Vision 21 of this covenant;
provided, however, that the Optometrist and the Company shall not be bound by
this covenant and shall not be obligated to pay the liquidated damages
contemplated in this Section 17.1 if at the time of a breach of this covenant
the Business Management Agreement has already been terminated pursuant to
Section 6.2(a) thereof. Without limiting other possible remedies to Vision 21
for breach of this covenant, the Optometrist and the Company agree that
injunctive or other equitable relief will be available to enforce the covenants
of this provision, such relief to be without the necessity of posting a bond,
cash or otherwise. The Optometrist, the Company and Vision 21 further
expressly acknowledge that the damages that would result from a violation of
this non-competition covenant would be impossible to predict with any degree of
certainty, and agree that liquidated damages in the aggregate amount of the
aggregate consideration received by the Optometrist pursuant to this Agreement
is reasonable in light of the severe harm to the Management Business and Vision
21 which would result in the event that a violation of this non- competition
covenant were to occur. For purposes of calculation of the liquidated damages
contemplated in this Section and for purposes of calculation of the liquidated
damages contemplated in the Business Management Agreement and the Optometrist
Employment Agreement between the Optometrist and the Company, the aggregate
consideration received by Optometrist pursuant to this Agreement shall be in
those amounts and in such form as set forth in Schedule 17.1. If the
Optometrist violates this non-competition covenant, Vision 21 shall, in
addition to all other rights and remedies available at law or equity, be
entitled to (a) cancel the number of shares of Common Stock held by the
Optometrist or the Company or, with respect to shares of Common Stock entitled
to be received by the Optometrist or the Company, terminate its obligation to
deliver such number of shares of Common Stock, valued as set forth in Section
6.6(a) of the Business Management Agreement, (b) set off all or any of such
liquidated damages sum against amounts payable under the Note held by the
Optometrist or the Company, and (c) repayment by Optometrist to Vision 21 of
the fair market value as described above, of Vision 21 Common Stock sold by
Optometrist; but in no event shall Vision 21 be entitled to offset amounts in
excess of the liquidated damages sum pursuant to this Section 17.1. The
Optometrist and the Company agree to deliver to Vision 21 the certificates
representing any such shares canceled by Vision 21 or the Note. Payment and
satisfaction by Optometrist shall be made within sixty (60) days of
notification to Optometrist by Vision 21 that Optometrist has violated this
non-competition covenant.
60
<PAGE> 75
e. This covenant shall be construed as an
agreement ancillary to the other provisions of this Agreement, and the
existence of any claim or cause of action of the Optometrist or the Company
against Vision 21, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Vision 21 of this covenant;
provided, however, that the Optometrist and the Company shall not be bound by
this covenant if at the time of a breach of this covenant the Business
Management Agreement has already been terminated pursuant to Section 6.2(a)
thereof. Without limiting other possible remedies to Vision 21 for breach of
this covenant, the Optometrist and the Company agree that injunctive or other
equitable relief will be available to enforce the covenants of this provision,
such relief to be without the necessity of posting a bond, cash or otherwise.
f. Notwithstanding anything contained
herein, this Section 17.1 shall not be construed to (i) limit the freedom of
any patient of the Optometrist or the Company to choose the facility or
optometrist from whom such patient shall receive health-care services or (ii)
limit or interfere with the Optometrist's ability to exercise his professional
judgment in treating his patients or his ability to provide optometric services
to his patients.
17.2. Optometrist and Company Confidentiality Covenant.
From the date hereof, the Optometrist and the Company shall not, directly or
indirectly, use for any purpose, other than in connection with the performance
of the Optometrist's duties under the Optometrist Employment Agreement with the
Company, or disclose to any third party, any information of Vision 21 or the
Company, as appropriate (whether written or oral), including any business
management or economic studies, patient lists, proprietary forms, proprietary
business or management methods, marketing data, fee schedules, or trade secrets
of Vision 21 or of the Company, as applicable, and including the terms and
provisions of this Agreement and any transaction or document executed by the
parties pursuant to this Agreement. Notwithstanding the foregoing, the
Optometrist and the Company may disclose information that the Optometrist or
the Company can establish (a) is or becomes generally available to and known by
the public or optometric community (other than as a result of an unpermitted
disclosure directly or indirectly by the Optometrist or the Company or their
respective Affiliates, advisors, or representatives); (b) is or becomes
available to the Optometrist or the Company on a nonconfidential basis from a
source other than Vision 21 or its Affiliates, advisors or representatives,
provided that such source is not and was not bound by a confidentiality
agreement with or other obligation of secrecy to Vision 21 or its Affiliates,
advisors or representatives of which the Optometrist or the Company has
knowledge; or (c) has already been or is hereafter independently acquired or
developed by the Optometrist or the Company without violating any
confidentiality agreement with or other obligation of secrecy to Vision 21, the
Company or their respective Affiliates, advisors or representatives. Without
limiting the other possible remedies to Vision 21 for the breach of this
covenant, the Optometrist and the Company agree that injunctive or other
equitable relief shall be available to enforce this covenant, such relief to be
without the necessity of posting a bond, cash or otherwise. The Optometrist
and the Company further agree that if any restriction contained in this Section
17.2 is held by any court to be unenforceable or unreasonable, a lesser
restriction shall be enforced in its place and the remaining restrictions
contained herein shall be enforced independently of each other.
61
<PAGE> 76
17.3. Survival. The parties acknowledge and agree that
this Article 17 shall survive the Closing of the transactions contemplated
herein.
18. DISPUTES.
18.1. Mediation and Arbitration. Any dispute,
controversy or claim (excluding claims arising out of an alleged breach of
Article 17 of this Agreement) arising out of this Agreement, or the breach
thereof, that cannot be settled through negotiation shall be settled (a) first,
by the parties trying in good faith to settle the dispute by mediation under
the Commercial Mediation Rules of the AAA (such mediation session to be held in
Tampa, Florida, if the amount in dispute is equal to or in excess of $200,000
or if the dispute is solely of a non-monetary nature, and in Tampa, Florida if
the amount in dispute is lower than $200,000, and in either case to commence
within 15 days of the appointment of the mediator by the AAA), and (b) if the
controversy, claim or dispute cannot be settled by mediation, then by
arbitration administered by the AAA under its Commercial Arbitration Rules
(such arbitration to be held in Tampa, Florida, if the amount in dispute is
equal to or in excess of $200,000 or if the dispute is solely of a non-monetary
nature, and in Tampa, Florida if the amount in dispute is lower than $200,000,
and in either case before a single arbitrator and to commence within 15 days of
the appointment of the arbitrator by the AAA), and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
19. MISCELLANEOUS
19.1. Taxes. Optometrist and the Company shall pay all
transfer taxes, sales and other taxes and charges, imposed by the State, if
any, which may become payable in connection with the transactions and documents
contemplated hereunder (excluding any of such taxes which may be attributable
to services to be provided by Vision 21 under the Business Management
Agreement). Vision 21 shall pay all transfer taxes, sales and other taxes and
charges imposed by the State of Florida, if any, which may become payable in
connection with the transactions and documents contemplated hereunder
(excluding any of such taxes which may be attributable to services to be
provided by Vision 21 under the Business Management Agreement).
19.2. Remedies Not Exclusive. No remedy conferred by
any of the specific provisions of this Agreement or any document contemplated
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise. The election of any one or more remedies by any party hereto
shall not constitute a waiver of the right to pursue other available remedies.
19.3. Parties Bound. Except to the extent otherwise
expressly provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
62
<PAGE> 77
19.4. Notices. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to Vision 21 addressed to:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 33777
Attn: Richard T. Welch, Chief Financial Officer
With copies to:
Shumaker, Loop & Kendrick
Post Office Box 172609
101 E. Kennedy Boulevard, Suite 2800
Tampa, Florida 33672-0609
Facsimile No. (813) 229-1660
Attn: Darrell C. Smith, Esquire
If to the Company and the Optometrist addressed to:
Gillette & Associates, #6965 P.A.
7209 Bryan Dairy Road
Largo, Florida 33777
Attn: Theodore N. Gillette
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 19.4. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery
or refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
19.5. Choice of Law. This Agreement shall be
construed, interpreted, and the rights of the parties determined in accordance
with, the laws of the State of Florida except with respect to matters of law
concerning the internal affairs of any corporate or partnership entity which is
a party to or the subject of this Agreement, and as to those matters the law of
the state of incorporation or organization of the respective entity shall
govern.
19.6. Entire Agreement; Amendments and Waivers. This
Agreement, together with the documents contemplated by this Agreement and all
Exhibits and Schedules hereto and thereto, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter
63
<PAGE> 78
hereof. No supplement, modification or waiver of any of the provisions of this
Agreement shall be binding unless it shall be specifically designated to be a
supplement, modification or waiver of this Agreement and shall be executed in
writing by the party to be bound thereby. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
19.7. Confidentiality Agreements. The provisions of
any prior confidentiality agreements and letters of intent between or among
Vision 21, the Company and the Optometrist, as amended, shall terminate and
cease to be of any force or effect at and upon the Closing.
19.8. Reformation Clause. It is the intention of the
parties hereto to conform strictly to applicable laws regarding the practice
and regulation of optometry, whether such laws are now or hereafter in effect,
including the laws of the United States of America, the State or any other
applicable jurisdiction, and including any subsequent revisions to, or judicial
interpretations of, those laws, in each case to the extent they are applicable
to this Agreement (the "Applicable Laws"). Accordingly, if the ownership of
any Non-optometric Asset by Vision 21 violates any Applicable Law, then the
parties hereto agree as follows: (a) the provisions of this section 19.8 shall
govern and control; (b) if none of the parties hereto are materially
economically disadvantaged, then any Non-optometric Asset, the ownership of
which violates any Applicable Law, shall be deemed to have never been owned by
Vision 21; (c) if one or more of the parties hereto is materially economically
disadvantaged, then the parties hereto agree to negotiate in good faith such
changes to the structure and terms of the transactions provided for in this
Agreement as may be necessary to make these transactions, as restructured,
lawful under applicable laws and regulations, without materially disadvantaging
either party; (d) this Agreement shall be deemed reformed; and (e) the parties
to this Agreement shall execute and deliver all documents or instruments
necessary to effect or evidence the provisions of this Section 19.8.
19.9. Assignment. The Agreement may not be assigned by
operation of law or otherwise except that Vision 21 shall have the right to
assign this Agreement, at any time, to any Affiliate or direct or indirect
wholly-owned subsidiary. In the event of such assignment, Vision 21 shall
remain liable hereunder.
19.10. Attorneys' Fees. Except as otherwise
specifically provided herein, if any action or proceeding is brought by any
party with respect to this Agreement or the other documents contemplated with
respect to the interpretation, enforcement or breach hereof, the prevailing
party in such action shall be entitled to an award of all reasonable costs of
litigation or arbitration, including, without limitation, attorneys' fees, to
be paid by the losing party, in such amounts as may be determined by the court
having jurisdiction of such action or proceeding or by the arbitrators deciding
such action or proceeding.
19.11. Further Assurances. From time to time hereafter
and without further consideration, each of the parties hereto shall execute and
deliver such additional or further instruments of conveyance, assignment and
transfer and take such other actions as any of the
64
<PAGE> 79
other parties hereto may reasonably request in order to more effectively
consummate the transactions contemplated hereunder or as shall be reasonably
necessary or appropriate in connection with the carrying out of the parties'
respective obligations hereunder for the purposes of this Agreement.
19.12. Announcements and Press Releases. Any press
releases or any other public announcements concerning this Agreement or the
transactions contemplated hereunder shall be approved in advance by Vision 21
and the Company; provided, however, that such approval shall not be
unreasonably withheld and if any party reasonably believes that it has a legal
obligation to make a press release and the consent of the other party cannot be
obtained, then the release may be made without such approval.
19.13. No Tax Representations. Each party acknowledges
that it is relying solely on its advisors to determine the tax consequences of
the transactions contemplated hereunder and that no representation or warranty
has been made by any party as to the tax consequences of such transactions
except as otherwise specifically set forth in this Agreement.
19.14. No Rights as Stockholder. The Optometrist shall
have no rights as a stockholder with respect to any shares of Common Stock
until the issuance of a stock certificate evidencing such shares. Except as
otherwise provided in the Agreement, no adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to such
date any stock certificate is issued.
19.15. Multiple 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.
19.16. Headings. The headings of the several articles
and sections herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
19.17. Severability. Each article, section and
subsection of this Agreement constitutes a separate and distinct undertaking,
covenant or provision of this Agreement. If any such provision shall finally
be determined to be unlawful, such provision shall be deemed severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
19.18. Form of Transaction. If after the execution
hereof, Vision 21 determines that the sale of the Non-optometric Assets of the
Company can be better achieved through a different form of transaction without
economic injury to the Company or the Optometrist, or delay of the consummation
of the transaction, the Company and the Optometrist shall cooperate in revising
the structure of the transaction and shall negotiate in good faith to so amend
this Agreement; provided, that Vision 21 shall reimburse the Company and the
Optometrist at Closing for all reasonable additional expenses incurred by the
Company and the Optometrist as a result of such change in form.
65
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
"COMPANY" GILLETTE &
ASSOCIATES, #6965, P.A.
/s/
- --------------------------------- By: /s/ Theodore N. Gillette
Witness ---------------------------------
/s/ Theodore N. Gillette, President
- ---------------------------------
Witness
"OPTOMETRIST"
/s/ /s/ Theodore N. Gillette
- --------------------------------- ---------------------------------
Witness Theodore N. Gillette
/s/
- ---------------------------------
Witness
/s/ /s/ Mark Sarno
- --------------------------------- ---------------------------------
Witness Mark Sarno
/s/
- ---------------------------------
Witness
/s/ /s/ Mark Beiler
- --------------------------------- ---------------------------------
Witness Mark Beiler
/s/
- ---------------------------------
Witness
"VISION 21"
VISION 21, INC.
/s/
- --------------------------------- By: /s/ Theodore N. Gillette
Witness ---------------------------------
/s/ Theodore Gillette, President
- ---------------------------------
Witness
66
<PAGE> 81
Schedule 2.1(c)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the "Optometrist")
and Vision 21, Inc. ("Vision 21")
Personal Property Leases
None
<PAGE> 82
Schedule 2.1(d)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Real Property Leases
Lease between Visionworks (now ECCA) and Dr. Gillette & Associates for each of
the following locations:
1. Visionworks 6964 8. Visionworks 6956
3700 U.S. 27 Space 108 3817 E. Colonial Dr.
Lake Wales, FL 33853 Box 40356
Orlando, FL 32803
2. Visionworks 6946
810 South Missouri Ave. 9. Visionworks 6957
Clearwater, FL 34616 700 S. Dale Mabry
Tampa, FL 33609
3. Visionworks 6947
2001 E. Fowler Ave. 10. Visionworks 6965
6965 Tampa, FL 33612 9644 Scenic Dr.
Port Richey, FL 34668
4. Visionworks 6948
2143 Tyrone Blvd. 11. Visionworks 6978
6978 St. Pete., FL 33710 11212 Park Blvd.
Seminole, FL 34642
5. Visionworks 6949
30715 US. 19 S. 12. Visionworks 6980
Palm Harbor, FL 34683 14901 N. Dale Mabry
Tampa, FL 33618
6. Visionworks 6951
891 S. Tamiami Trail
Sarasota, FL 34236
7. Visionworks 6954
3301 4th St. N.
St. Pete., FL 33704
<PAGE> 83
Schedule 2.1(e)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Assumed Contracts
1. Real Property Leases in Schedule 2.1(d)
<PAGE> 84
Schedule 2.1(f)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Tangible Personal Property
See attached.
[TABLE OF TANGIBLE PERSONAL PROPERTY OMITTED]
<PAGE> 85
Schedule 2.1(h)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Non-Optometric Assets
None.
<PAGE> 86
Schedule 2.2
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Optometric Assets
The following constitute the Optometric Assets:
Optometric records,
Patient lists;
Third-party payer contracts (except for rights to purchased
accounts receivable);
Eyeglasses, lenses and other eyewear;
Licenses, certificates of need, Medicare/Medicaid
certifications and other governmental authorizations necessary
to provide Professional Eye Care Services and to be paid
therefor by applicable third-party payers; and
Any other asset that legally cannot be owned by a party that
is not optometrist-owned.
<PAGE> 87
Schedule 2.2(b)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Personal Effects
All personally-owned artwork, furniture, wall hangings, computer equipment,
books and diplomas and other personal documents
<PAGE> 88
Schedule 2.3
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Assumed Obligations
See leases at Schedule 2.1(d)
<PAGE> 89
Schedule 2.4A
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Purchase Price
$416,103 in cash and 560,957 shares of Vision 21 common stock payable pursuant
to the Subordinated Promissory Note
<PAGE> 90
Schedule 2.8
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Purchase Price Allocation
To be completed after Purchase Price Adjustment
<PAGE> 91
Schedule 3
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Individuals - Best knowledge
representations and warranties of the Company
1. Theodore N. Gillette, O.D.
2. Mark Sarno, O.D.
3. Mark Beiler, O.D.
<PAGE> 92
Schedule 3.1
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Capital Stock or other interest owned by the Company,
the Optometrist or any Professional Employee in any Competitor
See attached.
[EMPLOYEE QUESTIONNAIRE IS OMITTED]
<PAGE> 93
Schedule 3.2
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Sale, distribution, or spin-off of significant assets
of the Company or its Affiliates within the last two years
Assets of the Keratorefractive Center were sold for $19,000 in 6/95
<PAGE> 94
Schedule 3.4
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Violations or conflicts resulting from
execution, delivery and consummation of
transaction by the Company
None.
<PAGE> 95
Schedule 3.5
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Consents required for Company from
Governmental Authority or any other persons
None
<PAGE> 96
Schedule 3.7
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Liabilities of the Company
not reflected in Financial Statements
None.
<PAGE> 97
Schedule 3.8(a)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Compensation of all Employees of the Company
See chart attached hereto and made a part hereof.
* * *
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THE CHART
CALLED FOR BY THIS SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY
WITH THE SECURITIES EXCHANGE COMMISSION.]
<PAGE> 98
Schedule 3.8(b)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Compensation plans, arrangements or practices
sponsored by the Company or to which the Company
contributes on behalf of its employees (other
than Employment Agreements and Employee Benefit Plans)
None.
<PAGE> 99
Schedule 3.8(c)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employment Agreements
None.
<PAGE> 100
Schedule 3.8(d)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employee Policies and Procedures
None.
<PAGE> 101
Schedule 3.8(f)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Exceptions to Labor Compliance
None.
<PAGE> 102
Schedule 3.8(g)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Union participation of Company Employees
None.
<PAGE> 103
Schedule 3.9(a)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plans sponsored by the Company or
to which the Company contributes on behalf of its
Employees in the past three years
See attached summary of benefits. Before January 1, 1997, all refractionists,
technicians and non-revenue participating optometrists of the Company were
provided the attached benefits at the Company's expense. Revenue-participating
optometrists were allowed to share in the benefits, but only at their personal
expense.
[SUMMARY OF BENEFITS IS OMITTED]
<PAGE> 104
Schedule 3.9(b)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Exceptions to Employee Benefit Plan Compliance
None.
<PAGE> 105
Schedule 3.9(c)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan audits, investigations or enforcement actions
None.
<PAGE> 106
Schedule 3.9(d)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Prohibited Transactions
None.
<PAGE> 107
Schedule 3.9(f)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan determination letter or IRS ruling
None; Intended plans qualify
<PAGE> 108
Schedule 3.9(g)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Accumulated Funding Deficiency
None.
<PAGE> 109
Schedule 3.9(h)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Excise Taxes
None.
<PAGE> 110
Schedule 3.10
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Changes to Company since Balance Sheet Date
None.
<PAGE> 111
Schedule 3.11(b)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Permitted Encumbrances on Personal Property
See attached.
[LIEN TABLE IS OMITTED]
<PAGE> 112
Schedule 3.11(c)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Real Property Leases and Personal Property Leases
See Schedules 2.1(c) and 2.1(d)
<PAGE> 113
Schedule 3.12
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Commitments of the Company
None.
<PAGE> 114
Schedule 3.13
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Insurance Policies; Cancellations;
Outstanding Claims, Settlements or Premiums Owed;
Professional Liability Insurance
Denials since January 1, 1994; and All Claims since January 1, 1994
All Optometrists and Professional Employees of the Company have professional
liability insurance coverage through the Company's Policy (#P126884708) with
CNA (Poe Brown is the broker) and health and dental insurance with Prudential
(Policy #69516).
The following are the only outstanding known insurance claims filed against the
Company:
Mark Salta, O.D. is being sued for missing a high pressure reading in
a patient's eye. This can result in a serious but preventable eye
condition. No demand has been entered by the plaintiff. The defense
has offered $50,000.00 with no response. The expectation of all
parties is an out of court settlement. The only question is how much.
The insurance company is handling the claim. Minimal potential
exposure.
* * *
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING A PORTION OF THE INFORMATION
ON THIS SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE
SECURITIES EXCHANGE COMMISSION.]
<PAGE> 115
Schedule 3.14
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Description of Proprietary Rights; Consents
None.
<PAGE> 116
Schedule 3.15
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Good faith disputes over payment of
Taxes; Tax deficiency or delinquency
None.
<PAGE> 117
Schedule 3.16
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
List of licenses, franchises, permits and
governmental authorizations for conduct of the Company's
business; Notices of Noncompliance
State Board Licenses and Topical Pharmaceutical Licenses exist for all
the Optometrists and Professional Employees employed by the Company.
<PAGE> 118
Schedule 3.17
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Finder's, broker's or agent's fee owed by the Company
None.
<PAGE> 119
Schedule 3.18
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Company Litigation
None.
<PAGE> 120
Schedule 3.21
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
List of Company borrowing and investing arrangements
See attached.
* * *
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THE
ATTACHMENT CALLED FOR BY THIS SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED
SEPARATELY WITH THE SECURITIES EXCHANGE COMMISSION.]
<PAGE> 121
Schedule 3.22
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Ownership Interests of Interested Persons and
Material Affiliations in the last three years
None.
<PAGE> 122
Schedule 3.23
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Company Investments in Competitors
See Schedule 3.1.
<PAGE> 123
Schedule 3.29
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Description of and relationship with Payors
Humana Health Care Plan
5401 W. Kennedy Blvd.
Suite 800
Tampa, FL 33609
<PAGE> 124
Schedule 3.35
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Inventory Exceptions
None.
<PAGE> 125
Schedule 3.36
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Tangible Personal Property Exceptions
None.
<PAGE> 126
Schedule 3.37
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Real Property Lease and Personal Property Leases Exceptions
None.
<PAGE> 127
Schedule 3.38
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Assumed Contract Exceptions
None.
<PAGE> 128
Schedule 4.2
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Violations or conflicts resulting from
execution, delivery or consummation of
transaction by the Optometrist
None.
<PAGE> 129
Schedule 4.5
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Finder's, broker's or agent's fees owed by the Optometrist
None.
<PAGE> 130
Schedule 4.6
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Optometrist Ownership of Interested Persons and Material Affiliations
See Schedule 3.1.
<PAGE> 131
Schedule 4.7
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Optometrist Investments in Competitors
See Schedule 3.1.
<PAGE> 132
Schedule 4.8
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Optometrist Litigation
None.
<PAGE> 133
Schedule 4.10
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
List of hospitals at which Optometrist has full staff privileges
Not applicable.
<PAGE> 134
Schedule 4.11
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Exceptions to continued Optometrist intent to practice
Theodore Gillette does not anticipate working as an optometrist on
behalf of the Company but instead shall work full-time with Vision 21, Inc.
Mark Sarno anticipates working one day per month at the Company's
#6978 store.
<PAGE> 135
Schedule 5
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Individuals - Best knowledge
representations and warranties of Vision 21
1. Theodore N. Gillette
2. Richard L. Sanchez
3. Richard T. Welch
4. Nicholas M. Arfaras
<PAGE> 136
Schedule 5.1
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Jurisdictions where Vision 21 is qualified to do business
1. Florida
2. Arizona
3. Minnesota
4. New York
<PAGE> 137
Schedule 5.6
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Consents
Visionworks (ECCA) leases for the Company's stores
<PAGE> 138
Schedule 5.7
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Finder's, brokers or agent's fees owed by Vision 21
None.
<PAGE> 139
Schedule 5.10
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Liabilities of Vision 21 not reflected in Financial Statements
Bridge Financing
<PAGE> 140
Schedule 6.1(b)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Exception to Optometrist "accredited investor"
or "sophisticated investor" representation
None.
<PAGE> 141
Schedule 6.1(d)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Optometrist's principal residence
* * *
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 142
Schedule 7.14
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Optometrist Employment Agreement
None
<PAGE> 143
Schedule 7.18
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Assignment of Fees for Optometry Services
None
<PAGE> 144
Schedule 8.4
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Personal liabilities of Optometrist for which
Vision 21 will use best efforts to obtain release
None.
<PAGE> 145
Schedule 9.4
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Joint personal liabilities of Optometrist and
Company to which Vision 21 will use best
efforts to obtain release
None.
<PAGE> 146
Schedule 16.1
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
Liquidated damages for Optometrist
breaching Optometrist Employment Agreement
Liquidated damages for Theodore N. Gillette, O.D. shall equal: (i)
$388,224 in cash; plus (ii) $2.77 per share of Vision 21 common stock times
523,373 shares of Vision 21 common stock granted to Theodore N. Gillette, O.D.
in connection with the Transaction, which stock total equals $1,449,743. The
total of the foregoing liquidated damages equals $1,837,967.
Liquidated damages for Mark Sarno, O.D. shall equal: (i) $13,731 in
cash; plus (ii) $2.77 per share of Vision 21 common stock times 18,511 shares
of Vision 21 common stock granted to Mark Sarno, O.D. in connection with the
Transaction, which stock total equals $51,275. The total of the foregoing
liquidated damages equals $65,006.
Liquidated damages for Mark Beiler, O.D. shall equal: (i) $14,148 in
cash; plus (ii) $2.77 per share of Vision 21 common stock times 19,073 shares
of Vision 21 common stock granted to Mark Beiler, O.D. in connection with the
Transaction, which stock total equals $52,832. The total of the foregoing
liquidated damages equals $66,980.
<PAGE> 147
Exhibit 12.1(n)
to Asset Purchase Agreement among Dr. Gillette & Associates,
#6965, P.A. (the "Company"), Theodore N. Gillette, O.D., Mark
Sarno, O.D. and Mark Beiler, O.D. (collectively, the
"Optometrist") and Vision 21, Inc. ("Vision 21")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement"), dated as of
_________________, 19__, is by and between Vision 21, Inc., a Florida
corporation and any successor ("Vision 21"), and Gillette & Associates, #6965,
P.A., a Florida professional association with its principal office located at
7209 Bryan Dairy Road Largo, Florida 34647 ("Shareholder").
1. Registration Rights.
(a) In the event that Vision 21 proposes to file a registration
statement under the Securities Act for purposes of effecting an underwritten
public offering of shares of Vision 21 common stock for cash (including, but
not limited to, a registration statement relating to a secondary offering of
Vision 21 common stock, but excluding registration statements relating to any
employee benefit plan or a corporate reorganization), Vision 21 shall give
written notice of such proposed filing to the Shareholder at least fifteen (15)
days before the anticipated filing date, and such notice shall offer
Shareholder the opportunity to register such number of the Shareholder's shares
of common stock as Shareholder may request in writing within ten (10) days
after receipt of such notice; provided, however, that the maximum number of
shares of common stock that such Shareholder may request to include in any
registration statement shall be limited as provided in Section 1(c).
(b) In the event that (i) one (1) year has elapsed from the date
of effectiveness of the registration statement filed in connection with an
underwritten initial public offering of shares of Vision 21 common stock, and
(ii) Vision 21 receives a written request from holders holding in the aggregate
a minimum of 300,000 shares of Vision 21 common stock issued to the founding
practices described in Vision 21's Confidential Information Memorandum dated
September 27, 1996, as amended, and issued to certain professionals owning
equity interests in such founding practices (the founding practices and
professionals of such practices holding share's of common stock of Vision 21
are collectively referred to as the "Founding Shareholders"), that Vision 21
file a registration statement under the Securities Act effecting an offering of
shares of Vision 21 common stock; then Vision 21 shall as soon as practicable
file a registration statement at its own expense effecting a public offering of
shares of Vision 21 common stock held by Founding Shareholders, as well as any
other Vision 21 shares owned by any other shareholders which Vision 21 wishes
to include in the offering (which offering may be an underwritten offering at
Vision 21's sole discretion); provided however that Vision 21 shall be
obligated to effect only one registration statement containing each
Shareholder, and Vision 21 shall be obligated to file only two (2) registration
statements in the aggregate, pursuant to this Section 1(b).
<PAGE> 148
(c) The maximum aggregate number of shares of common stock that
Shareholder may request to be registered under this Agreement shall be sixty
percent (60%) of Shareholder's original shares of Vision 21 common stock. In
no event shall the total number of Shareholder's shares of common stock that
Vision 21 is obligated to register under this Agreement exceed sixty percent
(60%) of Shareholder's original shares of Vision 21 common stock, and in no
event shall Vision 21 be obligated to register more than (i) in an initial
offering, thirty percent (30%) of Shareholder's original shares of Vision 21
common stock or (ii) in a second offering, sixty percent (60%) of the
Shareholder's original shares minus the percent of the Shareholder's original
shares that the Shareholder registered in the first offering. The "original
shares" of Vision 21 as described herein shall be deemed to be the
______________ shares of common stock received by the Shareholder on the date
of this Agreement.
(d) Vision 21 shall have the sole and exclusive right to select
the underwriters of any public offering of shares of Vision 21 common stock,
including any public offering conducted pursuant to the demand registration
right set forth in Section 1(b) above. The use of underwriters in any demand
registration right set forth in Section 1(b) above is subject to Vision 21's
ability to engage underwriters under terms and conditions deemed reasonable by
Vision 21.
(e) If the managing underwriter of any offering advises Vision 21
that the total number of shares of Vision 21's common stock which Vision 21,
the Shareholder and any other persons intend to include in such offering would
adversely affect the success of such offering, then the amount of shares of
common stock to be offered for the account of Shareholder shall be reduced to
the extent necessary to reduce the total number of shares of common stock to be
included in such offering to the amount recommended by such managing
underwriter.
(f) Vision 21 shall not be required to (i) reduce the amount of
shares of common stock to be offered by Vision 21 in such offering for any
reason or (ii) include any shares of common stock of Shareholder in any public
offering for which a registration statement is or is proposed to be filed if
such shares of common stock are, at the time of effectiveness of such
registration statement, eligible to be sold under Rule 144 under the Securities
Act or otherwise eligible for sale to the public without registration.
(g) Vision 21 shall have the right to extend or delay the
effectiveness of any registration statement for a period of up to ninety (90)
days if, upon the advice of counsel, such delay is advisable and in the best
interests of Vision 21 because of the existence of non-public material
information, or to allow Vision 21 to complete any pending audit of its
financial statements or any public financing plan.
(h) Shareholder agrees to cooperate with Vision 21 in all respects
in connection with registration of the common stock, including timely supplying
all information and executing and returning all documents requested by Vision
21 and its managing underwriter.
Exhibit 12.1(n) - Page 2
<PAGE> 149
(i) Vision 21 shall not be required to include any of
Shareholder's shares of common stock in any registration statement unless
Shareholder accepts the terms of the underwriting as agreed upon between Vision
21 and its underwriters.
(j) Vision 21 shall have the right to defer the filing of any
registration statement if the Board of Directors of Vision 21 determines in
good faith that it would be seriously detrimental to Vision 21 and its
shareholders for such registration statement to be filed.
(k) This Agreement shall expire two (2) years from the date of an
initial public offering of Vision 21 common stock.
2. Covenants of Vision 21. Vision 21 hereby covenants and agrees:
(a) To take such steps as may be necessary to comply with the Blue
Sky laws of such states as the managing underwriter may reasonably request;
provided that in no event shall Vision 21 be obligated to qualify to do
business in any state where it is not so qualified or to take any action which
would subject it to unlimited service of process in any state where it is not
at such time so subject;
(b) To use reasonable efforts to cause the registration statement
to become effective and to keep the registration statement effective for such
period as may be required under the terms of the underwriting agreement
relating thereto but no longer than for a period of forty-five (45) days, to
file such post-effective amendments as may be necessary to keep any prospectus
contained in such registration statement true and complete during such period
as the registration statement shall be effective, and to furnish and file such
other amendments, supplements, and other documents the managing underwriter may
reasonably request;
(c) To supply such numbers of prospectuses as may be reasonably
required by the managing underwriter;
(d) To pay the reasonable costs and expenses of the registration
statement including without limitation all registration and Blue Sky filing
fees, all fees and expenses of Vision 21's counsel (but not the fees and
expenses of counsel for Shareholder), all accounting costs (including costs
associated with the preparation of interim period financial statements), NASD
fees, printing costs, experts' fees, expenses, costs of post-effective
amendments, and all other usual and customary expenses in connection with the
registration statement, except for Shareholder's pro rata share of underwriting
discounts, fees, and selling commissions (calculated in the manner set forth in
Section 3(a)(ii) of this Agreement); and
(e) With respect to any registration statement filed pursuant to
this Agreement, where underwriters are utilized, to cooperate with the
underwriters to the best of its abilities and to enter into an underwriting
agreement with such underwriters containing such representations,
Exhibit 12.1(n) - Page 3
<PAGE> 150
warranties, and covenants on the part of Vision 21 as are usual and customary
in an underwritten public sale of common stock.
3. Covenants of Shareholder.
(a) Shareholder hereby covenants and agrees:
(i) To cooperate with Vision 21 in its compliance with
all federal and state securities laws, including without limitation providing
such information and signing such documents as are necessary to effect a
registration or reasonably requested by underwriters pursuant to this
Agreement;
(ii) To pay his pro rata portion (calculated on the basis
of the ratio of the aggregate offering price attributable to the shares of
Shareholder being registered and sold in relation to the aggregate offering
price attributable to the total number of securities being registered and sold,
including securities being registered and sold by other selling stockholders)
of the underwriting discounts and selling commissions and to pay all the fees
and disbursements of his counsel; and
(iii) To the entry of stop transfer instructions with the
Company's transfer agent against the transfer of any shares of Shareholder's
Vision 21 common stock except in compliance with the restrictions as set forth
in this Section 3.
(b) Shareholder shall be considered an "affiliate" of Vision 21
for purposes of Rule 144 under the Securities Act, even in the event
Shareholder is not technically an affiliate of Vision 21 as defined in Rule
144, and the Vision 21 common stock owned by Shareholder shall be subject to
the restrictions and limitations on resale imposed by Rule 144 on affiliates of
Vision 21. Shareholder shall not sell any of his shares of Vision 21 common
stock under Rule 144 unless Shareholder would be eligible to do so under the
provisions applicable to affiliates.
(c) In addition to the transfer restrictions otherwise provided
for herein, Shareholder shall not, whether or not Shareholder elects to cause
the registration of his shares pursuant to this Agreement, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of any shares of Vision 21 common stock
(other than the shares covered by such registration, which may be sold in
accordance with the plan or plans of distribution described in the registration
statement) owned by Shareholder for a period of one hundred eighty (180) days
or such shorter period as negotiated by the Company following the effective
date of such registration statement without the prior written consent of Vision
21. In the event that Shareholder is a corporation, professional corporation
or professional limited liability company, Shareholder may after receiving the
written approval of Vision 21 (which approval shall not be unreasonably
withheld) transfer its shares of Vision 21 Common Stock to any of the
individuals and/or trusts described in Sections 7(a), (b) and (c) hereof. Such
Exhibit 12.1(n) - Page 4
<PAGE> 151
transferee shall, for purposes of the transfer restrictions contained in this
Agreement, be deemed to have held such transferred shares for the same period
as Shareholder.
4. Indemnification of Shareholder.
Whenever registration with respect to any shares of Shareholder's
common stock is effected under the Securities Act pursuant hereto, Vision 21
will indemnify and hold harmless Shareholder, each underwriter, the directors,
officers, employees and agents of each underwriter, and each person, if any,
who controls each underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, (including any securities law
violations) insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or alleged omission to state
in such document a material fact required to be stated in it or necessary to
make the statements in it not misleading, provided that Vision 21 will not be
liable to Shareholder to the extent that such loss, claim, liability, expense
or damage is based on an untrue statement or omission made in reliance on and
in conformity with information furnished to Vision 21 by Shareholder, or by
Shareholder through any attorney-in-fact, expressly for inclusion in the
registration statement or any prospectus included in such registration
statement.
5. Indemnification of Vision 21.
Whenever registration with respect to any shares of Shareholder's
common stock is effected under the Securities Act pursuant hereto, Shareholder
will indemnify and hold harmless Vision 21, each of Vision 21's directors and
officers, each person who controls Vision 21 within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, each underwriter, the
directors, officers, employees and agents of each underwriter, and each person,
if any, who controls each underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact required to be stated
in it or necessary to make the statements in it not misleading; provided that
Shareholder will not be liable except to the extent that such loss, claim,
liability, expense or damage arises from or is based upon an untrue statement
or omission or alleged untrue statement or omission made in reliance on and in
conformity with information furnished to Vision 21 by the Shareholder, or
Exhibit 12.1(n) - Page 5
<PAGE> 152
by Shareholder through any attorney-in-fact, expressly for inclusion in the
registration statement or any prospectus included in such registration
statement.
6. Defense of Claim.
Promptly after receipt by an indemnified party of notice of the
commencement of any action, the indemnified party shall notify the indemnifying
party in writing of the commencement thereof if a claim in respect thereof is
to be made against an indemnifying party under this Agreement, but the omission
of such notice shall not relieve the indemnifying party from liability which it
may have to the indemnified party under this Agreement, except to the extent
that the indemnifying party is actually prejudiced by such failure to give
notice, and shall not relieve the indemnifying party from any liability which
it may have to any indemnified party otherwise than under this Agreement. In
case any action is brought against the indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in, and to the extent that it chooses, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party that it so chooses, the indemnifying party shall not be
liable for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof; provided however that (i) if the
indemnifying party fails to take reasonable steps necessary to defend
diligently the claim within twenty (20) days after receiving notice from the
indemnified party that the indemnified party believes the indemnifying party
has failed to diligently defend such claim, or (ii) if the indemnified party
who is a defendant in any action or proceeding which is also brought against
the indemnifying party reasonably shall have concluded that there are legal
defenses available to the indemnified party which conflict with the defense
strategy of the indemnifying party, or (iii) if representation under applicable
standards of professional conduct require separate representation of the
indemnified party and the indemnifying party, then the indemnified party shall
have the right to assume or continue its own defense as set forth above and the
indemnifying party shall reimburse the indemnified party for the costs of such
defense as provided in Section 4 and 5. In no event shall the indemnifying
party be responsible for the fees of more than one firm for all indemnified
parties.
7. Non-Transferability.
The registration rights and benefits set forth herein, including
indemnification by Vision 21 are granted for the sole and personal benefit of
Shareholder and may not be transferred or assigned except for (a) gifts to
his/her family members (b) assignment to a trust controlled by the Shareholder,
(c) transfers to Shareholder's heirs which occur by operation of law as a
result of the death of the Shareholder, or (d) if the Shareholder is a
corporation, professional corporation or professional limited liability
company, transfers or assignments to the individuals who are current equity
holders of Shareholder and by such equity holders to the individuals and/or
trusts described in subsection (i) and (ii) of this Section.
Exhibit 12.1(n) - Page 6
<PAGE> 153
8. Survival of Indemnity.
The indemnifications provided by this Agreement shall be a continuing
right to indemnification and shall survive the registration and sale of any
securities by any person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
9. Delay of Registration.
Shareholder agrees that he shall have no right to obtain or seek an
injunction restraining or otherwise delaying any registration statement filed
by Vision 21.
10. Notices.
(a) All communications under this Agreement shall be in writing
and shall be sufficient in all respects if when personally delivered or mailed
by prepaid certified or registered mail, return receipt requested, addressed as
follows:
(i) If to Vision 21, at:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34647
Attn: Theodore N. Gillette, Chief Executive Officer
With a copy to:
Darrell C. Smith, Esquire
c/o Shumaker, Loop & Kendrick, LLP
101 E. Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
or at such other address as Vision 21 may have furnished in writing to
Shareholder at the time outstanding, or
(ii) If to Shareholder at:
Gillette & Associates, #6965, P.A.
7209 Bryan Dairy Road
Largo, Florida 34647
Attn: Theodore N. Gillette, President
Exhibit 12.1(n) - Page 7
<PAGE> 154
(b) Any notice so addressed, when mailed by registered or
certified mail shall be deemed to be given three days after so mailed, and when
delivered by hand shall be deemed to be given immediately.
11. Counterparts.
One or more counterparts of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
12. Governing Law.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Florida, which shall prevail in all matters
arising under or in connection with this Agreement.
13. Headings.
The headings in this Agreement are for convenience of reference only
and shall not be deemed to alter or affect the meaning or interpretation of any
provisions hereof.
14. Stock Lettering.
The Company shall have the right to provide a legend on the shares of
stock covered hereunder reflecting the restriction described hereunder.
Exhibit 12.1(n) - Page 8
<PAGE> 155
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date and year first above written.
"VISION 21"
VISION 21, INC.
By:_____________________________________
Theodore N. Gillette, Chief Executive
Officer
"SHAREHOLDER"
GILLETTE & ASSOCIATES, #6965, P.A.
By:_____________________________________
Theodore N. Gillette, President
Exhibit 12.1(n) - Page 9
<PAGE> 1
Exhibit 10.22
BUSINESS MANAGEMENT AGREEMENT
(PROFESSIONAL)
This Business Management Agreement is made and entered into effective
as of December 1, 1996, by and between Vision 21, Inc., a Florida corporation
("Business Manager"), and Gillette & Associates, #6965 P.A., a professional
association, organized and existing under the laws of the State of Florida (the
"Practice").
R E C I T A L S
A. The Practice is a professional association duly organized and
validly existing under the laws of the State of Florida (the "State") which is
engaged in the provision of Professional Eye Care Services (as defined below)
to the general public in the State through individual Professionals (as defined
below) who are licensed to practice optometry in the State and who are employed
or otherwise retained by the Practice.
B. Business Manager is a corporation duly organized and validly
existing under the laws of the State.
C. The Practice desires to devote substantially all of its
energies, expertise and time on the delivery of Professional Eye Care Services
to patients.
D. The Practice desires to engage Business Manager to provide
facilities, equipment and such management, administrative and business services
as are necessary and appropriate for the day-to-day administration of the non-
optometric aspects of the Practice's professional eye care practice, and
Business Manager desires to provide such, upon the terms and conditions
hereinafter set forth, for the purpose of enhancing the cost-efficiency and
quality of services rendered by the Practice to its patients.
NOW, THEREFORE, for and in consideration of the mutual agreements,
terms, covenants and conditions contained herein and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree as follows:
1. DEFINITIONS. For the purposes of this Business Management
Agreement, the following terms shall have the following meanings ascribed
thereto, unless otherwise clearly required by the context in which such term is
used:
1.1. Account. The term "Account" shall mean the bank account
described in Sections 3.9 and 3.10(a) and (c).
<PAGE> 2
1.2. Acquisition Transaction. The term "Acquisition Transaction"
shall mean the completed Asset Purchase Agreement entered into by and among
Theodore N. Gillette, Mark Sarno, O.D., Mark Beiler, O.D. and Vision 21, Inc.
1.3. Adjusted Gross Revenue. The term "Adjusted Gross Revenue"
shall mean all revenues, for Professional Eye Care Services and any other
revenues, calculated on an accrual basis under GAAP, generated by or on behalf
of the Practice and its Professionals and Capitation Revenues during the term
of this Business Management Agreement, including, without limitation, all
technical fees from ancillary services, all proceeds from key person life
insurance policies purchased by Business Manager in accordance with Section
3.15, all amounts paid by third parties for contractual liabilities, including
payments under non-shareholder Professionals' non-competition agreements, and
all consultant, teaching and expert witness fees except for those fees set
forth in Exhibit 1.3 (unless the time and efforts of the individuals
responsible for such excluded revenues are materially greater than the
historical time or efforts expended in obtaining such revenues or if such
excluded revenues historically flowed through the Practice), minus any
allowances for bad debts, uncollectible accounts, Medicare, Medicaid and other
payor contractual adjustments, discounts, workers' compensation adjustments,
reasonable professional courtesies, and other reductions in collectible revenue
that result from activities that do not result in collectible charges.
1.4. Agreement or Business Management Agreement. The term
"Agreement" or "Business Management Agreement" shall mean this instrument as
originally executed and delivered, or, if amended or supplemented, as so
amended or supplemented.
1.5. Budget. The term "Budget" shall mean an operating budget and
capital expenditure budget for each fiscal year as prepared in accordance with
Section 3.11(a).
1.6. Business Manager. The term "Business Manager" shall have the
meaning set forth in the Recitals hereto.
1.7. Business Manager Consent. The term "Business Manager Consent"
shall mean the consent granted by Business Manager's representatives (or either
representative) to the Practice Advisory Council created pursuant to Article II
herein, which consent shall not be unreasonably withheld or delayed and shall
be binding on the Business Manager.
1.8. Business Manager Expense. The term "Business Manager Expense"
shall mean an expense or cost incurred by the Business Manager, for which the
Business Manager is financially liable and is not entitled to reimbursement
from the Practice. Business Manager Expense shall specifically include: (a)
any amortization of intangible assets resulting from the Acquisition
Transaction, (b) any income or franchise taxes of the Business Manager, (c) any
expense or cost relating to any underwritten initial public offering of
Business Manager's common stock pursuant to which a registration statement is
filed under the Securities Act of 1933 (except for underwriter's commissions,
charges or discounts related to the sale of stock by
-2-
<PAGE> 3
any Shareholder of the Practice which shall be borne individually by them), (d)
expenses and costs relating to the acquisition of any other health care
companies unless all or a specific portion of such expenses and costs are
approved as an Office Expense by the Practice Advisory Council, or unless the
Practice participates in the acquisition through the Practice's acquisition of
optometric assets of an acquired optometric practice, and (e) any other expense
or cost incurred by Business Manager that are not reasonable and customary
reimbursements based upon a usual national practice management company's
arrangement with a practice. Business Manager Expenses (as of the date hereof)
are more specifically identified in Exhibit 1.8. In the case of any
inconsistency between specifics in Exhibit 1.8 and the general descriptions in
(a) through (d) above, Exhibit 1.8 shall govern (as of the date hereof).
1.9. Capitation Revenues. The term "Capitation Revenues" shall
mean all collections from managed care organizations or third-party payors
where such payment is made periodically on a per member basis for the partial
or total needs of a subscribing patient, less amounts that are payable to other
providers of health care items and services to capitation patients. Capitation
Revenues shall include any co-payments and incentive bonuses received as a
result of a capitation plan.
1.10. Clinical Personnel. The term "Clinical Personnel" shall mean
those individuals who are (to the extent permitted by law) employed by or
otherwise under contract or associated with Business Manager as nurse
anesthetists, technicians, nurse practitioners or similar positions, or any
position that generates a professional charge except for Professionals. In the
event that such individuals are not permitted by the laws of the State to be
employed by or otherwise under contract with Business Manager, such individuals
shall instead be employed by or under contract with the Practice, and all
expenses associated with the employment of or contracting with such individuals
shall be Practice Expenses.
1.11. Confidential Information. The term "Confidential Information"
shall mean any information of Business Manager or the Practice, as appropriate
(whether written or oral), including all business management or economic
studies, patient lists, proprietary forms, proprietary business or management
methods, marketing data, fee schedules, or trade secrets of the Business
Manager or of the Practice, as applicable, whether or not such Confidential
Information is disclosed or otherwise made available to one Party by the other
Party pursuant to this Business Management Agreement. Confidential Information
shall also include the terms and provisions of this Business Management
Agreement and any transaction or document executed by the Parties pursuant to
this Business Management Agreement. Confidential Information does not include
any information that the receiving party can establish (a) is or becomes
generally available to and known by the public or optometric community (other
than as a result of an unpermitted disclosure directly or indirectly by the
receiving party or its affiliates, advisors, or Representatives); (b) is or
becomes available to the receiving party on a nonconfidential basis from a
source other than the furnishing party or its affiliates, advisors or
Representatives, provided that such source is not and was not bound by a
confidentiality agreement with or other obligation of secrecy to the furnishing
party of which the receiving
-3-
<PAGE> 4
party has knowledge; or (c) has already been or is hereafter independently
acquired or developed by the receiving party without violating any
confidentiality agreement with or other obligation of secrecy to the furnishing
party.
1.12. GAAP. The term "GAAP" shall mean generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity or other
practices and procedures as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date
of the determination. All financial reporting which is required pursuant to
this Agreement to be made in conformity with GAAP shall also be prepared in a
manner acceptable to the Securities and Exchange Commission for reports made
pursuant to the Securities and Exchange Commission's rules and regulations.
1.13. Local Advisory Council. The term "Local Advisory Council"
shall have the meaning set forth in Section 2.10 of this Agreement.
1.14. Management Fee. The term "Management Fee" shall mean the
Business Manager's compensation established as described in Article V hereof.
1.15. Management Services. The term "Management Services" shall
mean the business, administrative, and management services to be provided for
the Practice, including, without limitation, the provision of equipment,
inventory and supplies (including the use of all assets owned by Business
Manager which are located at the Office on the effective date hereof), support
services, personnel (including Clinical Personnel but excluding Professionals),
office space, management, administration, financial record keeping and
reporting, and other business office services, all as reasonably necessary for
the conduct of the Practice's business.
1.16. National Appeals Council. The term "National Appeals Council"
shall have the meaning set forth in Section 2.11 hereto.
1.17. Office. The term "Office" shall mean any office space,
clinic, or facility, including satellite facilities, that Business Manager
shall own or lease or otherwise procure for the use of the Practice.
1.18. Office Expense. The term "Office Expense" shall mean all
operating and non-operating expenses incurred by the Business Manager in the
provision of Management Services to the Practice and all operating and
non-operating expenses incurred by the Practice at the Office except to the
degree the Business Manager cannot by law be obligated for an expense. So long
as the Practice is in full compliance with the terms of this Business
Management Agreement, the Business Manager shall be financially liable for all
Office Expenses and the Business Manager shall reimburse the Practice for any
Office Expense incurred by the Practice relating to the items set forth in this
Section, upon request by the Practice.
-4-
<PAGE> 5
1.19. Optometrist. The term "Optometrist" shall mean each
individually licensed Optometrist, if any, who is employed or otherwise
retained by or associated with the Practice, each of whom shall meet at all
times the qualifications described in Section 4.2 and Section 4.3.
1.20. Parties. The term "Parties" shall mean the Practice and
Business Manager.
1.21. Practice. The term "Practice" shall have the meaning set
forth in the Recitals.
1.22. Practice Advisory Council. The term "Practice Advisory
Council" shall have the meaning set forth in Section 2.6 of this Agreement.
-5-
<PAGE> 6
1.23. Practice Consent. The term "Practice Consent" shall mean the
consent granted by the Practice's representatives (or either representative) to
the Practice Advisory Council created pursuant to Article II herein, which
consent shall not be unreasonably withheld or delayed and shall be binding on
the Practice.
1.24. Reserved.
1.25. Practice Territory. The term "Practice Territory" shall mean
the geographic area described in Exhibit 1.26, representing the geographic
boundaries in which the Practice renders Professional Eye Care Services.
1.26. Professional. The term "Professional" shall mean any
Optometrist.
1.27. Professional Eye Care Services. The term "Professional Eye
Care Services" shall mean professional health care items and services,
including, but not limited to, the practice of optometry, and all related
professional health care services provided by the Practice through the
Practice's Optometrists and other professional health care providers that are
retained by or professionally affiliated with the Practice. The term shall
also include any and all business whatsoever in connection with any optical
businesses owned or operated, or to be owned or operated in the future, in
whole or in part, by the Practice or any of its Professionals during the terms
of this Agreement.
1.28. Representatives. The term "Representatives" shall mean a
Party's officers, directors, managers, employees, or other agents.
-6-
<PAGE> 7
1.29. Shareholder. The term "Shareholder" shall mean any current or
future shareholder of the Practice.
1.30. Shareholder Expense. The term "Shareholder Expense" or "Practice
Expense" shall be limited to the following expenses, as such expenses are more
specifically described in Exhibit 1.18: (a) Shareholders' salaries,
benefits, payroll taxes, and other direct costs (including professional dues,
subscriptions, continuing education expenses, severance payments,
entertainment, and travel costs for continuing education or other business
travel but excluding business travel requested by Business Manager, which shall
be an Office Expense, and excluding any other expense of a Shareholder approved
as an Office Expense in advance by the Parties); (b) those portions of
leasehold obligations of the Business Manager which are deemed in excess of
fair market value as set forth in Exhibit 1.30; (c) to the extent not covered
by insurance and subject to the advance provisions contained herein, the
defense costs of any litigation brought against the Practice or the
Professionals by any third party and any liability judgment assessed against
the Practice or the Professionals; (d) certain equipment expenses described in
Section 3.2(d); (e) interest on any funds advanced to the Practice by Business
Manager to the extent that Business Manager is a net lender in accordance with
the terms of this Agreement; (f) "tail" coverage malpractice insurance expenses
for the Shareholders and any malpractice insurance expenses of any Professional
which are in excess of those which are customary and reasonable; (g) any income
taxes or franchise tax of the Practice; and (h) consulting, accounting, or
legal fees which relate solely to the Shareholders. The Practice shall be
financially liable for all Shareholder Expenses, and the Practice shall
reimburse the Business Manager for any Shareholder Expense incurred by the
Business Manager. Unless an expense is expressly designated as a Business
Expense or an Office Expense expenses incurred by the Practice shall
be considered a Shareholder Expense. Notwithstanding the above, the Practice
may require certain Professionals to pay certain expenses incurred for them
specifically. Nothing in this Section shall create personal liability on the
part of the Practice's Shareholders.
1.31. State. The term "State" shall have the meaning set forth in
the Recitals.
1.32. Term. The term "Term" shall mean the initial and any renewal
periods of duration of this Business Management Agreement as described in
Section 6.1.
2. APPOINTMENT OF BUSINESS MANAGER AND ESTABLISHMENT OF
PRACTICE ADVISORY COUNCIL, LOCAL ADVISORY COUNCIL AND
NATIONAL APPEALS COUNCIL.
2.1 Appointment. The Practice hereby appoints Business Manager as
its sole and exclusive agent for the management and administration of the
business functions and business affairs of the Practice and Business Manager
hereby accepts such appointment, subject at all times to the provisions of this
Business Management Agreement.
-7-
<PAGE> 8
2.2 Authority. Consistent with the provisions of this Business
Management Agreement, Business Manager shall have the responsibility and
commensurate authority to provide Management Services for the Practice. The
Practice shall give Business Manager thirty (30) days' prior notice of the
Practice's intent to execute any agreement creating a binding legal obligation
on the Practice. The Parties acknowledge and agree that the Practice, through
its Professionals, shall be responsible for and shall have complete authority,
responsibility, supervision, and control over the provision of all Professional
Eye Care Services and other professional health care services performed for
patients, and that all diagnoses, treatments, procedures, and other
professional health care services shall be provided and performed exclusively
by or under the supervision of Professionals as such Professionals, in their
sole discretion, deem appropriate. Business Manager shall have and exercise
absolutely no control, influence, authority or supervision over the provision
of Professional Eye Care Services.
2.3 Patient Referrals. Business Manager and the Practice agree
that the benefits to the Practice hereunder do not require, are not payment
for, and are not in any way contingent upon the referral, admission, or any
other arrangement for the provision of any item or service offered by Business
Manager to patients of the Practice in any facility, laboratory, center, or
health care operation controlled, managed, or operated by Business Manager.
2.4 Internal Decisions of the Practice. Matters involving the
Practice's allocation of professional income among its Shareholders and the
Professional employees of the Practice, tax planning, and investment planning
shall remain the responsibility of the Practice and the Shareholders of the
Practice.
2.5 Practice of Optometry. The Parties acknowledge that Business
Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of optometry. To the extent any
act or service herein required by Business Manager should be construed by a
court of competent jurisdiction or by the State Board of Optometry to
constitute the practice of optometry, the requirement to perform that act or
service by Business Manager shall be deemed waived and unenforceable.
2.6 Formation and Operation of the Practice Advisory Council. The
Parties hereby establish a Practice Advisory Council which shall be responsible
for advising Business Manager and the Practice with respect to developing and
implementing management and administrative policies for the overall operation
of the Practice's facilities and for providing dispute resolution on certain
matters. The Practice Advisory Council shall consist of four (4) members.
Business Manager shall designate, in its sole discretion, two (2) members of
the Practice Advisory Council or may have one (1) member with two (2) votes.
The Practice shall designate, in its sole discretion, two (2) members of the
Practice Advisory Council or may have one (1) member with two (2) votes. The
Practice Advisory Council members selected by the Practice shall be full-time
Professional employees of the Practice. Each Party's representatives to the
Practice Advisory Council shall have the authority to make decisions on behalf
of the respective Party. Except as may otherwise be provided, the act of a
majority of the members of the Practice
-8-
<PAGE> 9
Advisory Council shall be the act of the Practice Advisory Council. The
decisions, resolutions, actions, or recommendations of the Practice Advisory
Council shall be implemented by Business Manager or the Practice, as
appropriate.
2.7 Duties and Responsibilities of the Practice Advisory Council.
The Practice Advisory Council shall review, evaluate, make recommendations, and
where specifically authorized herein and permitted by law, make decisions with
respect to the following matters:
(a) Facility Improvements and Expansion. Any
renovation and expansion plans and capital equipment expenditures with respect
to the Practice's facilities (including with respect to any optical business)
shall be reviewed by the Practice Advisory Council which shall make
recommendations to Business Manager with respect to proposed changes therein.
Such renovation and expansion plans and capital equipment expenditures shall be
based upon economic feasibility, optometry support, productivity and then
current market conditions.
(b) Marketing and Public Relations. The Practice
Advisory Council shall review and make recommendations to the Practice with
respect to all marketing and public relations services and programs promoting
the Practice's Professional Eye Care Services.
(c) Patient Fees; Collection Policies. As a part of
the annual operating budget, the Practice Advisory Council shall review and
make recommendations to the Practice concerning the fee schedule and collection
policies for all Professional Eye Care Services and ancillary services rendered
by the Practice.
(d) Ancillary Services. The Practice Advisory Council
must approve any new non-professional ancillary services to be rendered by the
Practice including optical business, and concerning the pricing, continuation
of, access to, and quality of such services.
(e) Provider and Payor Relationships. The Practice
Advisory Council shall review and make recommendations to Business Manager and
the Practice regarding the establishment or maintenance of relationships
between the Practice and institutional health care providers and third-party
payors, and shall review and approve all agreements with institutional health
care providers and third-party payors which contain terms which are materially
different from those terms set forth in guidelines established by the Local
Advisory Council. The Practice Advisory Council shall also make
recommendations to Business Manager and the Practice concerning discounted fee
schedules, including capitated fee arrangements of which the Practice shall be
a party, and shall review and approve all such capitated fee arrangements.
(f) Strategic Planning. The Practice Advisory Council
may make recommendations to Business Manager concerning development of
long-term strategic planning objectives for the Practice.
-9-
<PAGE> 10
(g) Capital Expenditures. The Practice Advisory
Council shall make recommendations to Business Manager and the Practice
concerning the priority of major capital expenditures and shall review and
approve any commitment to make any capital expenditures for non-optometric
equipment relating to the Office involving amounts in excess of $15,000
individually, or $50,000 in the aggregate, in any one fiscal year, which
amounts may be increased from time-to-time by the Local Advisory Council.
(h) Hiring of Professionals. The Practice Advisory
Council shall recommend to the Practice the number and type of Professionals
required for the efficient operation of the Practice's facilities.
(i) Fee Dispute Resolution. At the request of Business
Manager or the Practice, the Practice Advisory Council shall make
recommendations to Business Manager with respect to any dispute concerning a
set-off or reduction in Management Fees.
(j) Grievance Referrals. The Practice Advisory Council
shall consider and make recommendations to Business Manager and the Practice
regarding grievances pertaining to matters not specifically addressed in this
Business Management Agreement as referred to it by Business Manager or the
Practice's Board of Directors.
(k) Termination of Business Manager's Personnel. The
Practice Advisory Council shall review and approve any decision by the Business
Manager to terminate any of Business Manager's personnel primarily located at
the Office who occupy office manager or higher level positions.
(l) Approval of New Office. The Practice Advisory
Council shall approve any move of the current Office location or the expansion
to an additional Office location. Additionally, the Practice Advisory Council
shall approve the establishment of any optical business of the Practice and the
move or expansion of any such business.
(m) Approval of Budget. The Practice Advisory Council
shall have the power to adopt, approve and amend the Budget and to approve
various expenses as set forth herein, which shall be subject to change upon
submission of any dispute thereon to Ernst & Young LLP (or its successor or
replacement) and appeal to the National Appeals Council as provided in Section
3.11(a).
Except in those specific instances set forth above in which the Practice
Advisory Council has been granted the authority to make decisions binding upon
the Business Manager and the Practice, it is acknowledged and agreed that
recommendations of the Practice Advisory Council are intended for the advice
and guidance of Business Manager and the Practice and that the Practice
Advisory Council does not have the power to bind Business Manager or the
Practice. Where discretion with respect to any matter is vested in Business
Manager or the Practice under the terms of this Agreement, Business Manager or
the Practice, as the case may be, shall have
-10-
<PAGE> 11
ultimate responsibility for the exercise of such discretion, notwithstanding
any recommendations of the Practice Advisory Council. Business Manager and the
Practice shall, however, take such recommendations of the Practice Advisory
Council into account in good faith in the exercise of such discretion.
2.8 Professional Health Care Decisions. Despite the above listing
of activities and areas of interest, all decisions required by applicable law
to be made solely by health care professionals will be made solely by the
appropriate Professionals, but non-Professional members of the Practice
Advisory Council may participate in the discussion process. The Professional
representatives of the Practice on the Practice Advisory Council shall have
exclusive authority to review and resolve issues related to:
(a) Types and levels of Professional Eye Care Services
to be provided; (provided, however, that the Practice Advisory Council shall
have the authority set forth in Section 2.7(d) with respect to new optical
business);
(b) Recruitment of Professionals to the Practice,
including the specific qualifications and specialties of recruited
Professionals;
(c) Any optometric related functions;
(d) Fee schedules; and
(e) Any other decisions required by applicable law to
be made solely by Professionals and not by non-Professionals.
2.9 Meetings of the Practice Advisory Council. The Practice
Advisory Council shall meet on a regular basis as mutually agreed by the
Parties. A special meeting of the Practice Advisory Council may be called by
either Business Manager or the Practice upon two (2) weeks' notice, except in
the event of an emergency, in which case a special meeting may be called by
either Business Manager or the Practice upon three (3) business days' notice.
Meetings may be held telephonically or by any other means agreeable to the
Parties.
2.10 Formation and Operation of Local Advisory Council. Business
Manager shall, within six (6) months of the effective date of this Business
Management Agreement establish a Local Advisory Council composed of delegates
from health care practices for which Business Manager is then providing
management services similar to those services contemplated in this Business
Management Agreement. All of such health care practices shall be located
within the market area described on Exhibit 2.10, as such market area may be
expanded from time-to-time by the Local Advisory Council. For six (6) years
from the date hereof, the Practice shall be entitled to appoint one delegate to
the Local Advisory Council, of which the initial delegate shall serve an
initial two (2) year term. Thereafter, for the two (2) subsequent two (2) year
terms, the Practice may appoint the same or a different delegate to the Local
Advisory Council. After
-11-
<PAGE> 12
the six (6) year period, the Practice shall have the right to vote, along with
other Practices managed in the market by the Business Manager, for the
delegates to the Local Advisory Council in accordance with the by-laws, as
modified from time to time as described below. Business Manager shall be
entitled to appoint two delegates to the Local Advisory Council who may be
replaced from time-to-time at the Business Manager's discretion, and who
together shall have a voting power equal to the combined voting power of all
delegates appointed by the health care practices. If any market contains only
one health care practice, such practice shall appoint one (1) individual to the
Local Advisory Council who shall have two (2) votes. Any matter to be
determined by the Local Advisory Council must receive the affirmative vote of a
majority of the votes cast of the delegates appointed to the Local Advisory
Council. The Local Advisory Council shall make recommendations to Business
Manager and such health care practices as to regional policy and strategy
issues within the market area and as to the following:
(a) The establishment of private pay fee schedules
where permitted by law;
(b) The establishment of guidelines for agreements with
institutional health care providers and third-party payors; and
(c) Any agreement with an institutional health care
provider or third-party payor which materially differs from guidelines
established by the Local Advisory Council.
The Local Advisory Council may, from time-to-time, select commercial
carriers for professional, casualty and comprehensive general liability
coverage for health care practices in the market area and such selection shall
be binding upon such health care practices.
The Local Advisory Council shall consider and determine any issue upon
which the Practice Advisory Council is deadlocked (except for the determination
of the Budget). In determining such disputes, the Local Advisory Council shall
make findings of fact relating to evidence presented by the Parties to the
dispute. Decisions by the Local Advisory Council may be appealed by any party
adversely affected to the National Appeals Council, which shall have the option
of hearing the appeal. The Local Advisory Council's rules of operation and
procedure shall be governed by by-laws to be adopted by the delegates, and such
by-laws may be amended or restated from time-to-time. Such by-laws shall be
reasonable and in accord with the terms and spirit of this Agreement. The
Practice and Business Manager covenant and agree to abide by the Local Advisory
Council's by-laws, as such by-laws may be amended from time-to-time.
2.11 Formation and Operation of the National Appeals Council.
Business Manager shall within six (6) months of the effective date of this
Business Management Agreement establish a National Appeals Council composed of
one (1) delegate appointed by each of the initial Local Advisory Councils to be
established by Business Manager, and two (2) delegates appointed by the
Business Manager. The initial delegates of the Local Advisory Councils shall
serve an initial two (2) year term, and thereafter, if the local advisory
council qualifies under
-12-
<PAGE> 13
the then current by-laws of the National Appeals Council with respect to the
eligibility of Local Advisory Councils to appoint delegates to the National
Appeals Council, the local advisory council may appoint the same or a different
delegate to the National Appeals Council. Business Manager's delegates to the
National Appeals Council shall together have a voting power equal to the
combined voting power of all delegates appointed by the Local Advisory
Councils. Any matter to be determined by the National Appeals Council must
receive the affirmative vote of a majority of the votes cast of the delegates
appointed to the National Appeals Council. The National Appeals Council shall
serve as a forum of appeal of any determinations of the Local Advisory Councils
over which it chooses to have jurisdiction. In resolving such appeals it
determines to hear, the National Appeals Council shall review findings of fact
made by the applicable local advisory council and shall only reverse a decision
of the local advisory council if the local advisory council's decision was
based upon manifest error. The National Appeals Council shall also determine
disputes which it chooses to have jurisdiction over and which cannot be decided
because of a deadlock among the delegates of any Local Advisory Council. In
the event of a deadlock among the delegates of the National Appeals Council,
the dispute may be submitted by either party to the dispute to arbitration in
accordance with Section 8.7 of this Agreement. In all other instances, the
determination of a dispute by the National Appeals Council shall be final. The
National Appeals Council's rules of operation and procedure shall be governed
by by-laws to be adopted by the Local Advisory Councils' and Business Manager's
delegates, and such by-laws may be amended or restated from time-to-time. Such
by-laws shall be reasonable and reflect the terms and spirit of this Agreement.
The National Appeals Council's decisions shall be binding upon the parties.
The Practice and Business Manager covenant and agree to abide by the National
Appeal Council's by-laws, as such by-laws may be amended from time-to-time.
3. OBLIGATIONS AND RESPONSIBILITIES OF BUSINESS MANAGER.
3.1 Management Services. Business Manager shall provide all
Management Services as are necessary and appropriate for the day-to-day
administration of the business aspects of the Practice's operations, pursuant
to the terms of this Business Management Agreement. Business Manager shall
operate in a reasonable and customary manner with due consideration to the
Practice's past business practices and shall operate in accordance with all
applicable laws, rules and regulations which are necessary and material to the
Business Manager's performance of the Management Services. Business Manager
will provide in good faith and with due diligence its services consistent with
management services generally provided in operations of an optometric practice
similar in size, type and operations in the State of the Practice. All costs
and expenses related to Business Manager's duties contained in this Section 3
shall be Office Expenses unless limited or excluded as an Office Expense
pursuant to the terms of this Agreement.
3.2 Office and Equipment.
(a) Business Manager shall lease, sublease, acquire or
otherwise procure one or more Offices that are deemed by the Parties to be
reasonably necessary and appropriate,
-13-
<PAGE> 14
and the expenses associated with such lease, sublease, acquisition, or
procurement shall be Office Expenses. Any Office procured by Business Manager
for the use by the Practice shall be procured at commercially reasonable rates.
Any relocation from the Practice's present Office location or expansion of the
Practice's Office into an additional Office shall be done only after Business
Manager has received Practice Consent, which shall not be unreasonably
withheld.
(b) In the event the Practice is the lessee of an
Office under a lease with an unrelated and nonaffiliated lessor, Business
Manager may require the Practice to assign such lease to Business Manager upon
receipt of consent from the lessor. The Practice shall use its best efforts to
assist in obtaining the lessor's consent to the assignment. Any expenses
incurred in the assignment shall be Office Expenses.
(c) Business Manager shall provide all non-health care
equipment, fixtures, office supplies, furniture and furnishings as are
reasonable and approved in the Budget for the operation of the Office and the
provision of Professional Eye Care Services. If the Practice wishes to choose
additional equipment, which the Business Manager determines not to acquire or
lease, the Practice may acquire or lease such equipment, and the expense
related thereto shall be deemed a Shareholder Expense.
(d) Business Manager shall provide, finance, or cause
to be provided or financed health care related equipment as reasonably required
by the Practice. The Practice shall have final authority in all health care
equipment selections; provided, however, that if the Practice chooses to
acquire health care equipment which is not in the Budget and which Business
Manager reasonably chooses not to acquire, expenses related thereto shall be
treated as a Shareholder Expense and such equipment shall be owned by the
Practice; provided further that following such acquisition or lease by the
Practice, if the Practice Advisory Council determines that after a period of
six months of use such equipment is reasonably certain to result in material
profit to Business Manager (taking into account the cost or expense and
anticipated revenues associated with such equipment), then Business Manager
shall acquire such equipment from the Practice by either (at Business Manager's
option), paying cash or by assuming the liability associated with such
equipment, or if such equipment is then being leased by the Practice, by
assuming such lease. In the event of such an acquisition by Business Manager,
it shall reimburse the Practice for previous expenses applied thereto. Except
for equipment which Business Manager elects not to acquire or lease which are
acquired or leased by the Practice pursuant to Section 3.2(c) or (d), all
health care and non-health care equipment, other than Professional-owned
automobiles, acquired for the use of the Practice shall be owned by Business
Manager and the depreciation and related capital charge shall be an Office
Expense. Business Manager may make recommendations to the Practice on the
relationship between its health care equipment decisions and the overall
administrative and financial operations of the practice.
(e) Business Manager shall be responsible for the
repair and maintenance of the Office, consistent with Business Manager's
responsibilities under the terms of any lease or other use arrangement, and for
the prompt repair, maintenance, and replacement of all
-14-
<PAGE> 15
equipment other than such repairs, maintenance and replacement necessitated by
the gross negligence or willful misconduct of the Practice, its Professionals
or other personnel employed by the Practice, the repair or replacement of which
shall be a Shareholder Expense and not an Office Expense. Replacement
equipment shall be acquired where Business Manager in good faith determines
that such replacement is necessary or where the Budget has made allowances for
such replacement.
(f) Any portion of the foregoing lease payments in
excess of fair market value (as set forth in Exhibit 1.30) relating to leases
of equipment or an Office shall be treated as a Shareholder Expense.
Reserved.
3.3 Health Care Supplies. Business Manager shall order, procure,
purchase and provide on behalf of and as agent for the Practice all reasonable
health care supplies unless otherwise prohibited by federal and/or state law.
Furthermore, Business Manager shall ensure that the Office is at all times
adequately stocked with the health care supplies that are necessary and
appropriate for the operation of the Practice and required for the provision of
Professional Eye Care Services. The ultimate oversight, supervision and
ownership for all health care supplies is and shall remain the sole
responsibility of the Practice and all costs and expenses relating to such
supplies shall be a Practice Expense. As used in this provision, the term
"health care supplies" shall mean all drugs, pharmaceuticals, optical supplies,
products, substances, items or devices the whose purchase, possession,
maintenance, administration, prescription or security of which requires the
authorization or order of a licensed health care provider or requires a permit,
registration, certification or other governmental authorization held by a
licensed health care provider as specified under any federal and/or state law.
3.4 Support Services. Business Manager shall provide or arrange
for all printing, stationery, forms, postage, duplication or photocopying
services, and other support services as are reasonably necessary and
appropriate for the operation of the Office and the provision of Professional
Eye Care Services therein.
3.5 Quality Assurance, Risk Management, and Utilization Review.
Business Manager shall assist the Practice in the Practice's establishment and
implementation of procedures to ensure the consistency, quality,
appropriateness, and necessity of Professional Eye Care Services
-15-
<PAGE> 16
provided by the Practice, and shall provide administrative support for the
Practice's overall quality assurance, risk management, and utilization review
programs. Business Manager shall perform these tasks in a manner to ensure the
confidentiality and non-discoverability of these program actions to the fullest
extent allowable under state and federal law.
3.6 Licenses and Permits. Business Manager shall, on behalf of
and in the name of the Practice, coordinate all development and planning
processes, and apply for and use reasonable efforts to obtain and maintain all
federal, state and local licenses and regulatory permits required for or in
connection with the operation of the Practice and the equipment (existing and
future) located at the Office, other than those relating to the practice of
optometry or the administration of drugs by Professionals retained by or
associated with the Practice. The expenses and costs associated with obtaining
and maintaining permits with respect to the Office and licenses for
professional practice by the non- shareholder Professionals shall be deemed an
Office Expense.
3.7 Personnel. Except as specifically provided in Section 4.2 of
this Business Management Agreement, Business Manager shall employ or otherwise
retain and shall be responsible for selecting, hiring, training, supervising,
and terminating, all management, administrative, clerical, secretarial,
bookkeeping, accounting, payroll, billing and collection and other personnel
(including Clinical Personnel but excluding Professionals) as Business Manager
deems reasonably necessary and appropriate for Business Manager's performance
of its duties and obligations under this Business Management Agreement.
Consistent with reasonably prudent personnel management policies, Business
Manager shall seek and consider the advice, input, and requests of the Practice
in regard to personnel matters. Business Manager shall have sole
responsibility for determining the salaries and providing fringe benefits, and
for withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law
or governmental requirement. Business Manager does not currently intend to
change the existing composition or employment terms of any of Business
Manager's personnel which have employment arrangements with the Practice on the
effective date of this Agreement (unless there are unsettled issues regarding
such arrangements as described in Exhibit 3.7). Business Manager reserves the
right, however, to change the number, composition or employment terms of such
personnel in the future at Business Manager's discretion; provided, however,
that the termination of any of Business Manager's personnel who are Clinical
Personnel or occupy office manager or higher level positions, and are primarily
located at the Office must receive the approval of the Practice Advisory
Council. Business Manager and the Practice recognize and acknowledge that
Business Manager and personnel retained by Business Manager may from
time-to-time perform services for persons other than the Practice. This
Business Management Agreement shall not be construed to prevent or prohibit
Business Manager from performing such services for others or restrict Business
Manager from using its personnel to provide services to others. Business
Manager hereby disclaims any liability relating to the effect of its employees
on the qualification of the Practice's retirement plans under the Internal
Revenue Code, and all liabilities for such classification shall be solely the
responsibility of the Practice.
-16-
<PAGE> 17
3.8 Contract Negotiations. Business Manager shall evaluate,
assist in negotiations and administer on behalf of the Practice contracts that
do not relate to the provision of Professional Eye Care Services as set forth
in this Agreement and/or as approved in the Budget. To the extent permitted by
law, Business Manager shall evaluate, assist in negotiations, administer and
execute on the Practice's behalf, all contractual arrangements with third
parties as are reasonably necessary and appropriate for the Practice's
provision of Professional Eye Care Services, including, without limitation,
negotiated price agreements with third-party payors, alternative delivery
systems, or other purchasers of group health care services. However, the
Practice shall have the final authority with regard to the entry into all of
such contractual arrangements relating to the provision of Professional Eye
Care Services.
3.9 Billing and Collection. As an agent on behalf of and for the
account of the Practice, Business Manager shall establish and maintain credit
and billing and collection services, policies and procedures, and shall use
reasonable efforts to timely bill and collect all Professional and other fees
for all billable Professional Eye Care Services provided by the Practice, or
Professionals employed or otherwise retained by the Practice. The Practice
Advisory Council shall make recommendations to and consult with Business
Manager and the Practice regarding the fees for Professional Eye Care Services
provided by the Practice. In connection with the billing and collection
services to be provided hereunder, and throughout the Term (and thereafter as
provided in Section 6.3), the Practice hereby grants to Business Manager an
exclusive special power of attorney and appoints Business Manager as the
Practice's exclusive true and lawful agent and attorney-in-fact (which shall be
deemed revoked in the event of termination for cause by the Practice), and
Business Manager hereby accepts such special power of attorney and appointment,
for the following purposes:
(a) To bill the Practice's patients, in the Practice's
name using the Practice's tax identification number and on the Practice's
behalf, for all billable Professional Eye Care Services provided by the
Practice to patients.
(b) To bill, in the Practice's name using the
Practice's tax identification number and on the Practice's behalf, all claims
for reimbursement or indemnification from health maintenance organizations,
self-insured employers, insurance companies, Medicare, Medicaid, and all other
third-party payors or fiscal intermediaries for all covered billable
Professional Eye Care Services provided by the Practice to patients.
(c) To collect and receive, in the Practice's name and
on the Practice's behalf, all accounts receivable generated by such billings
and claims for reimbursement, to administer such accounts including, but not
limited to, extending the time of payment of any such accounts; suing,
assigning or selling at a discount such accounts to collection agencies; or
taking other measures to require the payment of any such accounts; provided,
however, that the Practice shall review and approve (which approval shall not
be unreasonably withheld) any decision by Business Manager to undertake
extraordinary collection measures, such as filing lawsuits, discharging or
releasing obligors, or assigning or selling accounts at a discount to
-17-
<PAGE> 18
collection agencies. Business Manager shall act in a professional manner and
in compliance with all federal and State fair debt collection practices laws in
rendering billing and collection services.
(d) To deposit all amounts collected into the Account
which shall be a cash collateral account held in the name of Business Manager
and shall be opened at a financial institution chosen by Business Manager. All
amounts received or collected are hereby pledged to the Business Manager and
shall be held or deposited in the Account to secure the performance of the
Practice's obligations under this Agreement. The Account shall be held under
Business Manager's tax identification number. The Practice covenants to
transfer and deliver to the Account all funds received by the Practice from
patients or third-party payors for Professional Eye Care Services. Upon
receipt by Business Manager of any funds from patients or third-party payors or
from the Practice pursuant hereto for Professional Eye Care Services, Business
Manager shall immediately deposit the same into the Account. So long as the
Practice is in full compliance with the terms of this Business Management
Agreement, the Business Manager shall administer, be responsible for, and be
obligated to pay for all Office Expenses. Business Manager shall disburse such
deposited funds to creditors and other persons on behalf of the Practice,
maintaining records of such receipt and disbursement of funds. Business
Manager may borrow amounts from the Account in excess of amounts due Business
Manager pursuant to this Agreement and to the full extent of funds in the
Account. Such borrowed amounts shall bear interest to the Account in the
amount of six percent (6%) per annum, and any of such borrowed amounts
outstanding shall be repaid by Business Manager to the Account when needed to
cover all expenses and obligations under this Agreement and shall be repaid
within thirty (30) days of the termination of this Agreement.
(e) To take possession of, endorse in the name of the
Practice, and deposit into the Account any notes, checks, money orders,
insurance payments, and any other instruments received in payment of accounts
receivable for Professional Eye Care Services.
(f) To sign checks on behalf of the Practice, and to
make withdrawals from the Account for payments specified in this Business
Management Agreement. Upon request of Business Manager, the Practice shall
execute and deliver to the financial institution wherein the Account is
maintained, such additional documents or instruments as may be necessary to
evidence or effect the special power of attorney granted to Business Manager by
the Practice pursuant to this Section 3.9. The special power of attorney
granted herein shall be coupled with an interest and shall be irrevocable
except with Business Manager's written consent. The irrevocable power of
attorney shall expire when this Business Management Agreement has been
terminated, all accounts receivable payable to Business Manager pursuant to
this Business Management Agreement have been collected and all Management Fees
due to Business Manager have been paid. If Business Manager assigns this
Business Management Agreement in accordance with its terms, the Practice shall
execute a power of attorney in favor of the assignee in a form acceptable to
Business Manager.
-18-
<PAGE> 19
3.10 Maintenance of Account. During the term of this Business
Management Agreement, all Adjusted Gross Revenues collected resulting from the
rendering of Professional Eye Care Services by the Practice shall be deposited
directly into the Account in which Business Manager shall have the sole signing
capacity.
(a) Payments from the Account. Each month Business
Manager shall pay (to the extent that funds are available) from funds that are
in the Account or in the Practice's accounts described in Section 3.10(b)
hereof all sums due and payable as Practice Expenses. Additionally, on or
before the 15th day of the following month, (i) Business Manager shall pay from
funds that are in the Account to the Practice Adjusted Gross Revenue less the
accrued Management Fee, accrued Practice Expense (excluding optical supplies),
and (at the discretion of Business Manager) all or a portion of sums advanced
by the Business Manager to the Practice, and (ii) the accrued Management Fee
for the previous month shall be paid.
(b) Payments to the Practice's Account. To the extent
funds are available, the Business Manager shall be responsible for remitting
from the Account to an account to be owned by and held in the Practice's name,
separate from the Account, the amounts which the Practice is entitled to
receive under Section 3.10(a) and amounts to be used for payment of Practice
Expenses. Within sixty (60) days of the end of each of the first three (3)
fiscal quarters in each fiscal year and within one hundred twenty (120) days of
the end of each fiscal year, a settlement process shall be undertaken pursuant
to which adjustments, if necessary, shall be made in the total payments to the
Practice based upon the financial statements prepared in accordance with
Section 3.11(b). Any additional payment due to the Practice will be made
within thirty (30) days of the completion of the settlement process. Any
reduction in payments to the Practice as the result of such settlement process
shall be made by reducing future payments to the Practice, commencing with the
month following completion of the settlement process, until such adjustments
are made in full.
Business Manager and the Practice shall each have signing capacity to
withdraw funds from the Practice's account; provided however that Business
Manager shall only be entitled to withdraw funds relating to such account in
connection with the payment of Practice Expenses and Shareholders' salaries,
benefits and payroll taxes. Subject to the foregoing, the Practice hereby
grants to Business Manager a special power of attorney and appoints Business
Manager as the Practice's true and lawful agent and attorney-in-fact, and
Business Manager hereby accepts such special power of attorney and appointment,
to sign checks on behalf of the Practice for payments of the Practice Expenses
and Shareholders' salaries, benefits and payroll taxes in accordance with this
Business Management Agreement. Upon request of Business Manager, the Practice
shall execute and deliver to the financial institution wherein the Practice's
account is maintained, such additional documents or instruments as may be
necessary to evidence or effect the special power of attorney granted to
Business Manager by the Practice pursuant to this Section 3.10(b). The special
power of attorney granted herein shall be coupled with an interest and shall be
irrevocable except with Business Manager's written consent. The irrevocable
power of attorney shall expire when this Business Management Agreement has been
terminated. If
-19-
<PAGE> 20
Business Manager assigns this Business Management Agreement in accordance with
its terms, the Practice shall execute a power of attorney in favor of the
assignee in a form acceptable to Business Manager. Business Manager shall not
make any withdrawal from the Practice's account unless expressly authorized in
this Agreement.
A Practice payroll account shall be established on behalf of the
Practice for payroll to non-shareholder Professionals of the Practice. Funds
for this account shall be received as Practice Expenses. Business Manager and
the Practice shall each have signing capacity to access the account for
payroll.
(c) Insufficient Funds in Account. During the Term of
this Agreement, Business Manager shall advance sufficient funds to cover all
Practice Expenses and Shareholder Expenses only if, and to the extent that, the
amount of such advances, plus accrued interest thereon, does not exceed the
reasonably collectable value of the Practice's accounts receivable as
determined by Business Manager in its reasonable discretion plus any amounts
borrowed by Business Manager pursuant to Section 5.4 and minus the accrued
Management Fee. Business Manager may, however, elect from time to time to
advance additional funds to the Practice at its discretion. Any of such
advances shall be deemed loans to the Practice to be repaid by the Practice
along with interest at six percent (6%) per annum. Any of such advanced
amounts which have not been paid to Business Manager pursuant to Section
3.10(a)(i) on the date of termination of this Agreement shall become due and
payable on the date of such termination.
(d) Payment of Office Expenses. During the Term of
this Business Management Agreement and so long as the Practice is in full
compliance with the terms of this Business Management Agreement, Business
Manager shall pay all sums due and payable as Office Expenses from one or more
accounts owned and controlled exclusively by Business Manager.
3.11 Fiscal Matters.
(a) Annual Budget. Annually and at least thirty (30)
days prior to the commencement of each fiscal year of the Practice, the
Practice Advisory Council shall prepare and deliver to the Practice a proposed
budget, setting forth an estimate of the Practice's revenues and expenses for
the upcoming fiscal year (including, without limitation, the Management Fee
associated with the Management Services provided by Business Manager hereunder
and the salaries and benefits of all non-shareholder Professionals employed by
the Practice). The Budget may be amended by the Practice Advisory Council from
time-to-time during any applicable fiscal year to reflect changing
circumstances affecting the Practice. Disputes concerning the Budget will, at
the request of either Party hereto, be submitted to the accounting firm of
Ernst & Young LLP, any successor thereof, or such other big six accounting firm
agreed to by the Parties, which shall determine an appropriate resolution of
the dispute. Such determination shall be binding upon the Practice and the
Business Manager, subject to either Party's right to petition the National
Appeals Council to consider the determination of Ernst & Young LLP (or its
-20-
<PAGE> 21
successor or replacement), which petition may be granted at the discretion of
the National Appeals Council. In all situations described in this Agreement in
which Ernst & Young LLP or its successor or replacement is to act as an
arbitrator of any matter relating to this Agreement, Ernst & Young LLP (or its
successor or replacement) shall act as an impartial and independent arbitrator.
The Parties hereby waive and release and agree to indemnify and hold harmless
Ernst & Young LLP (and its successor or replacement) from and for any and all
claims, demands, liabilities, losses, damages, costs and expenses relating to
its determinations made in good faith pursuant to this Agreement and agree to
execute any documents reasonably requested by Ernst & Young LLP (or its
successor or replacement) to effectuate the same. Any final decision of Ernst
& Young LLP or its successor or replacement, or the National Appeals Council
concerning the Budget shall be retroactive to the first day of the Budget
period in question. Notwithstanding the above, should Business Manager be in
material default hereunder, the Practice shall have the exclusive right to
establish the Budget. Additionally, notwithstanding the above, no change in an
adopted Budget shall be contrary to the terms and spirit of this Agreement nor
shall it have any effect on the Management Fee expressly agreed to herein,
unless approved in advance in writing by the Parties hereto.
(b) Accounting and Financial Records. Business Manager
shall establish and administer accounting procedures, controls, and systems for
the development, preparation, and safekeeping of administrative or financial
records and books of account relating to the business and financial affairs of
the Practice and the provision of Professional Eye Care Services, all of which
shall be prepared and maintained in accordance with GAAP. Business Manager
shall prepare and deliver to the Practice (i) within sixty (60) days of the end
of each of the first three (3) fiscal quarters in each fiscal year, and (ii)
within one hundred twenty (120) days of the end of each fiscal year, a balance
sheet and a profit and loss statement reflecting the financial status of the
Practice in regard to the provision of Professional Eye Care Services as of the
end of such period, all of which shall be prepared in accordance with GAAP
consistently applied. In addition, Business Manager shall prepare or assist in
the preparation of any other financial statements or records as the Practice
may reasonably request.
(c) Sales and Use Taxes. Business Manager and the
Practice acknowledge and agree that to the extent that any of the services to
be provided by Business Manager hereunder may be subject to any state sales and
use taxes, Business Manager may have a legal obligation to collect such taxes
from the Practice and to remit the same to the appropriate tax collection
authorities. The Practice agrees to have applicable state sales and use taxes
attributable to the services to be provided by Business Manager hereunder
treated as an Office Expense.
3.12 Reports and Records.
(a) Health Care Records. To the extent permitted by
applicable law, Business Manager shall establish, monitor, and maintain
procedures and policies for the timely creation, preparation, filing and
retrieval of all health care records generated by the Practice in
-21-
<PAGE> 22
connection with the Practice's provision of Professional Eye Care Services;
and, subject to applicable law, shall ensure that health care records are
promptly available to Professionals and any other appropriate persons. All
such health care records shall be retained and maintained by the Practice, and
the Business Manager as agent for the Practice, in accordance with all
applicable State and federal laws relating to the confidentiality and retention
thereof. All health care records shall be and remain the property of the
Practice. The Practice shall at all times during the term of this Agreement
grant Business Manager unrestricted access to such health care records and
shall in the course of the Practice's business obtain the written consent of
the Practice's patients to Business Manager's access to, and review and use of
such records.
(b) Other Reports and Records. Business Manager shall
timely create, prepare, and file such additional reports and records as are
reasonably necessary and appropriate for the Practice's provision of
Professional Eye Care Services, and shall be prepared to analyze and interpret
such reports and records upon the request of the Practice.
3.13 Recruitment of the Practice's Professionals. Upon the
Practice's request, Business Manager shall perform all administrative services
reasonably necessary and appropriate to recruit potential Professionals to
become employees of the Practice. Business Manager shall provide the Practice
with model agreements to document the Practice's employment, retention or other
service arrangements with such individuals. It will be and remain the sole and
complete responsibility of the Practice to interview, select, contract with,
supervise, control and terminate all Professionals performing Professional Eye
Care Services or other professional services.
3.14 Confidential and Proprietary Information.
(a) Business Manager agrees and acknowledges that all
materials provided by the Practice to the Business Manager constitute
Confidential Information disclosed in confidence and with the understanding
that it constitutes valuable business information developed by the Practice at
great expenditures of time, effort, and money. Business Manager further agrees
that it shall not, directly or indirectly, disclose any Confidential
Information of the Practice to other persons without the Practice's express
written authorization, such Confidential Information shall not be used in any
way directly or indirectly detrimental to the Practice, and Business Manager
will keep such Confidential Information confidential and will ensure that its
affiliates and advisors who have access to such Confidential Information comply
with these nondisclosure obligations; provided, however, that Business Manager
may disclose Confidential Information to those of its Representatives who need
to know Confidential Information for the purposes of this Business Management
Agreement, it being understood and agreed to by Business Manager that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by
Business Manager not to disclose to any other person any Confidential
Information. Business Manager agrees to be responsible for any breach of this
Section by its affiliates, advisors, or Representatives. If Business Manager
is requested or required (by oral questions, interrogatories, requests for
information or documents, subpoenas, civil investigative demands,
-22-
<PAGE> 23
or similar processes) to disclose or produce any Confidential Information
furnished in the course of its dealings with the Practice or its affiliates,
advisors, or Representatives, Business Manager will (i) provide the Practice
with prompt notice thereof and copies, if possible, and, if not, a description,
of the Confidential Information requested or required to be produced so that
the Practice may seek an appropriate protective order or waive compliance with
the provisions of this Section and (ii) consult with the Practice as to the
advisability of the Practice's taking of legally available steps to resist or
narrow such request. Business Manager further agrees that, if in the absence
of a protective order or the receipt of a waiver hereunder Business Manager is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning the Practice to any tribunal
legally authorized to request and entitled to receive such Confidential
Information or to stand liable for contempt or suffer other censure or penalty,
Business Manager may disclose or produce such Confidential Information to such
tribunal without liability hereunder; provided, however, that Business Manager
shall give the Practice written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use its best efforts to obtain, to the greatest extent
possible, an order or other reliable assurance that confidential treatment will
be accorded to such Confidential Information so required to be disclosed or
produced. Upon expiration or termination of this Business Management Agreement
by either Party for any reason whatsoever, Business Manager shall immediately
return and shall cause its Representatives, affiliates, and independent
contractors to immediately return to the Practice all Confidential Information,
and Business Manager shall not, and will cause its Representatives, affiliates,
and independent contractors not to, thereafter use, appropriate or reproduce
such Confidential Information. Business Manager further expressly acknowledges
and agrees that any such use, appropriation, or reproduction of any such
Confidential Information by any of the foregoing after the expiration or
termination of this Agreement will result in irreparable injury to the
Practice, that the remedy at law for the foregoing would be inadequate, and
that in the event of any such use, appropriation, or reproduction of any such
Confidential Information after the termination or expiration of this Agreement,
the Practice, in addition to any other remedies or damages available to it,
shall be entitled to injunctive or other equitable relief without the necessity
of posting a bond, cash, or otherwise, and without the necessity of proving
actual damages. Such rights to relief shall not preclude the Practice from
other remedies which may be available to it hereunder.
(b) Notwithstanding clause (a) above, Business Manager
may share, subject to the restrictions of this Section, with other professional
corporations, associations, ophthalmology and optometry practices, or health
care delivery entities the practice statistics of the Practice, including
utilizing review data, quality assurance data, cost data, outcomes data, or
other practice data. In addition, Business Manager may disclose all
practice-related information necessary or desirable in connection with any
public or private offering of any debt or equity security. No such data will
disclose or divulge patient identifying information or, to the extent possible,
Professional identifying information.
-23-
<PAGE> 24
3.15 Business Manager's Insurance. Throughout the Term, Business
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof, appropriate
workers' compensation coverage for Business Manager's employed personnel
provided pursuant to this Business Management Agreement, and professional,
casualty and comprehensive general liability insurance covering Business
Manager, Business Manager's personnel, and all of Business Manager's equipment
in such amounts, on such basis and upon such terms and conditions as Business
Manager deems appropriate. Such insurance policies shall be issued by a
carrier or carriers having a current rating of not less than "A" as rated by
A.M. Best Company, unless the Practice agrees in writing to the purchase of a
policy or policies from a carrier having a lesser rating than "A". Business
Manager shall cause the Practice to be named as an additional insured on
Business Manager's casualty and comprehensive general liability policy.
Business Manager hereby releases the Practice from any and all liability for
losses or damages caused by any act or neglect of the Practice occurring after
the effective date hereof to the extent that such losses or damages are covered
by insurance; provided, however, that such release shall not apply to any loss
or damage caused by the willful, wanton, or premeditated negligence of the
Practice. Business Manager shall obtain from any insurance company issuing the
foregoing policies its consent to the release from liability contained in this
Section. Upon the request of the Practice, Business Manager shall provide the
Practice with a certificate evidencing such insurance coverage. Business
Manager may also obtain key man life insurance policies on the life of any
Shareholder as is consistent with 1.18(n).
3.16 No Warranty. The Practice acknowledges that Business Manager
has not made and will not make any express or implied warranties or
representations that the Management Services provided by Business Manager will
result in any particular amount or level of optometry practice or income to the
Practice. Specifically, Business Manager has not represented that its
Management Services will result in higher revenues, lower expenses, greater
profits or growth in the number of patients treated by the Practice's
Professionals.
3.17 Non-Competition Covenant from Business Manager. The Business
Manager hereby recognizes and acknowledges that the Practice shall incur
substantial costs in modifying its business activities to carry out this
Business Management Agreement and that in the process of Business Manager's
providing services under this Business Management Agreement, the Business
Manager will be privy to financial and Confidential Information, to which the
Business Manager would not otherwise be exposed. Business Manager agrees and
acknowledges that the non-competition covenants described hereunder are
necessary for the protection of the Practice, and that the Practice would not
have entered into this Business Management Agreement without such covenants.
Business Manager represents, warrants and covenants that during the Term of
this Business Management Agreement and for a period of two (2) years from the
date this Business Management Agreement is terminated, other than if terminated
by Business Manager for cause, neither Business Manager nor any person or
entity affiliated directly or indirectly with Business Manager will, anywhere
within five (5) miles of any Office existing on the effective date of this
Business Management Agreement, enter into a direct or indirect relationship
similar
-24-
<PAGE> 25
to the relationship between the Practice and Business Manager, or acquire the
non-optometric assets of, any professional practice group or engage in any
other eye care business currently engaged in by the Business Manager without
approval of the Practice. The Local Advisory Council shall consult with
Business Manager with respect to any acquisition of or merger with a health
care practice outside such five (5) mile area and within the region described
in Exhibit 2.10. Notwithstanding anything to the contrary in this Section,
Business Manager (a) may establish and maintain relationships with the entities
described on Exhibit 3.17, (b) may enter into managed care agreements with (i)
other practices on the one hand, and national or regional payor entities on the
other hand, if the Practice, upon being offered the opportunity to enter into
such managed care agreements, elects not to enter into such managed care
agreements, (ii) other health care practices within the above-described file
(5) mile area if and to the extent that the Practice is unable to provide the
specific services, reasonable access to, or minimum standards as required by, a
managed care payor for all of the patients to be covered by a managed care
agreement, and (iii) other health care practices where Business Manager
reasonably believes additional providers are required to obtain a contract;
provided, however, that the exceptions to Business Manager's covenant not to
compete contained in this subsection (b) shall not permit Business Manager to
enter into business management agreements with such other health care
practices. If the Business Manager breaches any obligation set forth in this
Section, in addition to any other remedies available under this Business
Management Agreement, at law or in equity, the Practice shall be entitled to
enforce this Business Management Agreement by injunctive relief and by specific
performance of the Business Management Agreement, such relief to be without the
necessity of posting a bond, cash or otherwise. Additionally, nothing in this
Section 3.17 shall limit the Practice's right to recover any other damages to
which it is entitled as a result of the Business Manager's breach. The time
period for which the non-competition covenants are effective shall be extended
day for day for the time period the Business Manager is in violation of the
non-competition covenants. If any provision of the covenants is held by a
court of competent jurisdiction to be unenforceable due to an excessive time
period, geographic area, or restricted activity, the covenants shall be
reformed to comply with such time period, geographic area, or restricted
activity that would be held enforceable. Following termination of this
Agreement pursuant to Section 6.2(b) hereof, Business Manager shall be released
from any and all of the restrictions imposed in this Section 3.17.
3.18 Marketing and Public Relations. In accordance with applicable
laws, regulations and ethical standards, Business Manager shall use its best
efforts to provide such marketing, support, advertising and public relations
services as are appropriate to promote and market the Practice's Professional
Eye Care Services. Such services shall be subject to review by the Local
Advisory Council. At the option of Business Manager and to the extent
permitted by law, the Business Manager's corporate name may be included on any
or all signage, letterhead, advertisements, announcements and the like relating
to Professional Eye Care Services provided by the Practice. Marketing support
services include training the Practice's personnel concerning marketing
techniques, providing written materials that may be used in marketing, and
providing technical assistance to the Practice's personnel engaged in direct
marketing efforts such as administrative support and assistance in contract
negotiation and implementation. Business
-25-
<PAGE> 26
Manager shall not perform direct marketing to potential sources of business,
but shall provide assistance to the Practice's personnel who perform any such
direct marketing as set forth above. Use of the Practice's name in any
advertising or promotions shall require the Practice's advance approval.
3.19 Inconsistent Transaction by Business Manager. The Business
Manager agrees that in performing the Management Services with respect to the
Practice, it shall not enter into any agreements, commitments or transactions
or engage in any activities which are exclusively within the authority and
responsibility of the Practice as set forth in this Agreement or are otherwise
materially inconsistent with the provisions of this Agreement.
3.20 Payment of Cash Portion of Note. From and after the effective
date hereof, Business Manager covenants and agrees to use its best efforts to
either (a) obtain from a financially secure third party such third party's
direct unconditional guaranty of payment of the mandatory cash portion of any
promissory note delivered by Business Manager in connection with an Acquisition
Transaction, or arrange a commercially reasonable credit facility or financing
arrangement from a financial institution or investor to be used for the payment
or direct security in form acceptable to the Practice for the payment of the
mandatory cash portion of such promissory note. Until payment of the mandatory
cash portion of the promissory note is protected in the foregoing manner,
Business Manager shall accumulate and reserve all of its net income, shall not
make any distributions of such net income to its shareholders, and shall not
use any of such reserved funds for acquisitions of, or mergers with, additional
health care practices. Notwithstanding the foregoing, Business Manager and its
subsidiaries shall be entitled to (i) continue its acquisitions and mergers
with the founding practices from the effective date hereof until December 31,
1996, (ii) enter into mergers with additional health care practices so long as
no cash consideration is used, and (iii) acquire or merge with additional
health care practices using such reserved funds so long as 2/3rds (66 2/3%) of
the shares held by the Founding Practices are voted in favor of such
acquisition or merger. For the purposes of this section a "financially secure
third party" shall be deemed to be a financial institution or investor having a
lending ability, fund size or net worth in excess of $100.0 million.
4. OBLIGATIONS AND RESPONSIBILITIES OF THE PRACTICE.
4.1 Organization and Operation. The Practice, as a continuing
condition of Business Manager's obligations under this Business Management
Agreement, shall at all times during the Term be and remain legally organized
and operated to provide Professional Eye Care Services in a manner consistent
with all State, federal and local laws. The Practice shall operate and
maintain within the Practice Territory a full-time practice of optometry
specializing in the provision of Professional Eye Care Services and shall
maintain and enforce employment agreements in the form of Exhibit 4.1A with the
Shareholders of the Practice specified in Exhibit 4.1B; provided, however, that
after the expiration of such employment agreements, and in the event that such
Shareholders continue a relationship with the Practice thereafter, the Practice
shall maintain and enforce employment agreements with such Shareholders and all
future
-26-
<PAGE> 27
Shareholders in the form of Exhibit 4.1C. Shareholders agree and the Practice
shall take steps to obtain the executed employment agreements in the form of
Exhibit 4.1C from such Shareholders after the five (5) year period and all
future Shareholders during the entire term of this Agreement if the Shareholder
elects to continue his relationship. After five (5) years from the effective
date of this Agreement, or earlier in the event of death or permanent
disability, a Shareholder may choose a successor to replace him as a
Shareholder. A Shareholder who wishes to have a successor replace him as a
Shareholder must first demonstrate to and obtain consent from Business Manager
that the successor is licensed to practice optometry in the State, and is
competent and capable to assume ownership of the Practice. Business Manager
Consent shall not be unreasonably withheld with respect to such replacement.
In the event of disability, death or planned retirement after five years,
Business Manager will make a good faith effort in assisting the Practice in
locating a possible successor. It is understood however that Business Manager
has no ultimate responsibility to find the ultimate successor, which shall be
the sole responsibility of the Shareholder. The Practice shall not amend the
employment agreements or waive any rights thereunder without the prior approval
of Business Manager. Recognizing that Business Manager would not have entered
into this Business Management Agreement but for the Practice's covenant to
maintain employment agreements with its Shareholders, the Practice shall pay to
Business Manager, in addition to the Management Fee, any damages, compensation,
payment, or settlement received by the Practice from each Shareholder specified
in Exhibit 4.1B pursuant to any non-competition covenant contained in Exhibit
4.1A. Such payment shall constitute liquidated damages of Business Manager for
the Practice's breach of the covenant contained in this Section 4.1. All
expenses and costs in enforcing the foregoing covenants not to compete shall be
deemed to be Office Expenses. The Practice shall take steps to have all future
Shareholders execute any reasonable documentation as required by Business
Manager in connection with this Section.
4.2 Practice Personnel. The Practice shall retain, that number
of Professionals sufficient in the sole discretion of the Practice as are
reasonably necessary and appropriate for the provision of Professional Eye Care
Services, each of whom shall act in accordance with the applicable provisions of
this Business Management Agreement. Each Optometrist retained by the Practice
shall hold and maintain a valid and unrestricted license to practice optometry
in the State, and shall be competent in the practice of optometry. The Practice
shall enter into and maintain with each such retained Optometrist and enforce a
written employment agreement substantially in the form of Exhibit 4.2B.
Notwithstanding the foregoing provisions, the employment contracts currently in
effect on the effective date of this Agreement with the non-shareholder
Professionals identified on Exhibit 4.2C shall remain in force during the
existing term; provided, however, that upon completion of such term should the
non-shareholder remain at the Practice or at such time the non-shareholder
Professional is granted options by Vision 21, such Professionals' employment
contracts shall then be immediately replaced with employment contracts in
substantially the form of Exhibit 4.1C. The Practice shall be responsible for
hiring, training, supervision, discipline, termination and paying the
compensation, and benefits as applicable, for all Professional personnel and
other contracted or
-27-
<PAGE> 28
affiliated Professionals, and for withholding, as required by law, any sums for
income tax, unemployment insurance, social security, or any other withholding
required by applicable law. Business Manager shall, however, on behalf of the
Practice, administer the compensation with respect to such individuals in
accordance with the written employment agreement between the Practice and each
Professional. The Practice shall cause its Professionals to obtain and
maintain all licenses and permits required in connection with the practice of
optometry, any other business it has or the administration of drugs by such
Professionals. Business Manager shall neither control nor direct any
Professional in the performance of Professional Eye Care Services for patients.
All damages recovered for violations of non-competition covenants from
Professionals subject to employment agreements in the forms of Exhibit 4.1C,
Exhibit 4.2A, or Exhibit 4.2B shall be treated as Adjusted Gross Revenue.
4.3 Professional Standards. As a continuing condition of Business
Manager's obligations hereunder each Optometrist and any other Optometrist
personnel retained by the Practice to provide optometry services must (i) have
and maintain a valid and unrestricted license to practice optometry in the
State, (ii) comply with, be controlled and governed by and otherwise provide
optometry services in accordance with applicable federal, State and municipal
laws, rules, regulations, ordinances and orders, and the ethics and standard of
care of the optometric community wherein the principal Office of the Practice
is located, (iii) obtain and retain appropriate staff membership with
appropriate privileges at any hospital or health care facility at which
optometry services are to be provided, and (iv) provide on a continual basis,
quality care to its patients. Procurement of temporary staff privileges
pending the completion of the staff approval process shall satisfy this
provision, provided the Optometrist actively pursues full appointment and
actually receives full appointment within a reasonable time.
4.4 Professional Eye Care Services. The Practice shall ensure
that Professionals are available as necessary to provide quality Professional
Eye Care Services to patients and shall assist the Business Manager in ensuring
that Clinical Personnel are available as necessary to provide quality
Professional Eye Care Services to patients. In the event that Professionals
employed by, or Shareholders of, the Practice are not available to provide
Professional Eye Care Services coverage, the Practice shall engage and retain
locum tenens coverage. Professionals retained on a locum tenens basis shall
meet all of the requirements of Section 4.3, and the cost of providing locum
tenens coverage shall be a Practice Expense. With the assistance of the
Business Manager, the Practice and the Professionals shall be responsible for
scheduling Professional and Clinical Personnel coverage of all optometric
procedures. The Practice shall cause all Professionals to exert their best
efforts to develop and promote the Practice in such manner as to ensure the
Practice is able to serve the diverse needs of the community.
4.5 Peer Review/Quality Assurance. The Practice shall adopt a
peer review/quality assurance program to monitor and evaluate the quality and
cost-effectiveness of Professional Eye Care Services provided by Professional
personnel of the Practice, the expenses of which shall be deemed an Office
Expense. Pursuant to such program, the Practice shall designate a committee of
Professionals to function as an optometric peer review committee to review
-28-
<PAGE> 29
credentials of potential recruits, perform quality assurance functions, and
otherwise resolve optometric competence issues. The optometric peer review
committee shall function pursuant to formal written policies and procedures.
Upon request of the Practice, Business Manager shall provide administrative
assistance to the Practice in performing its peer review/quality assurance
activities, but only if such assistance can be provided consistent with
maintaining the confidentiality, immunity, and non-discoverability of the
processes and actions of the peer review/quality assurance process of the
Practice.
4.6 Practice's Insurance. The Practice shall, obtain and
maintain with commercial carriers chosen by the Practice appropriate workers'
compensation coverage for the Practice's employed personnel, if any, and
professional and comprehensive general liability insurance covering the Practice
and each of the Professionals and Clinical Personnel the Practice retains to
provide Professional Eye Care Services. The comprehensive general liability
coverage with respect to each Professional and Clinical Personnel shall be in
the minimum amount of One Million Dollars ($1,000,000) and professional
liability coverage shall be in the minimum amount of One Million Dollars
($1,000,000) for each occurrence and Three Million Dollars ($3,000,000) annual
aggregate; provided, however, that with Business Manager Consent, which shall
not be unreasonably withheld or delayed, the Practice may from time-to-time
change such liability coverage amounts to amounts which are consistent with
industry standards. The insurance policy or policies shall provide for at least
thirty (30) days' advance written notice to the Practice from the insurer as to
any alteration of coverage, cancellation, or proposed cancellation for any
cause. The Practice hereby releases Business Manager from any and all liability
for losses or damages caused by any act or neglect of Business Manager occurring
after the effective date hereof to the extent that such losses or damages are
covered by insurance; provided, however, that such release shall not apply to
any loss or damage caused by the willful, wanton, or premeditated negligence of
Business Manager. The Practice shall obtain from any insurance company issuing
the foregoing policies its consent to the release from liability contained in
this Section. The Practice shall cause to be issued to Business Manager by such
insurer or insurers a certificate reflecting such coverage and obtain the
consent of such insurer or insurers to provide prior written notice to Business
Manager equal to notice given to a Professional of the cancellation or proposed
cancellation of such insurance for any cause. Such insurance policies shall be
issued by a carrier or carriers having a current rating of not less than "A" as
rated by A.M. Best Company, unless Business Manager agrees in writing to the
purchase of a policy or policies from a carrier having a lesser rating than "A".
The Local Advisory Council may, from time-to-time, select a different commercial
carrier or carriers for such workers' compensation and professional and general
liability coverage upon the establishment of a program affecting substantially
all practice groups within the market in which the Practice is located for which
Business Manager provides management services, which decision shall be binding
upon the Practice. Upon the termination of this Business Management Agreement
for any reason, the Practice shall continue to carry professional liability
insurance in the amounts specified herein for the shorter period of (i) the
period set forth in the State's statute of repose (or if no
-29-
<PAGE> 30
statute of repose exists, the State's statute of limitations) for bringing
professional malpractice claims based upon injuries which are not immediately
discoverable plus any applicable tolling periods, or (ii) ten (10) years after
termination; or if the Practice dissolves or ceases to practice optometry, the
Practice shall obtain and maintain as a Shareholder Expense "tail" professional
liability coverage, in the amounts specified in this Section for the shorter
period of (i) the period set forth in the State's statute of repose (or if no
statute of repose exists, the State's statute of limitations) for bringing
professional malpractice claims based upon injuries which are not immediately
discoverable plus any applicable tolling periods, or (ii) ten (10) years. The
Practice shall be responsible for paying all premiums for Shareholder "tail"
insurance coverage and such coverage shall be a Shareholder Expense; provided,
however, that the Practice may cause its Professionals to be responsible for
paying the premiums for such "tail" insurance coverage. Except as determined
by the Local Advisory Council, the professional liability insurance carrier
shall not be replaced or changed without Practice Consent and Business Manager
Consent.
4.7 Confidential and Proprietary Information. The Practice agrees
and acknowledges that all materials provided by Business Manager to the
Practice constitute Confidential Information disclosed in confidence and with
the understanding that it constitutes valuable business information developed
by Business Manager at great expenditures of time, effort, and money. The
Practice further agrees that it shall not, directly or indirectly, disclose any
Confidential Information of the Business Manager to other persons without
Business Manager's express written authorization, such Confidential Information
shall not be used in any way directly or indirectly detrimental to Business
Manager, and the Practice will keep such Confidential Information confidential
and will ensure that its affiliates and advisors who have access to such
Confidential Information comply with these nondisclosure obligations; provided,
however, that the Practice may disclose Confidential Information to those of
its Representatives who need to know Confidential Information for the purposes
of this Business Management Agreement, it being understood and agreed to by the
Practice that such Representatives will be informed of the confidential nature
of the Confidential Information, will agree to be bound by this Section, and
will be directed by the Practice not to disclose to any other person any
Confidential Information. The Practice agrees to be responsible for any breach
of this Section by its affiliates, advisors, or Representatives. If the
Practice is requested or required (by oral questions, interrogatories, requests
for information or documents, subpoenas, civil investigative demands, or
similar processes) to disclose or produce any Confidential Information
furnished in the course of its dealings with Business Manager or its
affiliates, advisors, or Representatives, the Practice will (i) provide
Business Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that Business Manager may seek an appropriate protective order or
waive compliance with the provisions of this Section and (ii) consult with
Business Manager as to the advisability of Business Manager's taking of legally
available steps to resist or narrow such request. The Practice further agrees
that, if in the absence of a protective order or the receipt of a waiver
hereunder, the Practice is nonetheless, in the written opinion of its legal
counsel, compelled to disclose or produce Confidential Information concerning
Business Manager to any tribunal legally authorized to request and entitled to
receive such Confidential Information or to
-30-
<PAGE> 31
stand liable for contempt or suffer other censure or penalty, the Practice may
disclose or produce such Confidential Information to such tribunal without
liability hereunder; provided, however, that the Practice shall give Business
Manager written notice of the Confidential Information to be so disclosed or
produced as far in advance of its disclosure or production as is practicable
and shall use its best efforts to obtain, to the greatest extent possible, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced. The
Practice acknowledges that the disclosure of Confidential Information to it by
Business Manager is done in reliance upon its representations and covenants in
this Business Management Agreement. Upon expiration or termination of this
Business Management Agreement by either Party for any reason whatsoever, the
Practice shall immediately return and shall cause its Representatives,
affiliates, and independent contractors to immediately return to Business
Manager all Confidential Information, and the Practice will not, and will cause
its Representatives, affiliates, and independent contractors not to, thereafter
use, appropriate or reproduce such Confidential Information. The Practice
further expressly acknowledges and agrees that any such use, appropriation, or
reproduction of any such Confidential Information by any of the foregoing after
the expiration or termination of this Agreement will result in irreparable
injury to Business Manager, that the remedy at law for the foregoing would be
inadequate, and that in the event of any such use, appropriation, or
reproduction of any such Confidential Information after the termination or
expiration of this Agreement, Business Manager, in addition to any other
remedies or damages available to it, shall be entitled to injunctive or other
equitable relief without the necessity of posting a bond, cash, or otherwise,
and without the necessity of proving actual damages. Such rights to relief
shall not preclude Business Manager from other remedies which may be available
to it hereunder.
4.8 Non-Competition. The Practice hereby recognizes and
acknowledges that Business Manager will incur substantial costs in providing
the equipment, support services, personnel, management, administration, and
other items and services that are the subject matter of this Business
Management Agreement and that in the process of providing services under this
Business Management Agreement, the Practice will be privy to financial and
Confidential Information, to which the Practice would not otherwise be exposed.
The Parties also recognize that the services to be provided by Business Manager
will be feasible only if the Practice operates an active practice to which the
Professionals associated with the Practice devote their full time and
attention. The Practice agrees and acknowledges that the non-competition
covenants described hereunder are necessary for the protection of Business
Manager, and that Business Manager would not have entered into this Business
Management Agreement without the following covenants.
(a) During the Term of this Business Management
Agreement and except for its obligations pursuant to this Business Management
Agreement, the Practice shall not establish, operate, or provide Professional
Eye Care Services at a medical office, optometric office or other health care
facility anywhere within twenty (20) miles of any current or future location at
which Business Manager provides business management services similar to the
-31-
<PAGE> 32
services contemplated in this Agreement; provided, however, that the Practice
may carry on the activities described in Exhibit 1.3 without violating this
Section 4.8.
(b) Except as specifically agreed to by Business
Manager in writing, the Practice and its Shareholders covenant and agree that
during the Term of this Business Management Agreement and for a period of two
(2) years from the date this Business Management Agreement is terminated, other
than if terminated by the Practice for cause, or expires, the Practice shall
not directly or indirectly own (excluding ownership of less than one percent
(1%) of the equity of any publicly traded entity and excluding ownership of the
common stock of Business Manager), manage, operate, control, contract with,
lend funds to, lend its name to, maintain any interest whatsoever in, or be
employed by, any enterprise (i) having to do with the provision, distribution,
promotion, or advertising of any type of management or administrative services
or products to third parties in competition with Business Manager, located
anywhere in the United States of America; and/or (ii) offering any type of
service(s) or product(s) to third parties substantially similar to those
offered by Business Manager to the Practice located anywhere in the United
States of America. Notwithstanding the above restriction, nothing herein shall
prohibit (i) the Practice or any of its Shareholders from providing management
and administrative services to this or their own optometry practices after the
termination of this Business Management Agreement, (ii) the Practice or its
Shareholders from contracting with a third-party manager to provide
administrative or management services for its or their professional eye care
practices after termination of this Business Management Agreement and two (2)
years thereafter, as long as such relationship complies with the provisions of
this Section 4.8(b); (iii) any of the Practice's Shareholders from providing
management and administrative services to their own optometry practices after
the termination of their employment relationship with the Practice in
accordance with this Business Management Agreement, and (iv) such Shareholders
from contracting with a third-party manager to provide administrative or
management services for their professional eye care practices after the
termination of their employment relationship with the Practice in accordance
with this Business Management Agreement. If the Practice violates this
Section, the Practice shall pay to Business Manager the amount received as
consideration by the Practice and/or the Shareholders in connection with the
Acquisition Transaction, as agreed upon liquidated damages. The Practice and
the Shareholders acknowledge and agree that such sum is reasonable in light of
the severe harm that Business Manager would suffer as a result of the
Practice's breach of this restrictive covenant. If the Practice fails to make
payment of liquidated damages as contemplated by this Section, Business Manager
shall be entitled among all other rights and remedies available at law or
equity, to (i) cancel the number of shares of Business Manager's common stock
held by the Practice or the Shareholders or, with respect to shares of Business
Managers' common stock entitled to be received by the Practice or the
Shareholders pursuant to the Acquisition Agreement, terminate its obligation to
deliver such number of shares of Business Manager's common stock, valued at the
market price per share representing such liquidated damages sum, or (ii) set
off all or any of such liquidated damages sum against amounts payable under any
promissory note held by the Practice or the Shareholders, or do both of the
foregoing, but in no
-32-
<PAGE> 33
event shall Business Manager be entitled to offset amounts in excess of the
liquidated damages sum pursuant to this Section.
(c) The written employment agreements in the form of
Exhibit 4.1A shall contain covenants of the Shareholder employees pursuant to
which the Shareholders agree not to compete with the Practice or with the
Business Manager within the Practice Territory for two (2) years after
termination or expiration of the employment agreement.
(d) The Practice shall obtain and enforce formal
written agreements from its Optometrist employees in the form of Exhibit 4.2A
or Exhibit 4.1C, as the case may be, pursuant to which the employees agree not
to compete with the Practice or with the Business Manager within the Practice
Territory for one (1) year after termination or expiration of the employment
agreement.
(e) The Practice understands and acknowledges that
Business Manager shall suffer severe harm in the event that the foregoing
non-competition covenants in Section 4.8 are violated, and accordingly, if the
Practice breaches any obligation of Section 4.8, in addition to any other
remedies available under this Business Management Agreement, at law or in
equity, Business Manager shall be entitled to enforce this Business Management
Agreement by injunctive relief and by specific performance of the Business
Management Agreement, such relief to be without the necessity of posting a
bond, cash or otherwise. Additionally, nothing in this Section 4.8(e) shall
limit Business Manager's right to recover any other damages to which it is
entitled as a result of the Practice's breach. The time period for which the
non-competition covenant is effective shall be extended day for day for the
time period the Practice is in violation of the non-competition covenant. If
any provision of the covenants is held by a court of competent jurisdiction to
be unenforceable due to an excessive time period, geographic area, or
restricted activity, the covenant shall be reformed to comply with such time
period, geographic area, or restricted activity that would be held enforceable.
Following termination of this Agreement pursuant to Section 6.2(b) hereof, the
Practice shall not amend, alter or otherwise change any term or provision of
the restrictive covenants or liquidated damages provisions of the employment
agreements with the Professionals. Following termination of this Agreement
pursuant to Section 6.2(a) hereof, the Practice and the Professionals shall be
relieved of the restrictions imposed by this Section 4.8.
4.9 Name, Trademark. The Practice represents and warrants that
the Practice conducts its professional practice under the name of, and only
under the name of "Gillette & Associates, #6965 P.A" and that such name is duly
registered, qualified, or licensed under the law of the State, and that, to the
Practice's knowledge, the Practice is the sole and absolute owner of the name
in the State. The Practice covenants and promises that, without the prior
written consent of the Business Manager, the Practice will not:
(a) take any action that is reasonably likely to result
in the loss of registration, qualification or licensure of the name;
-33-
<PAGE> 34
(b) fail to take any reasonably necessary action that
will maintain the registration, qualification, or licensure current;
(c) license, sell, give, or otherwise transfer the name
or the right to use the name to any optometry practice, Optometrist,
professional corporation, or any other entity; or
(d) cease conducting the professional practice of the
Practice under the name.
4.10 Lease Assignment. Upon Business Manager's request, if the
Practice is the lessee of the Office under a lease with an unrelated and
unaffiliated lessor, the Practice shall assign the lease to Business Manager
upon receipt of consent from the lessor. The Practice shall use its best
efforts to assist in obtaining the lessor's consent to the assignment. Upon
request, the Practice shall execute any instruments and shall take any acts
that Business Manager may deem necessary to accomplish the assignment of the
lease.
4.11 Billing Information and Assignments; Establishment of Fees.
The Practice shall promptly provide the Business Manager with all billing and
other information reasonably requested by the Business Manager to enable it to
bill and collect the Practice's fees and other charges and reimbursement claims
pursuant to Section 3.9, and the Practice shall use its best efforts to procure
consents to assignments and other approvals and documents necessary to enable
the Business Manager to obtain payment or reimbursement from third parties for
such fees, other charges and claims. The Practice shall establish reasonable
fees for all professional and ancillary services and pharmaceutical items in
connection with the provision of Professional Eye Care Services.
4.12 Provider Agreements. The Practice shall not enter into
contractual arrangements with third parties for the Practice's provision of
Professional Eye Care Services which are inconsistent with guidelines
established by the Local Advisory Council or any capitated fee arrangement
without the prior approval of the Practice Advisory Council. Subject to the
foregoing provision, the Practice shall have the final authority with regard to
all of such contractual arrangements.
4.13 Inconsistent Transaction by the Practice. The Practice agrees
that it shall not enter into any agreements, commitments or transactions or
engage in any activities which are within the authority and responsibility of
the Business Manager as set forth in this Agreement or otherwise materially
inconsistent with the provisions of this Agreement.
4.14 Recommendations. The Practice shall make recommendations to
Business Manager regarding the Office, the equipment, the business operations,
and the services to be provided by Business Manager under this Business
Management Agreement.
-34-
<PAGE> 35
4.15 General Obligations. The Practice shall take all lawful
actions reasonably necessary to maximize revenues and shall not take any action
to reduce revenues other than in the ordinary course of business.
4.16 Tax Matters. The Practice shall prepare or arrange for the
preparation by an accountant selected by the Practice of all appropriate
corporate tax returns and reports required of the Practice including such
returns and reports required with respect to the Account. All costs and
expenses relating to the preparation of such returns and reports shall be
deemed a Shareholder Expense.
4.17 Shareholders' Undertaking to Enforce Certain Provisions of
Agreement. The Practice shall cause to be executed by all Shareholders of the
Practice an undertaking in the form of Exhibit 4.17 by such Shareholders to
ensure that the corporate existence of the Practice is maintained and that the
covenants not to compete described in Sections 4.1 and 4.2 of this Agreement
are enforced by the Practice against any individuals violating such covenants.
5. BUSINESS MANAGER'S COMPENSATION.
5.1 Management Fee. The Practice and Business Manager agree to
the compensation set forth herein as being paid to Business Manager in
consideration of a substantial commitment made by Business Manager hereunder
and that such fees are fair and reasonable. Each month Business Manager shall
be paid the sum of that percentage set forth in Exhibit 5.1 of Adjusted Gross
Revenue (the "Management Fee"). Except for its obligation to pay in full all
Office Expenses, Business Manager shall not be liable for any losses generated
by the Practice.
5.2 Reasonable Value. Payment of the Management Fee is not
intended to be and shall not be interpreted or applied as permitting Business
Manager to share in the Practice's fees for Professional Eye Care Services or
any other services, but is acknowledged as the Parties' negotiated agreement as
to the reasonable fair market value of Business Manager's commitment to pay all
Office Expenses and the fair market value of the equipment, contract analysis
and support, other support services, purchasing, personnel, office space,
management, administration, strategic management and other items and services
furnished by Business Manager pursuant to the Business Management Agreement,
considering the nature and volume of the services required and the risks
assumed by Business Manager. The Practice and Business Manager recognize and
acknowledge that Business Manager will incur substantial costs and business
risks in undertaking to pay all Office Expenses, arranging for the Practice's
use of the Office and in providing the equipment, support services, personnel,
marketing, office space, management, administration, and other items and
services that are the subject matter of this Business Management Agreement, and
certain of such costs and expenses can vary to a considerable degree according
to the extent of the Practice's business and services. It is the
-35-
<PAGE> 36
intent of the Parties that the Management Fee reasonably compensate Business
Manager for the value to the Practice of Business Manager's administrative
expertise, given the considerable business risk to Business Manager in
providing the Management Services that are the subject of this Business
Management Agreement.
5.3 Payment of Management Fee. To facilitate the payment of the
Management Fee as provided in Section 5.1(a) hereof, the Practice hereby
expressly authorizes Business Manager to make withdrawals of the Management Fee
from the Account as such fee becomes due and payable during the Term in
accordance with Section 3.10(a) and after termination as provided in Section
6.3. Business Manager shall deliver to the Practice an invoice for the
Management Fee accompanied by a reasonably detailed statement of the
information upon which the Management Fee calculation is based.
5.4 Assignment of Fees for Optometry Services.
(a) As security for the performance of its obligations
under this Business Management Agreement, the Practice hereby irrevocably
assigns and sets over to Business Manager all of its right to receive payment
for Professional Eye Care Services (other than rights to receive payments
relating to the activities described in Exhibit 1.3) to the extent permitted by
law (the "Accounts Receivable") and retain such payment for its own account,
and shall obtain a like assignment from all Professionals. To the extent such
rights to receive payment cannot legally be assigned, the "Accounts Receivable"
shall include the right to have any amounts received by the Practice pursuant
to such non-assignable rights paid over to Business Manager upon receipt. The
Practice shall take such action as may be necessary to confirm to Business
Manager the rights set forth in this Section 5.4(a).
(b) Without limiting the generality of the foregoing,
it is the intent of the Parties that the assignments to Business Manager of the
rights described in Section 5.4(a) above shall be inclusive of the rights of
the Practice and the Professionals to receive payment with respect to any
services rendered prior to the effective date of any expiration or termination
of this Agreement; provided, however, that the right to receive payments
relating to the activities described in Exhibit 1.3 shall be excluded from such
assignment. The Practice agrees and shall cause each Professional to agree,
that Business Manager shall retain the right to collect and hold as security
any Accounts Receivable relating to any such services rendered prior to the
effective date of any such expiration or termination ("Pre-Termination Accounts
Receivable").
(c) The Practice acknowledges that it is the intent of
Business Manager to grant a security interest in one hundred percent (100%) of
the Pre-Termination Accounts Receivable, to the lender(s) under its working
capital credit facility (whether one or more, the "Credit Facility Lender"), as
in effect from time-to-time. The Practice agrees that such security interest
of the Credit Facility Lender is intended to be a first priority security
interest and is superior to any right, title or interest which may be asserted
by the Practice or any Professional
-36-
<PAGE> 37
with respect to the then applicable portion of the Pre-Termination Accounts
Receivable or the proceeds thereof. The Practice further agrees, and shall
cause each Professional to agree, that, upon the occurrence of an event which,
under the terms of such working capital credit facility, would allow the Credit
Facility Lender to exercise its right to collect such portion of the
Pre-Termination Accounts Receivable and apply the proceeds thereof toward
amounts due under such working capital credit facility, the Credit Facility
Lender will succeed to all rights and powers of Business Manager under the
powers of attorney provided for in Section 3.9(f) above as if such Credit
Facility Lender had been named as the attorney-in-fact therein, and the
Practice and each Professional hereby waive, and the Credit Facility Lender
shall not take the Pre-Termination Accounts Receivable subject to, any and all
defenses the Practice and/or such Professionals may have with respect to money
coming into the Account and any defenses they may have against the Credit
Facility Lender. The Practice shall, and shall cause its Professionals to,
execute any and all documents, financing statements, and agreements reasonably
requested by such Credit Facility Lender to evidence and effectuate the Credit
Facility Lender's rights contemplated in this Section.
(d) In the event that, contrary to the mutual intent of
Business Manager and the Practice, the assignment of rights described in this
Section 5.4 shall be deemed, for any reason, to be ineffective as an outright
assignment, the Practice and each Professional shall, effective as of the date
of this Business Management Agreement, be deemed to have granted (and the
Practice does hereby grant, and shall cause each Professional to grant) to
Business Manager a first priority lien on and security interest in and to any
and all interests of the Practice and such Professionals in any accounts
receivable generated by the provision of Professional Eye Care Services by the
Practice and its Professionals or otherwise generated through the operations of
the Office, and all proceeds with respect thereto, to secure the payment to
Business Manager of all amounts due to Business Manager hereunder, and this
Business Management Agreement shall be deemed to be a security agreement to the
extent necessary to give effect to the foregoing. The Practice shall execute
and deliver, and cause each Professional to execute and deliver, all such
financing statements as Business Manager may request in order to perfect such
security interest. The Practice shall not grant (and shall not suffer any
Professional to grant) any other lien on or security interest in or to such
accounts receivable or any proceeds thereof.
(e) Upon termination of this Business Management
Agreement, Business Manager shall release the foregoing lien with respect to
Accounts Receivable generated after the effective date of such termination and
shall execute and cause to be filed any termination statements relating to such
release of lien. However, it is understood that all rights of the Parties to
the Accounts Receivable shall be subordinate to any interest of the Credit
Facility Lender.
-37-
<PAGE> 38
5.5 Disputes Regarding Fees.
(a) It is the Parties' intent that any disputes
regarding performance standards of the Business Manager be resolved to the
extent possible by good faith negotiation. To that end, the Parties agree that
if the Practice in good faith believes that Business Manager has failed to
perform its obligations, and that as a result of such failure, the Practice is
entitled to a set-off or reduction in its Management Fees, the Practice shall
give Business Manager notice of the perceived failure and request in the notice
a set-off or reduction in Management Fees. Business Manager and the Practice
shall then negotiate the dispute in good faith, and if an agreement is reached,
the Parties shall implement the resolution without further action.
(b) If the Parties cannot reach a resolution within a
reasonable time, the Parties shall submit the dispute to mediation to be
conducted in accordance with the Florida Mediation Rules.
(c) If the mediation process fails to resolve the
dispute, the dispute shall be submitted by either Party to binding arbitration
under Section 8.7.
6. TERM AND TERMINATION.
6.1 Initial and Renewal Term. The Term of this Business
Management Agreement will be for an initial period of forty (40) years after
the effective date, and shall be automatically renewed for successive five (5)
year periods thereafter, provided that neither Business Manager nor the
Practice shall have given notice of termination of this Business Management
Agreement at least one hundred twenty (120) days before the end of the initial
term or any renewal term, or unless otherwise terminated as provided in Section
6.2 of this Business Management Agreement.
6.2 Termination.
(a) Termination by the Practice. The Practice may
immediately terminate this Agreement at its discretion, upon written notice
pursuant to Section 8.3, as follows:
i) If Business Manager becomes insolvent by
reason of its inability to pay its debts as they mature; is adjudicated
bankrupt or insolvent; files a petition in bankruptcy, reorganization or
similar proceeding under the bankruptcy laws of the United States or shall have
such a petition filed against it which is not discharged within thirty (30)
days; has a receiver or other custodian, permanent or temporary, appointed for
its business, assets or property; makes a general assignment for the benefit of
creditors; has its bank accounts, property or accounts attached; has execution
levied against its business or property; or voluntarily dissolves or liquidates
or has a petition filed for corporate dissolution and such petition is not
dismissed with thirty (30) days;
-38-
<PAGE> 39
ii) If the Business Manager fails to comply
with any material provision of this Agreement, or any other agreement with the
Practice, and does not correct such failure within sixty (60) days after
written notice of such failure to comply is delivered by the Practice
specifying the nature of the breach in reasonable detail.
(b) Termination by Business Manager. Business Manager
may immediately terminate this Agreement at its discretion, upon written notice
pursuant to Section 8.3, as follows:
i) If the Practice becomes insolvent by
reason of its inability to pay its debts as they mature; is adjudicated
bankrupt or insolvent; files a petition in bankruptcy, reorganization or
similar proceeding under the bankruptcy laws of the United States or shall have
such a petition filed against it which is not discharged within thirty (30)
days; has a receiver or other custodian, permanent or temporary, appointed for
its business, assets or property; makes a general assignment for the benefit of
creditors; has its bank accounts, property or accounts attached; has execution
levied against its business or property; or voluntarily dissolves or liquidates
or has a petition filed for corporate dissolution and such petition is not
dismissed with thirty (30) days; or
ii) If the Practice fails to comply with any
material provision of this Agreement, or any other agreement with Business
Manager, and does not correct such failure within sixty (60) days after written
notice of such failure to comply is delivered by Business Manager specifying
the nature of the breach in reasonable detail; or
iii) If the Practice's Adjusted Gross Revenue
for any twelve (12) month consecutive period during this Agreement falls below
eighty percent (80%) of the Practice's Adjusted Gross Revenue for the
Practice's fiscal year 1995.
(c) Termination by Agreement. In the event the
Practice and Business Manager shall mutually agree in writing, this Business
Management Agreement may be terminated on the date specified in such written
agreement.
(d) Legislative, Regulatory or Administrative Change.
In the event there shall be a change in the Medicare or Medicaid statutes,
federal statutes, state statutes, case laws, administrative interpretations,
regulations or general instructions, the adoption of new federal or state
legislation, or a change in any third-party reimbursement system, any of which
are reasonably likely to materially and adversely affect the manner in which
either Party may perform or be compensated for its services under this Business
Management Agreement or which shall make this Business Management Agreement or
any related agreements unlawful or unenforceable, or which would be reasonably
likely to subject either Party to this Agreement, or any member, shareholder,
officer, director, employee, agent or affiliated organization to any civil or
criminal penalties or administrative sanctions, the Parties shall immediately
use their best efforts to enter into a new service arrangement or basis for
compensation for the services
-39-
<PAGE> 40
furnished pursuant to this Business Management Agreement that complies with the
law, regulation, or policy, or which minimizes the possibility of such
penalties, sanctions or unenforceability, and that approximates as closely as
possible the economic position of the Parties prior to the change. If the
Parties are unable to reach a new agreement within a reasonable time, then
either Party may submit the issue to arbitration pursuant to Section 8.7 for
the purpose of reaching an alternative arrangement that is equitable under the
circumstances.
6.3 Effects of Termination. Upon termination of this Business
Management Agreement, as hereinabove provided, neither Party shall have any
further obligations hereunder except for (i) obligations accruing prior to the
date of termination, including, without limitation, payment of the Management
Fee relating to services provided prior to the termination of this Business
Management Agreement, (ii) obligations, promises, or covenants set forth herein
that are expressly made to extend beyond the Term, including, without
limitation, insurance, indemnities and non-competition provisions, which
provisions shall survive the expiration or termination of this Business
Management Agreement, (iii) the obligation of the Practice described in Section
6.4, (iv) the obligation of Business Manager to repay amounts borrowed from the
Account pursuant to Section 5.4(a), and (v) the obligation of the Practice to
repay amounts advanced by Business Manager to the Practice. In effectuating
the provisions of this Section 6.3, the Practice specifically acknowledges and
agrees that if this Business Management Agreement terminates pursuant to
Sections 6.2(b) or (d), Business Manager shall continue for a period not to
exceed ninety (90) days to exclusively collect and receive on behalf of the
Practice all cash collections from accounts receivable in existence at the time
this Business Management Agreement is terminated, it being understood that (a)
such cash collections will represent compensation to Business Manager for
Management Services already rendered, (b) Business Manager shall not be
entitled to collect accounts receivables after the termination date if this
Agreement is terminated pursuant to Section 6.2(a), and (c) the Business
Manager shall deduct from such cash collections any other amounts owed to
Business Manager under this Business Management Agreement, including, without
limitation, (i) ten percent (10%) of such cash collections as its Management
Fee during any period after the termination of this Business Management
Agreement while such collections are taking place, (ii) any reasonable costs
incurred by Business Manager in carrying out the post termination procedures
and transactions contemplated herein, and (iii) any adjustments pursuant to
Section 3.10(b). Business Manager shall remit remaining amounts from such
collection activities, if any, to the Practice. Upon the expiration or
termination of this Business Management Agreement for any reason or cause
whatsoever, Business Manager shall surrender to the Practice all books and
records pertaining to the Practice's optometry practices. All sums received or
collected by either Party after termination for Adjusted Gross Revenues earned
prior to termination shall be split in accordance with this Section 6.3.
6.4 Purchase Obligation. Upon expiration of this Business
Management Agreement in accordance with Section 6.1 or termination of this
Business Management Agreement by Business Manager, as set forth in Section
6.2(b) above, the Practice shall upon Business Manager's demand:
-40-
<PAGE> 41
(a) Pay to Business Manager the difference between the
consideration received in the Acquisition Transaction minus the book value of
the net tangible assets (for purposes of such repurchase obligations such
difference shall be amortized over a forty (40) year period), deferred charges,
and all other amounts on the books of the Business Manager relating to the
Business Management Agreement, as such amounts shall be established pursuant to
the Acquisition Transaction and including amounts, if any, for the covenants
described in Section 4.8 above, as adjusted through the last day of the month
most recently ended prior to the date of such termination in accordance with
GAAP to reflect amortization or depreciation of the intangible assets, deferred
charges, or covenants;
(b) Purchase from Business Manager any real estate
owned by Business Manager and used as an Office at the greater of the appraised
fair market value thereof or the then book value thereof. In the event of any
repurchase of real property, the appraised value shall be determined by
Business Manager and the Practice, each selecting a duly qualified appraiser,
who in turn will agree on a third appraiser. This agreed-upon appraiser shall
perform the appraisal which shall be binding on both Parties. In the event
either Party fails to select an appraiser within fifteen (15) days of the
selection of an appraiser by the other Party, the appraiser selected by the
other Party shall perform the appraisal which shall be binding on both Parties;
(c) Purchase at book value all improvements, additions,
or leasehold improvements that have been made by Business Manager at any Office
and that relate principally to the performance of Business Manager's
obligations under this Business Management Agreement;
(d) Assume all contracts and leases and the Practice's
pro rata share of all debts and payables that are obligations of Business
Manager and that relate principally to the performance of Business Manager's
obligations under this Business Management Agreement or the properties leased
or subleased by Business Manager; provided, however, that the Practice shall
only be obligated to assume such contracts and leases if the Practice will be
able to enjoy the benefits of the contracts and leases following such
assumption;
(e) Purchase from Business Manager at book value all of
the equipment leased to the Practice, including all replacements and additions
thereto made by Business Manager pursuant to the performance of its obligations
under this Business Management Agreement, and all other assets, including
inventory and supplies, tangibles and intangibles, set forth on the books of
Business Manager as adjusted through the last day of the month most recently
ended prior to the date of such termination in accordance with GAAP to reflect
operations of the Office, depreciation, amortization, and other adjustments of
assets shown on the books of Business Manager; and
(f) Cause to be executed by Shareholders of the
Practice such personal guaranties and any security agreements reasonably
required by Business Manager in connection
-41-
<PAGE> 42
with the purchase described in this Section 6.4. For purposes of this Section
6.4(f), the term "Shareholders" shall mean any individual who is a Shareholder
of the Practice on the date that notice is given of the termination of this
Business Management Agreement and any additional individual who is a
Shareholder of the Practice on the effective date of this Business Management
Agreement. However, such obligations of personal guaranties by Shareholders
shall expire effective five (5) years from the date hereof and each
Shareholder's guaranty shall terminate upon the death of such Shareholder.
All current Shareholders of the Practice shall on or before the effective date
of this Business Management Agreement, and all individuals who become
Shareholders of the Practice after the effective date of commencement of this
Business Management Agreement shall upon becoming a Shareholder of the
Practice, execute and deliver to Business Manager an undertaking to comply with
this Section 6.4(f) which shall be in the form of Exhibit 6.4(f).
Notwithstanding the above, the Practice and the Shareholders shall not permit
without Business Manager Consent, during any three (3) year period during which
this Agreement is in effect and only after five (5) years from the commencement
hereof, the transfer of over fifty percent (50%) of the ownership interests of
the Practice to any existing or new Shareholders of the Practice or
combinations of existing or new Shareholders of the Practice, except in cases
of death, disability or retirement of such transferring Shareholders or
transfers to replacement Shareholders described in Section 4.1 in accordance
with the provisions set forth in Section 4.1.
6.5 Purchase Option. Upon termination of this Business Management
Agreement by the Practice pursuant to Section 6.2(a), the Practice shall be
released from the restrictive covenants in Section 4.8 and shall have the
option but not the obligation to do all or none of the following:
(a) Pay to Business Manager the difference between the
consideration received in the Acquisition Transaction minus the book value of
the net tangible assets (for purposes of such repurchase obligations such
difference shall be amortized over a forty (40) year period), deferred charges,
and all other amounts on the books of the Business Manager relating to the
Business Management Agreement, as such amounts shall be established pursuant to
the Acquisition Transaction and including amounts, if any, for the covenants
described in Section 4.8 above, as adjusted through the last day of the month
most recently ended prior to the date of such termination in accordance with
GAAP to reflect amortization or depreciation of the intangible assets, deferred
charges, or covenants;
(b) Purchase from Business Manager any real estate
owned by Business Manager and used as an Office at the greater of the appraised
fair market value thereof or the then book value thereof. In the event of any
repurchase of real property, the appraised value shall be determined by
Business Manager and the Practice, each selecting a duly qualified appraiser,
who in turn will agree on a third appraiser. This agreed-upon third appraiser
shall perform the appraisal which shall be binding on both Parties. In the
event either Party fails to select an appraiser within fifteen (15) days of the
selection of an appraiser by the other Party,
-42-
<PAGE> 43
the appraiser selected by the other Party shall perform the appraisal which
shall be binding on both Parties;
(c) Purchase at book value all improvements, additions,
or leasehold improvements that have been made by Business Manager at any Office
and that relate principally to the performance of Business Manager's
obligations under this Business Management Agreement;
(d) Assume all contracts and leases and the Practice's
pro rata share of all debts and payables that are obligations of Business
Manager and that relate principally to the performance of Business Manager's
obligations under this Business Management Agreement or the properties leased
or subleased by Business Manager; provided, however, that the Practice shall
only be obligated to assume such contracts and leases if the Practice will be
able to enjoy the benefits of the contracts and leases following such
assumption; and
(e) Purchase from Business Manager at book value all of
the equipment leased to the Practice, including all replacements and additions
thereto made by Business Manager pursuant to the performance of its obligations
under this Business Management Agreement, and all other tangible assets,
including inventory and supplies, set forth on the books of the Business
Manager as adjusted through the last day of the month most recently ended prior
to the date of such termination in accordance with GAAP to reflect operations
of the Office, depreciation, amortization, and other adjustments of assets
shown on the books of the Business Manager.
The Practice shall provide notice to Business Manager of its intent to
exercise the option above described at the same time that the Practice provides
notice to Business Manager of the Practice's election to terminate this
Business Management Agreement for cause.
6.6 Closing of Purchase. If the Practice purchases the assets
pursuant to Section 6.4 or 6.5, the Practice shall pay cash for the purchased
assets; provided, however, that the Practice may also use Business Manager's
common stock as consideration for the purchased assets, which stock shall be
valued for purposes of this Agreement as follows: (a) in the event of a Section
6.4 termination, the shares shall be valued at the lower of the value on the
date the shares were received by the Shareholder (as agreed to by the parties),
and the value on the date of the closing of this purchase, or (b) in the event
of a Section 6.5 termination, the shares shall be valued at the higher of the
value of such shares on the dates set forth in 6.6(a) above. The amount of the
purchase price shall be reduced by the amount of debt and liabilities of
Business Manager, if any, assumed by the Practice and by any unpaid portion of
any promissory notes payable by Business Manager to any Shareholder of the
Practice, which shall be offset against the purchase price. The Practice and
all Shareholders of the Practice shall execute such documents as may be
required to assume the liabilities set forth in Section 6.4(d) or Section
6.5(c) and to remove Business Manager from any liability with respect to such
repurchased asset and with respect to any property leased or subleased by
Business Manager. The closing date
-43-
<PAGE> 44
for the purchase shall be determined by the Parties, but shall in no event
occur later than the expiration date of this Business Management Agreement if
this Agreement expires in accordance with Section 6.1, or sixty (60) days from
the date of the notice of termination for cause. The termination of this
Business Management Agreement shall become effective upon the closing of the
sale of the assets if the assets are purchased, and all Parties shall be
released from any restrictive covenants provided for in Section 3.17 or Section
4.8 on the closing date. If the Practice chooses not to purchase the assets
pursuant to Section 6.5, the termination shall be effective as of the notice
date given by the Practice under Section 6.2(b), at which time the parties
shall be released from the restrictive covenants in Section 3.17 and Section
4.8. From and after any termination, each Party shall provide the other Party
with reasonable access of the books and records then owned by it to permit such
requesting Party to satisfy reporting and contractual obligations that may be
required of it.
6.7 Limitation of Liability. In no event shall Business Manager
be liable to the Practice for any indirect, special or consequential damages or
lost profits, arising out of or related to this Agreement or the performance or
breach thereof, even if Business Manager has been advised of the possibility
thereof.
7. INDEMNIFICATION; THIRD PARTY CLAIMS.
7.1 Indemnification by the Practice. The Practice shall indemnify
and hold harmless Business Manager and Business Manager's shareholders,
directors, officers, agents and employees, from and against all claims,
demands, liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees, resulting in any manner, directly or indirectly, from the
negligent or intentional acts or omissions of the Practice or its members,
Shareholders, directors, officers, employees, agents or independent
contractors, including but not limited to any such claims, demands,
liabilities, losses, damages, costs and expenses which accrued or arose prior
to the date of execution of this Business Management Agreement.
7.2 Indemnification by Business Manager. Business Manager shall
indemnify and hold harmless the Practice, and the Practice's members,
Shareholders, directors, officers, agents and employees, from and against any
and all claims, demands, liabilities, losses, damages, costs and expenses,
including reasonable attorneys' fees, resulting in any manner, directly or
indirectly, from the negligent or intentional acts or omissions of Business
Manager or its shareholders, directors, officers, employees, agents or
independent contractors.
7.3 Notice of Claim for Indemnification. No claims for
indemnification under this Agreement relating to claims solely between the
Parties shall be valid unless notice of such claim is delivered to the Practice
(in the case of a claim by Business Manager) or Business Manager (in the case
of a claim by the Practice) within one (1) year after the Party making such
claim first obtained knowledge of the facts upon which such claim is based.
Any such notice shall set forth in reasonable detail, to the extent known by
the Party giving such notice, the facts on which such claim is based and the
resulting estimated amount of damages.
-44-
<PAGE> 45
7.4 Matters Involving Third Parties.
(a) If the Practice or Business Manager receives notice
or acquires knowledge of any matter which may give rise to a claim by another
person and which may then result in a claim for indemnification under this
Agreement, then: (i) if such notice or knowledge is received or acquired by
the Practice, the Practice shall promptly notify Business Manager; and (ii) if
such notice or knowledge is received or acquired by Business Manager, the
Business Manager shall promptly notify the Practice; except that no delay in
giving such notice shall diminish any obligation under this Agreement to
provide indemnification unless (and then solely to the extent) the Party from
whom such indemnification is sought is prejudiced.
(b) Any Party from whom such indemnification (the
"Indemnifying Party") is sought shall have the right to defend the Party
seeking such indemnification (the "Indemnified Party") against such claim by
another person (the "Third Party Claim") with counsel of the Indemnifying
Party's choice reasonably satisfactory to the Indemnified Party so long as: (i)
within fifteen (15) days after the Indemnified Party has given notice of the
Third Party Claim to the Indemnifying Party, the Indemnifying Party notifies
the Indemnified Party that the Indemnifying Party will indemnify the
Indemnified Party from and against all adverse consequences the Indemnified
Party may suffer caused by, resulting from, arising out of or relating to such
Third Party Claim; (ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably satisfactory to the Indemnified Party that the
Indemnifying Party has the financial resources necessary to defend against the
Third Party Claim and fulfill its indemnification obligations; (iii) the Third
Party Claim seeks money damages; (iv) settlement of, or an adverse judgment
with respect to, the Third Party Claim (other than an optometric malpractice
claim) is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party; and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.4(b): (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim; (ii) the Indemnified
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior consent of
the Indemnifying Party; and (iii) the Indemnifying Party shall not consent to
the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior consent of the Indemnified Party.
(d) If any of the conditions specified in Section
7.4(b) is or becomes unsatisfied, however; (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem advisable (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith); (ii) the Indemnifying Party shall
-45-
<PAGE> 46
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' and
accountants' fees and expenses); and (iii) the Indemnifying Party shall remain
responsible for any adverse consequences the Indemnified Party may suffer
caused by, resulting from, arising out of or relating to such Third Party Claim
to the fullest extent provided in this Agreement.
7.5 Settlement. Except as permitted by Section 7.4, a Party shall
not compromise or settle any claim for which the other Party is obligated to
indemnify it without the written consent of such Party.
7.6 Cooperation. The Indemnified Party shall make available all
information and assistance that the Indemnifying Party may reasonably request
in conjunction with assessing, defending and settling said claim.
8. MISCELLANEOUS.
8.1 Administrative Services Only. Nothing in this Business
Management Agreement is intended or shall be construed to allow Business
Manager to exercise control, authority or direction over the manner or method
by which the Practice and its Professionals perform Professional Eye Care
Services or other professional health care services. The rendition of all
Professional Eye Care Services, including, but not limited to, the prescription
or administration of medicine and drugs, shall be the sole responsibility of
the Practice and its Professionals, and Business Manager shall not interfere in
any manner or to any extent therewith. Nothing contained in this Business
Management Agreement shall be construed to permit Business Manager to engage in
the practice of optometry, it being the sole intention of the Parties hereto
that the services to be rendered to the Practice by Business Manager are solely
for the purpose of providing non-optometric management and administrative
services to the Practice so as to enable the Practice to devote its full time
and energies to the professional conduct of its professional eye care practice
and provision of Professional Eye Care Services to its patients and not to
administration or practice management.
8.2 Status of Independent Contractor. It is expressly
acknowledged that the Parties hereto are "independent contractors," and nothing
in this Business Management Agreement is intended and nothing shall be
construed to create an employer/employee, partnership, or joint venture
relationship, or to allow either to exercise control or direction over the
manner or method by which the other performs the services that are the subject
matter of this Business Management Agreement; provided always that the services
to be provided hereunder shall be furnished in a manner consistent with the
standards governing such services and the provisions of this Business
Management Agreement. Each Party understands and agrees that (i) the other
will not be treated as an employee for federal tax purposes, (ii) neither will
withhold on behalf of the other any sums for income tax, unemployment
insurance, social security, or any other withholding pursuant to any law or
requirement of any governmental body or make available any of the benefits
afforded to its employees, (iii) all of such payments, withholdings, and
benefits,
-46-
<PAGE> 47
if any, are the sole responsibility of the Party incurring the liability, and
(iv) each will indemnify and hold the other harmless from any and all loss or
liability arising with respect to such payments, withholdings, and benefits, if
any.
8.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be deemed effectively given
when in writing and personally delivered or mailed by prepaid certified or
registered mail, return receipt requested, addressed as follows:
The Practice: Gillette & Associates, #6965
7209 Bryan Dairy Road
Largo, Florida 33777
Attention: Theodore N. Gillette
Business Manager: Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 33777
Attention: Richard T. Welch, CFO
with a copy to: Shumaker, Loop & Kendrick, LLP
101 East Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
Attention: Darrell C. Smith, Esq.
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
8.4 Governing Law. This Business Management Agreement shall in
all respects be governed, interpreted and construed in accordance with the laws
of the State without giving effect to principles of comity or conflicts of laws
thereof.
8.5 Jurisdiction and Venue. Business Manager and the Practice
hereby consent to the personal jurisdiction and venue of the state and federal
courts in the judicial circuit where the Practice has its principal corporate
office, and do hereby waive all questions of personal jurisdiction and venue,
including, without limitation, the claim or defense that such courts constitute
an inconvenient forum.
8.6 Assignment. Except as may be herein specifically provided to
the contrary, this Business Management Agreement shall inure to the benefit of
and be binding upon the Parties hereto and their respective legal
representatives, successors, and assigns; provided, however,
-47-
<PAGE> 48
that the Practice may not assign this Business Management Agreement without the
prior written consent of Business Manager, which consent may be withheld. The
sale, transfer, pledge, or assignment of any of the ownership interests held by
any Shareholder of the Practice, the sale of any material portion of its assets
by the Practice, or the issuance by the Practice of voting ownership interests
to any other person (except to replacement Shareholders as described in Section
4.1), or any combination of such transactions within a period of five (5)
years, such that the existing Shareholders in the Practice fail to maintain a
majority of the voting interests in the Practice shall be deemed an attempted
assignment by the Practice, and shall be null and void unless consented to in
writing by Business Manager prior to any such transfer or issuance. Any breach
of this provision, whether or not void or voidable, shall constitute a material
breach of the Business Management Agreement, and in the event of such breach,
Business Manager may terminate this Business Management Agreement upon
twenty-four (24) hours' notice to the Practice and shall have all rights
available at law or in equity. Except as otherwise provided in this Agreement,
the Parties agree that until an initial public offering of Business Manager's
common stock occurs, Business Manager may only assign or transfer its rights
and obligations under this Business Management Agreement with the prior written
consent of the Practice. Except as otherwise provided in this Agreement, after
an initial public offering of Business Manager's common stock occurs, Business
Manager may assign or transfer its rights and obligations under this Business
Management Agreement only in the following situations: (a) pursuant to a merger
of Business Manager into another entity or the sale of substantially all of the
assets of Business Manager to a health care company; (b) pursuant to the sale
of all of the health care contracts of Business Manager within a multistate
region in which the Practice is located with the Practice's consent, which
shall not be unreasonably withheld and which may not be withheld where the
proposed assignment or transfer is to a healthcare practice management company
with similar or greater financial standing, expertise and service capabilities
to that of Business Manager; (c) pursuant to a transfer or assignment of this
Agreement to one of Business Manager's subsidiaries or parent organizations; or
(d) pursuant to any transfer or assignment to or by any financial lender of the
Business Manager, and this Agreement is subordinate to the rights of such
lender. After such assignment and transfer, the Practice agrees to look solely
to such assignee or transferee for performance of this Business Management
Agreement. In addition, Business Manager or the assignee or transferee shall
have the right to (i) collaterally assign its interest in this Business
Management Agreement and its right to collect Management Fees hereunder to any
financial institution or other third party without the consent of the Practice,
and (ii) subject to the foregoing provisions, assign its rights and obligations
hereunder to any third party without the consent of the Practice. In the event
that Business Manager assigns its rights and obligations hereunder to one or
more of its subsidiaries, Business Manager shall unconditionally guaranty the
obligations of such subsidiary or subsidiaries. The Practice and executing
Shareholders agree to execute in the future any and all documentation
reasonably required to subordinate their rights pursuant to this Section 8.6 to
that of a lender.
8.7 Arbitration. The Parties shall use good faith negotiation to
resolve any controversy, dispute or disagreement arising out of or relating to
this Business Management
-48-
<PAGE> 49
Agreement or the breach of this Business Management Agreement. Except as
otherwise provided herein and except as it relates to Sections 3.14, 3.17, 4.7
and 4.8 of this Business Management Agreement and except for matters which are
to be determined by the Local Advisory Council and/or the National Appeals
Council as contemplated in this Business Management Agreement, any matter not
resolved by negotiation shall be submitted to mediation conducted in accordance
with the Florida Mediation Rules. If the mediation process fails to resolve
the dispute, the matter shall be submitted to binding and confidential
arbitration in accordance with the National Health Lawyers Association
Alternative Dispute Resolution Rules of Procedure for Arbitration and with one
individual knowledgeable in the health care business serving as the arbitrator.
Each Party will, upon the written request of the other Party, promptly provide
the other with copies of documents relevant to the issues raised by any claim
or counterclaim. Other discovery may be ordered by the arbitrator to the
extent the arbitrator deems additional discovery relevant and appropriate, and
any dispute regarding discovery shall be determined by the arbitrator, which
determination shall be conclusive.
8.8 Waiver of Breach. The waiver by either Party of a breach or
violation of any provision of this Business Management Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
8.9 Enforcement. In the event either Party resorts to legal
action to enforce or interpret any provision of this Business Management
Agreement, the prevailing Party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
8.10 Gender and Number. Whenever the context of this Business
Management Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
8.11 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Business Management Agreement
shall be self-operative and shall not require further agreement by the Parties;
provided, however, at the request of either Party, the other Party shall
execute such additional instruments and take such additional acts as are
reasonable and as the requesting Party may deem necessary to effectuate this
Business Management Agreement.
8.12 Consents, Approvals, and Exercise of Discretion. Whenever
this Business Management Agreement requires any consent or approval to be given
by either Party, or either Party must or may exercise discretion, the Parties
agree that such consent or approval shall not be unreasonably withheld or
delayed, and that such discretion shall be reasonably exercised.
8.13 Force Majeure. Neither Party shall be liable or deemed to be
in default for any delay or failure in performance under this Business
Management Agreement or other interruption of service deemed to result,
directly or indirectly, from acts of God, civil or military authority,
-49-
<PAGE> 50
acts of public enemy, war accidents, fires, explosions, earthquakes, floods,
failure of transportation, strikes or other work interruptions by either
Party's employees, or any other similar cause beyond the reasonable control of
either Party unless such delay or failure in performance is expressly addressed
elsewhere in this Business Management Agreement. Notwithstanding the same, the
Parties hereto agree to continue this Agreement to the best degree they can so
long as reasonably possible and the Practice shall not be excused from its
obligations under Sections 4.2, 6.4 and 6.6 pursuant to this Section 8.13.
8.14 Severability. The Parties hereto have negotiated and prepared
the terms of this Business Management Agreement in good faith with the intent
that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective Parties. Accordingly,
if any one or more of the terms, provisions, promises, covenants or conditions
of this Business Management Agreement or the application thereof to any person
or circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be reformed, construed and enforced
as if such unenforceable provision had not been contained herein, and each and
all of the remaining terms, provisions, promises, covenants and conditions of
this Business Management Agreement or their application to other persons or
circumstances shall not be affected thereby and shall be valid and enforceable
to the fullest extent permitted by law. To the extent this Business Management
Agreement is in violation of applicable law, then the Parties agree to
negotiate in good faith to amend the Business Management Agreement, to the
extent possible consistent with its purposes, to conform to law. If the
Parties are unable to amend the Business Management Agreement in a manner which
conforms with applicable law, then either Party may submit the matter to
arbitration pursuant to Section 8.7 for the purpose of reaching an alternative
arrangement that is equitable under the circumstances.
8.15 Press Releases and Public Announcements. Except as otherwise
required by law or by applicable rules of any securities exchange or
association of securities dealers, neither the Practice nor the Business
Manager shall issue any press release, make any public announcement or
otherwise disclose any information for the purpose of publication by any print,
broadcast or other public media, relating to the transactions contemplated by
this Agreement, without the prior approval of the other Party.
8.16 Divisions and Headings. The divisions of this Business
Management Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith are solely for convenience and
shall not affect in any way the meaning or interpretation of this Business
Management Agreement.
8.17 Amendments and Execution. This Business Management Agreement
and any amendments hereto shall be in writing and executed in multiple copies
on behalf of the Practice by its President, and on behalf of Business Manager
by its President. Each multiple copy shall
-50-
<PAGE> 51
be deemed an original, but all multiple copies together shall constitute one
and the same instrument.
8.18 Licenses, Permits and Certificates. Business Manager and the
Practice shall each obtain and maintain in effect, at all times during the term
of this Business Management Agreement, all licenses, permits and certificates
required by law which are applicable to the performance of their respective
obligations pursuant to this Business Management Agreement.
8.19 No Third Party Beneficiaries. Except as otherwise provided
herein, this Business Management Agreement shall not confer any rights or
remedies upon any person other than Business Manager and the Practice and their
respective successors and permitted assigns.
8.20 Compliance with Applicable Laws. Business Manager and the
Practice shall comply with all applicable federal, state and local laws,
regulations, rules and restrictions in the conduct of their obligations under
this Business Management Agreement.
8.21 Language Construction. The Practice and Business Manager
acknowledge that each Party hereto and its counsel have reviewed and revised
this Business Management Agreement and agree that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting Party shall not be employed in the interpretation of this Business
Management Agreement.
8.22 Entire Business Management Agreement. With respect to the
subject matter of this Business Management Agreement, this Business Management
Agreement supersedes all previous contracts and constitutes the entire
agreement between the Parties. Neither Party shall be entitled to benefits
other than those specified herein. No prior oral statements or contemporaneous
negotiations or understandings or prior written material not specifically
incorporated herein shall be of any force and effect, and no changes in or
additions to this Business Management Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to
become effective on the date stipulated in such amendment(s). The Parties
specifically acknowledge that, in entering into and executing this Business
Management Agreement, the Parties rely solely upon the representations and
agreements contained in this Business Management Agreement and no others.
8.23 DISCLAIMER OF WARRANTY. BUSINESS MANAGER MAKES NO WARRANTY,
EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE OFFICE OR ANY EQUIPMENT PROVIDED
BY BUSINESS MANAGER PURSUANT TO THIS BUSINESS MANAGEMENT AGREEMENT, AND ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY
EXPRESSLY DISCLAIMED.
8.24 Control of Board of Directors. While there is no assurance
that an initial public offering of Business Manager's common stock shall occur,
should Business Manager fail to
-51-
<PAGE> 52
complete the same on or before April 1, 1998, the Board of Directors shall be
controlled and the Business Manager managed by individuals designated by the
founding health care practices acquired in December of 1996. If such initial
public offering does not occur on or before April 1, 1998, each of such
founding health care practices shall be entitled to vote that number of shares
of Business Manager then held by such founding practices and the number of
share of Business Manager then held by the equity owners of such founding
practices to elect a new board of directors of Business Manager; provided,
however, that after April 1, 1998 and until February 28, 2000, Theodore N.
Gillette and his majority owned health care practice (and their respective
successors and assigns) shall not be entitled to vote their respective shares
of common stock of Business Manager in any election of directors during such
period.
8.25 Agreement for Future Good Faith Negotiation. The Parties
hereto agree that should either the chosen underwriters to a future initial
public offering or Business Manager's accounting firm make recommendations
regarding changes to this Business Management Agreement at a later date and
prior to the offering which either such underwriters or accountants reasonably
believe are necessary based upon customs in the industry to prevent any
material adverse valuation issue or to obtain favorable accounting treatment
for Business Manager, the Parties shall negotiate in good faith to modify any
terms which could have such a negative effect or which could result in such
favorable accounting treatment. In such event, the revisions shall be deemed
to be retroactive to the effective date of this Business Management Agreement.
8.26 Agreement to Transfer Stock and Stock Pledge.
Contemporaneously with the execution of this Agreement and to ensure the
continued viability and production of a Practice owned by one (1) Shareholder
(if applicable) the Parties hereto have executed and delivered that certain
Agreement to Transfer Stock and Stock Pledge pursuant to which the Business
Manager and the Shareholder of the Practice have agreed to pledge all of the
shares of common stock of the Practice to the Business Manager and have agreed
that upon the death or disability of such Shareholder, the Practice shall be
entitled to designate a replacement Professional to acquire all such shares of
common stock of the Practice in return for payment of a fair value for such
stock. Additionally, any current or future Shareholder of a Practice that
becomes a sole Shareholder shall execute such agreement at the time the
Shareholder gains such status.
8.27 Authority. Business Manager and the Practice hereby warrant
and represent to each other that they have the requisite corporate authority to
execute and deliver this Business Management Agreement in their respective
name.
8.28 Waiver of Jury Trial. Any right to trial by jury with respect
to any claim or proceeding relating to or arising out of this Business
Management Agreement is waived by the Parties.
8.29 Indemnification of Advisory Council Members. The parties
hereto (and their successors) agree to indemnify and hold harmless all future
members of any Advisory Council established pursuant to the terms hereof from
any and all liability, claims, damages, costs and
-52-
<PAGE> 53
attorneys fees resulting from their decisions and actions as a member of such
Advisory Council, so long as the decision or action is made in good faith.
IN WITNESS WHEREOF, the Practice and Business Manager have caused this
Business Management Agreement to be executed by their duly authorized
representatives, all as of the day and year first above written.
WITNESSES: "PRACTICE"
GILLETTE & ASSOCIATES, #6965 P.A.
/s/ By: /s/ Theodore N. Gillette
- ------------------------------- --------------------------------
Name: Theodore N. Gillette
/s/ Title: President
- -------------------------------
"BUSINESS MANAGER"
VISION 21, INC.
/s/ By: /s/ Theodore N. Gillette
- ------------------------------- ---------------------------------
Name: Theodore N. Gillette
/s/ Title: President
- -------------------------------
STATE OF FLORIDA )
COUNTY OF HILLSBOROUGH )
The foregoing Business Management Agreement was executed before me this
___ day of December, 1996, by Theodore N. Gillette as President of Gillette &
Associates, #6965 P.A. and Vision 21, Inc., who is personally known to me or
who has produced identification and who did take an oath.
NOTARY PUBLIC:
Sign:
------------------------------
Print:
------------------------------
My Commission Expires:
-53-
<PAGE> 54
EXHIBIT "5.1"
MANAGEMENT FEE
<PAGE> 55
EXHIBIT "4.17"
SHAREHOLDERS' UNDERTAKING TO MAINTAIN PRACTICE'S
CORPORATE EXISTENCE AND ENFORCEMENT OF COVENANTS
NOT TO COMPETE
As an inducement to the Business Manager to enter into this Business
Management Agreement with the Practice or as required in the Business
Management Agreement, each of the undersigned person(s), having an ownership
interest in the Practice, irrevocably and unconditionally covenants and agrees
to maintain in good standing the corporate existence of the Practice under the
laws of the State and to cause the Practice to use its best efforts to enforce
employment agreements (including those covenants not to compete requirements
described in Sections 4.1 and 4.2) against any individuals violating such
employment agreements (and covenants not to compete). The undersigned persons
further unconditionally covenant and agree to indemnify and hold harmless
Business Manager from and against any and all claims requirements, demands,
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees, resulting in any manner from the failure of the Practice to
remain in good standing under the laws of the State or the failure of the
Practice to use its best efforts to enforce those employment agreements and
covenants not to compete described in Section 4.1 and 4.2 of such Business
Management Agreement, a copy of which has been delivered to the undersigned for
his review. The undersigned acknowledges that he or she has received adequate
consideration for the execution hereof. After a period of five (5) years from
December 1, 1996, this Undertaking may be assumed by a successor Shareholder or
Shareholders, in accordance with the terms and conditions set forth in Section
4.1 of the Business Management Agreement, whereupon the undersigned shall be
released to the extent of such assumption, provided that any such successor
Shareholder executes a form similar to this.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such shareholder's name.
Date: December 1, 1996 /s/ Theodore N. Gillette
--------------------------------
Theodore N. Gillette
Date: December 1, 1996 /s/ Mark Sarno
--------------------------------
Mark Sarno
Date: December 1, 1996 /s/ Mark Beiler
--------------------------------
Mark Beiler
<PAGE> 56
EXHIBIT "6.4(f)"
SHAREHOLDERS' UNDERTAKING TO CARRY OUT
PRACTICE'S PURCHASE OBLIGATION
As an inducement to the Business Manager to enter into this Business
Management Agreement with the Practice or as required in Business Management
Agreement, each of the undersigned person(s), having an ownership interest in
the Practice, irrevocably and unconditionally covenants and agrees subject to
the limitations contained in the Business Management Agreement to (i) cause the
Practice to carry out the purchase obligation described in Section 6.4(f) of
the Business Management Agreement, (ii) personally execute and deliver the
personal guarantees and security agreements referred to in Section 6.4(f) of
such Business Management Agreement, a copy of which has been delivered to the
undersigned for his review, and (iii) execute the documents described in
Section 6.6. The undersigned acknowledges that he or she has received adequate
consideration for the execution hereof.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such shareholder's name.
Date: December 1, 1996 /s/ Theodore N. Gillette
--------------------------------
Theodore N. Gillette
Date: December 1, 1996 /s/ Mark Sarno
--------------------------------
Mark Sarno
Date: December 1, 1996 /s/ Mark Beiler
--------------------------------
Mark Beiler
<PAGE> 57
Exhibit 1.3
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Fees Excluded from Adjusted Gross Revenue
1. None.
<PAGE> 58
Exhibit 1.8
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Business Manager Expenses
As of the Closing Date, Business Manager Expenses shall specifically
include:
1. expenses relating to services provided to Business Manager and the
Practice under current service agreements by Bruce Maller and BSM Consulting,
to the extent such expenses do not exceed the Practices' share (pro-rata
amongst all practices managed by the Business Manager, at any given moment,
e.g., 32 practices = 1/32nd of such expense) of the services currently
contracted for between Maller, BSM Consulting and Business Manager at an
anticipated annual cost of $480,000;
2. costs related to the current regional corporate structure, current
corporate overhead, strategic planning, and managed care administration;
3. expenses related to travel at the request of Business Manager except
as otherwise permitted in 1.18(h);
4. costs of stock option programs or grants to Physician and staff;
5. expenses related to services provided to Business Manager and the
Practice by Medical Director Richard Lindstrom, M.D. as part of the current
Medical Director Service Agreement; and
6. corporate overhead, except as defined in Section 1.18(k).
<PAGE> 59
Exhibit 1.18
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Office Expenses
[Table depicting breakdown of Office Expenses,
Practice Expenses and Shareholder Expenses omitted.]
<PAGE> 60
Exhibit 1.25
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Practice Territory
1. See area within circle on attached map.
[Map(s) depicting twenty-mile radius
from each office location omitted.]
<PAGE> 61
Exhibit 1.30
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Leasehold Obligations in Excess of Fair Market Value
1. None.
<PAGE> 62
Exhibit 2.10
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Market Area
1. The State of Florida.
<PAGE> 63
Exhibit 3.7
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Unsettled issues regarding personnel
1. None.
<PAGE> 64
Exhibit 3.17
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Entities and Relationship Excluded from Non-Competition
Covenant from Business Manager
1. None.
<PAGE> 65
Exhibit 4.1A
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
OPTOMETRIST EMPLOYMENT AGREEMENT
(FOUNDING SHAREHOLDER)
This Optometrist Employment Agreement (this "Employment Agreement")
dated as of _____________, 19__, is by and between Gillette & Associates, #6965
P.A., a professional association (the "Practice"), and __________________,
O.D., an individual (the "Optometrist").
R E C I T A L S
A. The Practice is a professional association organized under the
laws of the State of Florida (the "State") and is authorized to practice
optometry in the State through licensed individuals.
B. Vision 21, Inc., a Florida corporation ("Vision 21") has
acquired substantially all of the business assets of the Practice pursuant to
that certain Asset Purchase Agreement (the "Acquisition Agreement") of even
date herewith.
C. The Practice and Vision 21 have entered into a Business
Management Agreement (the "Business Management Agreement") of even date
herewith, whereby Vision 21 has agreed to provide various management services
to the Practice and the Practice has agreed to have its professional employees
execute employment agreements in a form substantially the same as this
Employment Agreement, and it is intended that except as otherwise limited
herein, Vision 21 be a third-party beneficiary of the restrictive covenants
contained in this Employment Agreement.
D. The Practice desires to employ Optometrist upon the terms and
subject to the terms and conditions set forth in this Employment Agreement.
E. The Optometrist is licensed to practice optometry in the State
and desires to be employed by the Practice upon the terms and subject to the
conditions set forth in this Employment Agreement.
F. The Optometrist possesses special knowledge relating to the
business and assets acquired pursuant to the Acquisition Agreement and has
developed valuable, long-term relationships with patients to be cared for by
the Practice which make him valuable to the Practice and which will contribute
to the Practice's future success.
G. In consideration for and in connection with the Acquisition
Agreement and such employment arrangement, the parties hereto desire to enter
into a covenant not to compete and a non-disclosure covenant.
NOW, THEREFORE, in consideration of the premises, the mutual promises,
covenants and conditions herein contained and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto intending to be legally bound hereby agree as follows:
<PAGE> 66
1. Employment. The Practice hereby employs Optometrist, and
Optometrist hereby accepts employment with the Practice, all upon the terms and
subject to the conditions set forth in this Employment Agreement.
2. Duties and Responsibilities.
2.01 Full Time Practice of Optometry. The Optometrist is
employed pursuant to the terms of this Employment Agreement to practice
optometry on behalf of the Practice. The Optometrist shall devote
substantially all of his time, best efforts and attention to the practice of
optometry on behalf of the Practice and shall provide patient care of the
highest quality. In addition to the foregoing duties, the Optometrist shall
undertake additional duties as directed by the Practice. During the term
hereof and any renewal, the Optometrist shall not, without the written consent
of the Practice and Vision 21, (1) render professional services to or for any
person, firm, corporation or other organization for compensation; or (2) engage
in any activity that competes with the interest of the Practice or Vision 21
whether Optometrist is acting by himself or as an officer, director,
shareholder, employee, partner or fiduciary. Any consent granted to the
Optometrist shall be revocable by the Practice or Vision 21 at any time upon
thirty (30) days' notice, and the Optometrist agrees to cease and desist upon
receipt of such notice. Notwithstanding the above, the Practice recognizes
that the Optometrist shall have the right to engage in those matters expressly
described on Schedule 2.01 attached hereto so long as such permitted activities
do not result in materially reduced services to the Practice as compared to the
Optometrist's previous services to his practice and so long as the same does
not materially impact the Optometrist's ability to perform hereunder or
materially impact the Optometrist's anticipated productivity.
2.02 Subject to Board Standards and Requirements. The
Practice recognizes that professional regulatory groups and bodies such as the
State Board of Optometry may from time to time establish standards and
requirements with regard to the practice of optometry by optometrists licensed
to practice optometry. All restrictions contained herein with respect to the
duties and obligations of the Optometrist shall be subject to said standards
and requirements of the aforesaid groups and bodies.
3. Authority and Control of Practice.
Subject to Section 2.02 above and to the extent permitted by
law:
3.01 The Optometrist recognizes that the Practice shall
have complete authority with regard to the acceptance for treatment of or the
refusal to treat any patient and the Practice shall have complete authority
with regard to the establishment of the appropriate fee for professional
service.
3.02 The Practice shall direct and control the assignment
of patients to the Optometrist. Such determination shall be solely by the
Practice and in the best interests of the patient and the Practice. The
Optometrist agrees to treat such patients as are assigned to him by the
Practice. The Optometrist recognizes that patients treated by him may
subsequently be assigned to other employees.
3.03 The Optometrist shall perform all professional
services as are assigned to him by the Practice and all work performed by the
Practice shall be subject to the review and study of the Practice.
Exhibit 4.1A - Page 2
<PAGE> 67
3.04 The performance of services by the Optometrist on
behalf of the Practice shall be performed at such times and at such places as
shall be determined by the Practice and in accordance with such rules as the
Practice may establish.
3.05 Hours of employment of the Optometrist shall be
determined by the Practice within reasonable standards within the profession.
3.06 The optometrist of record for each patient treated by
Optometrist shall be one of the individual owners of the Practice.
4. Term of Employment. The term of employment of Optometrist by
the Practice pursuant to this Employment Agreement shall be for five (5) years
(the "Employment Period") commencing on the date of this Agreement (the
"Commencement Date").
5. Place of Employment. Optometrist's principal place of work
shall be located where designated by the Practice.
6. Compensation. During the Employment Period, subject to all
the terms and conditions of this Employment Agreement and as compensation for
all services to be rendered by Optometrist under this Employment Agreement, the
Practice shall pay to or provide Optometrist with the compensation set forth in
Schedule 6 attached to this Agreement.
7. Adherence to Standards. Optometrist shall comply with the
written policies, standards, rules and regulations of the Practice from time to
time established for all employees of the Practice.
8. Review of Performance. The Practice may periodically review
and evaluate the performance of Optometrist under this Employment Agreement
with Optometrist.
9. Expenses. The Practice may reimburse Optometrist for
reasonable, ordinary and necessary expenses incurred by him in connection with
his employment hereunder that have been approved in advance by the Practice;
provided, however, Optometrist shall render to the Practice a complete and
accurate accounting of all such expenses in accordance with the substantiation
requirements of Section 274 of the Internal Revenue Code of 1986, as amended
(the "Code"), as a condition precedent to such reimbursement.
10. Termination with Cause by the Practice. This Employment
Agreement may be terminated with Cause (as hereinafter defined) by the Practice
provided that the Practice shall (i) give Optometrist the Notice of Termination
(as hereinafter defined) and (ii) pay Optometrist his annual base salary
through the Date of Termination (as hereinafter defined) at the rate in effect
at the time the Notice of Termination is given plus any bonus or incentive
compensation which have been earned or have become payable pursuant to the
terms of any compensation or benefit plan or have vested as of the Date of
Termination, but which have not yet been paid.
11. Definitions. In addition to the words and terms elsewhere
defined in this Employment Agreement, certain capitalized words and terms used
in this Employment Agreement shall have the meanings given to them by the
definitions and descriptions in this Section 11 unless the context or use
indicates another or different meaning or intent, and such definition shall be
equally applicable to both
Exhibit 4.1A - Page 3
<PAGE> 68
the singular and plural forms of any of the capitalized words and terms herein
defined. The following words and terms are defined terms under this Employment
Agreement:
11.01 Cause. A termination with "Cause" by the Practice
shall mean a termination of this Employment Agreement for any of the following
reasons:
(i) Optometrist's failure to promptly and adequately
perform the duties assigned by Practice after being notified by the Practice of
the specific act(s) constituting such failure and being given a period of
thirty (30) days after notification by the Practice to correct such failure;
(ii) upon Optometrist's breach of any provision of
this Employment Agreement which remains uncured for a period of thirty (30)
days after notification by Practice of the specific nature of the breach;
(iii) for good cause which shall include
insubordination, conduct reflecting moral turpitude, conduct diminishing the
goodwill or reputation of the Practice, conduct disloyal to the Practice,
material violation of any representation, warranty or covenant of this
Agreement; conviction of any felony, or suspension or revocation of
Optometrist's license to practice optometry;
(iv) upon Optometrist's death; or
(v) upon Optometrist's disability if the
disability renders Optometrist unable to practice optometry on a full-time
basis for a period of more than ninety (90) days in any consecutive six (6)
month period.
11.02 Date of Termination. "Date of Termination" shall mean
the date specified in the Notice of Termination which shall not be less than
thirty (30) days from the date such Notice of Termination is given unless the
Notice of Termination is provided pursuant to Sections 11.01(iii), (iv) or (v),
in which case the Date of Termination shall be the date that Notice of
Termination is received by the Optometrist.
11.03 Notice of Termination. "Notice of Termination" shall
mean a written notice which shall indicate the specific termination provision
in this Employment Agreement relied upon; provided, however, no such purported
termination shall be effective without such Notice of Termination.
12. Fees and Expenses. The prevailing party in any contest or
dispute under this Employment Agreement shall receive from the other party all
legal fees and related expenses (including the costs of experts, evidence and
counsel incurred by the prevailing party in any and all proceedings arising out
of this Employment Agreement, including trial, appellate and bankruptcy
proceedings.
13. Notices. For the purposes of this Employment Agreement,
notices and all other communications provided for in the Employment Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or sent by certified mail, return receipt requested, postage prepaid,
or by expedited (overnight) courier with an established national reputation,
shipping prepaid or billed to sender, in either case addressed to the
respective addresses last given by each party in writing to the other (provided
that all notices to the Practice shall be directed to the attention of the
Practice with a copy to the Secretary of the Practice). All notices and
communication shall be deemed to have been
Exhibit 4.1A - Page 4
<PAGE> 69
received on the date of delivery thereof, on the third business day after the
mailing thereof, or on the second day after deposit thereof with an expedited
courier service, except that notice of change of address shall be effective
only upon receipt.
14. Life Insurance. The Practice may, at any time after the
execution of this Employment Agreement, apply for and procure as owner and for
its own benefit, life insurance on Optometrist, in such amounts and in such
form or forms as the Practice may determine. Optometrist shall, at the request
of the Practice, submit to such medical examinations, supply such information,
and execute such documents as may be required by the insurance company or
companies to whom the Practice has applied for such insurance. Optometrist
hereby represents that to his knowledge there are no facts or circumstances
that would preclude the Practice from obtaining life insurance on Optometrist.
15. Proprietary Information and Inventions. Optometrist
understands and acknowledges that:
15.01 Trust. Optometrist's employment creates a relationship
of confidence and trust between Optometrist and the Practice (and by virtue of
the Business Management Agreement entered into by the Practice and Vision 21,
Optometrist's employment creates a relationship of confidence and trust between
the Optometrist and Vision 21) with respect to certain information applicable
to the business of the Practice and Vision 21, which may be made known to
Optometrist by the Practice or Vision 21 or learned by Optometrist during the
Employment Period.
15.02 Proprietary Information. The Practice and Vision 21
possess and will continue to possess information that has been created,
discovered, or developed by, or has otherwise become known to, the Practice or
Vision 21 (including, without limitation, information created, discovered, or
developed by or made known to Optometrist during the period of or arising out
of employment by the Practice) or in which property rights have been or may be
assigned or otherwise conveyed to the Practice or Vision 21, which information
has commercial value in the respective businesses in which the Practice and
Vision 21 are engaged and is treated by the Practice and Vision 21 as
confidential. Except as otherwise herein provided, all such information is
hereinafter called "Proprietary Information", which term, as used herein, shall
also include, but shall not be limited to, data, functional specifications,
computer programs, know-how, research, technology, improvements, developments,
designs, marketing plans, strategies, forecasts, new products, unpublished
financial statements, budgets, projections, licenses, prices, costs, patient,
supplier and potential acquisition candidates lists, and patient files and
records. Notwithstanding anything contained in this Employment Agreement to
the contrary, the term "Proprietary Information" shall not include (i)
information which is in the public domain, (ii) information which is published
or otherwise becomes part of the public domain through no fault of Optometrist,
(iii) information which Optometrist can demonstrate was in Optometrist's
possession at the time of disclosure and was not acquired by Optometrist
directly or indirectly from the Practice or Vision 21 on a confidential basis,
(iv) information which becomes available to Optometrist on a non-confidential
basis from a source other than the Practice or Vision 21 and which source, to
the best of Optometrist's knowledge, did not acquire the information on a
confidential basis or (v) information required to be disclosed by any federal
or state law, rule or regulation or by any applicable judgment, order or decree
or any court or governmental body or agency having jurisdiction in the
premises.
All Proprietary Information shall be the sole property of the Practice
and Vision 21 and their respective assigns. Optometrist assigns to the
Practice and Vision 21 any rights Optometrist may have or acquire in such
Proprietary Information. At all times, both during Optometrist's employment by
the
Exhibit 4.1A - Page 5
<PAGE> 70
Practice and after its termination or expiration, Optometrist shall keep in
strictest confidence and trust all Proprietary Information, and Optometrist
shall not use or disclose any Proprietary Information without the written
consent of the Practice and Vision 21, except as may be necessary in the
ordinary course of performing Optometrist's duties as an employee of the
Practice. This Section 15 shall survive the termination or expiration of this
Employment Agreement.
16. Patient Files and Surrender of Documents. To the extent
permitted by law, all records contained in the files of patients shall be the
property of the Practice. Optometrist shall, at the request of the Practice,
promptly surrender to the Practice any patient files, records, or x-rays, as
well as any Proprietary Information or document, memorandum, record, patient
record, letter or other paper in his possession or under his control relating
to the operation, business or affairs of the Practice or Vision 21.
17. Prior Employment Agreements; Successor Employment Agreements.
Optometrist represents and warrants that Optometrist's performance of all the
terms of this Employment Agreement and as an employee of the Practice does not,
and will not, breach any agreement to keep in confidence proprietary
information acquired by Optometrist in confidence or in trust prior to
Optometrist's employment by the Practice. Optometrist has not entered into,
and shall not enter into, any agreement, either written or oral, which is in
conflict with this Employment Agreement or which would be violated by
Optometrist's entering into, or carrying out his obligations under, this
Employment Agreement. Immediately following the expiration of the term of this
Employment Agreement, Optometrist shall, if he intends to continue his
relationship with the Practice, execute a new Employment Agreement with the
Practice in substantially the form of Exhibit 4.1C of the Business Management
Agreement.
18. Restrictive Covenant. Optometrist acknowledges and recognizes
(i) that Optometrist shall come into possession of Proprietary Information and
(ii) the highly competitive nature of the respective businesses of the Practice
and Vision 21 and, accordingly, agrees that in consideration of the premises
contained herein Optometrist will not, during the period of Optometrist's
employment by the Practice and for a period of three (3) years following the
date of expiration or termination of this Employment Agreement, directly or
indirectly (i) except as otherwise permitted by the terms of this Employment
Agreement, practice optometry or engage in the business of managing optometry
practices or related eye care optometric facilities within the area described
in Schedule 18, whether such engagement shall be as an employer, officer,
director, owner, employee, consultant, stockholder, partner or other
participant. Optometrist further agrees that during the period of
Optometrist's employment by Practice, and for a period of three (3) years
following the termination or expiration of this Employment Agreement,
Optometrist will not, directly or indirectly, (i) solicit any employee or
consultant of Vision 21 or the Practice for the purposes of hiring or retaining
such employee or consultant, (ii) utilize the services of any entity engaged in
the business of managing optometry practices or related eye care or optometric
facilities other than Vision 21, or (iii) contact any present or prospective
client of Vision 21 to solicit such person or entity to enter into a management
contract with any organization other than Vision 21. If Optometrist violates
this Section, Optometrist shall pay to Vision 21 the one half (1/2) of the
amount of the consideration received by Optometrist in connection with the
Acquisition Agreement (including one half (1/2) of the Optometrist's pro rata
share (based on his equity ownership in the Practice) of any consideration
received by the Practice in connection with the Acquisition Agreement), as
agreed upon liquidated damages. The Optometrist acknowledges that such sum is
reasonable in light of the resulting loss of intangible asset value associated
with the Optometrist's breach of this restrictive covenant. The Optometrist
further acknowledges and agrees that such liquidated damages sum shall be in
addition to any liquidated damages which may be owed by Optometrist to the
Practice in connection with a breach by
Exhibit 4.1A - Page 6
<PAGE> 71
Optometrist of Section 4 hereof. If the Optometrist fails to make payment of
liquidated damages as contemplated by this Section 18 within thirty (30) days
of Optometrist's receiving notice from the Practice or Vision 21 of the
violation of this Section, Vision 21, shall, in addition to all other rights
and remedies available at law or equity, be entitled to (i) cancel the number
of shares of Vision 21 common stock held by the Optometrist or, with respect to
shares of Vision 21 common stock entitled to be received by the Optometrist
pursuant to the Acquisition Agreement, terminate its obligation to deliver such
number of shares of Vision 21 common stock, valued as set forth in Section
6.6(a) of the Business Management Agreement representing all or a portion of
such liquidated damages sum, or (ii) set off all or any of such liquidated
damages sum against amounts payable under any promissory note held by the
Optometrist, or do both of the foregoing, but in no event shall Vision 21 be
entitled to offset amounts in excess of the liquidated damages sum pursuant to
this Section 18. Optometrist further agrees that (i) such liquidated damages
shall be in addition to the remedies available to the Practice or Vision 21 as
set forth in Section 19 below, (ii) Vision 21 is a third-party beneficiary of
this Section 18, (iii) this Section 18 is intended for the benefit of Vision
21, (iv) this Section 18 may be enforced by the Practice's and Vision 21's
successors and/or assigns, and (v) the enforcement of this Section 18 will not
violate public policy. This Section 18 shall survive the termination or
expiration of this Employment Agreement. Notwithstanding the foregoing, Vision
21 shall not have any right to enforce any provisions of this Employment
Agreement if the Business Management Agreement terminates pursuant to Section
6.2(a) of the Business Management Agreement.
19. Remedies. Optometrist acknowledges and agrees that the
Practice's and Vision 21's remedy at law for a breach or a threatened breach of
the provisions herein would be inadequate, and in recognition of this fact, in
the event of a breach or threatened breach by Optometrist of any of the
provisions of this Employment Agreement, it is agreed that the Practice and
Vision 21 shall be entitled to equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available, without posting bond
or other security. Optometrist acknowledges that the granting of a temporary
injunction, a temporary restraining order or other permanent injunction merely
prohibiting Optometrist from engaging in the practice of optometry or engaging
in the management of any optometric practice the prohibited period within the
prohibited area would not be an adequate remedy upon breach or threatened
breach of this Employment Agreement, and consequently agrees, upon any such
breach or threatened breach, to the granting of injunctive relief prohibiting
Optometrist from engaging in any activities prohibited by this Employment
Agreement. No remedy herein conferred is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to any other remedy given hereunder now or hereinafter existing at law
or in equity or by statute or otherwise. It is expressly understood and agreed
by Optometrist that although the parties consider the restrictions contained in
this Employment Agreement to be reasonable, if a court determines that the time
or territory or any other restriction contained in this Employment Agreement is
an unenforceable restriction on the activities of Optometrist, such provision
in this Employment Agreement shall not be rendered void but shall be deemed to
be amended to apply as to such maximum time and territory and to such extent as
such court may judicially determine or indicate to be reasonable. This Section
19 shall survive the termination or expiration of this Employment Agreement.
20. Successive Employment Notice. Within five (5) business days
after the Termination Date, Optometrist shall provide notice to the Practice of
Optometrist's next intended employment. If such employment is not known by
Optometrist at such date, Optometrist shall notify the Practice immediately
upon determination of such information. Optometrist shall continue to provide
the Practice with notice
Exhibit 4.1A - Page 7
<PAGE> 72
of Optometrist's place and nature of employment and any change in place or
nature of employment during the period ending three (3) years after the
expiration or termination of this Employment Agreement. Failure of Optometrist
to provide the Practice with such information in an accurate and timely fashion
shall be deemed to be a breach of this Employment Agreement and shall entitle
the Practice to all remedies provided for in this Employment Agreement as a
result of such breach.
21. Business Management Agreement. Optometrist agrees not to
commit any act or engage in any omission that would cause the Practice to
breach the Business Management Agreement with Vision 21.
22. Modification and Waiver. No provision of this Employment
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by Optometrist and
such officer as may be specifically designated by the Board of Directors of the
Practice and by such officer as may be specifically designated by the Board of
Directors of Vision 21. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Employment Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time, and such waiver shall not operate
or be construed as a waiver of any subsequent breach of the same provision or
condition by any of the Practice, Optometrist or Vision 21.
23. Headings. Headings used in this Employment Agreement are for
convenience only and shall not be used to interpret or construe its provisions.
24. Amendments. No amendments or variations of the terms and
conditions of this Employment Agreement shall be valid unless the same are in
writing and signed by all of the parties hereto.
25. Severability. The invalidity or unenforceability of any
provision of this Employment Agreement, whether in whole or in part, shall not
in any way affect the validity and/or enforceability of any other provision
herein contained. Any invalid or unenforceable provision shall be deemed
severable to the extent of any such invalidity or unenforceability. It is
expressly understood and agreed that while the Practice and Optometrist
consider the restrictions contained in this Employment Agreement reasonable for
the purpose of preserving for the Practice the good will, other proprietary
rights and intangible business value of the Practice, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Employment Agreement is an
unreasonable or otherwise unenforceable restriction against Optometrist, the
provisions of such clause shall not be rendered void but shall be deemed
amended to apply as to maximum time and territory and to such other extent as
such court may judicially determine or indicate to be reasonable.
26. Third-Party Beneficiary. Vision 21 is a third-party
beneficiary of Sections 4, 15, 18, 19 and 25 of this Employment Agreement and
the restrictive covenants contained in this Employment Agreement are intended
for the benefit of Vision 21. Except as otherwise provided herein, this
Employment Agreement shall not confer any rights or remedies upon any person
other than the Practice, Optometrist and Vision 21 and their respective
successors and permitted assigns.
27. Successors and Assigns. The Practice's and Vision 21's
successors and/or assigns are authorized to enforce the restrictive covenants
contained in this Employment Agreement.
Exhibit 4.1A - Page 8
<PAGE> 73
28. Governing Law. This Employment Agreement shall be construed
and enforced pursuant to the laws of the State in which the Practice conducts
its business.
29. Counterparts. This Employment Agreement may be executed in
more than one (1) counterpart and each counterpart shall be considered an
original.
IN WITNESS WHEREOF, this Employment Agreement has been duly executed
by the Practice and Optometrist as of the date first above written.
"PRACTICE"
Gillette & Associates, #6965 P.A.,
a Professional Association
By
---------------------------------
Theodore N. Gillette, its President
"OPTOMETRIST"
------------------------------------
, O.D.
---------------------
Exhibit 4.1A - Page 9
<PAGE> 74
Exhibit 4.1B
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
List of Practice Shareholders
1. Theodore N. Gillette, O.D.
2. Mark Sarno, O.D.
3. Mark Beiler, O.D.
<PAGE> 75
Exhibit 4.1C
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
OPTOMETRIST EMPLOYMENT AGREEMENT
(SHAREHOLDER - KEY PROFESSIONAL)
This Optometrist Employment Agreement (this "Employment Agreement")
dated as of _______________, 19__, is by and between Gillette & Associates,
#6965, P.A., a Florida professional association (the "Practice"), and
______________________________, an individual (the "Optometrist").
R E C I T A L S
A. The Practice is a professional association organized under the
laws of the State of Florida (the "State") and is authorized to practice
optometry in the State through licensed individuals.
B. The Practice and Vision 21, Inc., a Florida corporation
("Vision 21") have entered into a Business Management Agreement (the "Business
Management Agreement") dated as of December 1, 1996, whereby Vision 21 has
agreed to provide various management services to the Practice and the Practice
has agreed to have its shareholder and key professional employees execute
employment agreements in a form substantially the same as this Employment
Agreement, and it is intended that except as otherwise limited herein, Vision
21 be a third-party beneficiary of the restrictive covenants contained in this
Employment Agreement.
C. The Practice desires to employ Optometrist upon the terms and
subject to the terms and conditions set forth in this Employment Agreement.
D. The Optometrist is licensed to practice optometry in the State
and desires to be employed by the Practice upon the terms and subject to the
conditions set forth in this Employment Agreement.
E. The Optometrist possesses special knowledge relating to the
business and assets of the Practice and Vision 21 and has developed valuable,
long-term relationships with patients to be cared for by the Practice which
make him valuable to the Practice and which will contribute to the Practice's
and Vision 21's future success.
NOW, THEREFORE, in consideration of the premises, the mutual promises,
covenants and conditions herein contained and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto intending to be legally bound hereby agree as follows:
1. Employment. The Practice hereby employs Optometrist, and
Optometrist hereby accepts employment with the Practice, all upon the terms and
subject to the conditions set forth in this Employment Agreement.
2. Duties and Responsibilities.
2.01 Full Time Practice of Optometry. The Optometrist is
employed pursuant to the terms of this Employment Agreement to practice
optometry on behalf of the Practice. The Optometrist shall devote
substantially all of his time, best efforts and attention to the practice of
optometry on behalf
<PAGE> 76
of the Practice and shall provide patient care of the highest quality. In
addition to the foregoing duties, the Optometrist shall undertake additional
duties as directed by the Practice. During the term hereof and any renewal,
the Optometrist shall not, without the written consent of the Practice and
Vision 21, (1) render professional services to or for any person, firm,
corporation or other organization for compensation; or (2) engage in any
activity that competes with the interest of the Practice or Vision 21 whether
Optometrist is acting by himself or as an officer, director, shareholder,
employee, partner or fiduciary. Any consent granted to the Optometrist shall
be revocable by the Practice or Vision 21 at any time upon thirty (30) days'
notice, and the Optometrist agrees to cease and desist upon receipt of such
notice. Notwithstanding the above, the Practice recognizes that the
Optometrist shall have the right to engage in those matters expressly described
on Schedule 2.01 attached hereto so long as such permitted activities do not
result in materially reduced services to the Practice as compared to the
Optometrist's previous services to his practice and so long as the same does
not materially impact the Optometrist's ability to perform hereunder or
materially impact the Optometrist's anticipated productivity.
2.02 Subject to Board Standards and Requirements. The
Practice recognizes that professional regulatory groups and bodies such as the
State Board of Optometry may from time to time establish standards and
requirements with regard to the practice of optometry by optometrists licensed
to practice optometry. All restrictions contained herein with respect to the
duties and obligations of the Optometrist shall be subject to said standards
and requirements of the aforesaid groups and bodies.
3. Authority and Control of Practice.
Subject to Section 2.02 above and to the extent permitted by
law:
3.01 The Optometrist recognizes that the Practice shall
have complete authority with regard to the acceptance for treatment of or the
refusal to treat any patient and the Practice shall have complete authority
with regard to the establishment of the appropriate fee for professional
service.
3.02 The Practice shall direct and control the assignment
of patients to the Optometrist. Such determination shall be solely by the
Practice and in the best interests of the patient and the Practice. The
Optometrist agrees to treat such patients as are assigned to him by the
Practice. The Optometrist recognizes that patients treated by him may
subsequently be assigned to other employees.
3.03 The Optometrist shall perform all professional
services as are assigned to him by the Practice and all work performed by the
Practice shall be subject to the review and study of the Practice.
3.04 The performance of services by the Optometrist on
behalf of the Practice shall be performed at such times and at such places as
shall be determined by the Practice and in accordance with such rules as the
Practice may establish.
3.05 Hours of employment of the Optometrist shall be
determined by the Practice within reasonable standards within the profession.
3.06 The optometrist of record for each patient treated by
Optometrist shall be one of the individual owners of the Practice.
Exhibit 4.1C - Page 2
<PAGE> 77
4. Term of Employment. The term of employment of Optometrist by
the Practice pursuant to this Employment Agreement shall be for three (3) years
(the "Employment Period") commencing on the date of this Agreement (the
"Commencement Date"). The term of this Agreement shall renew automatically at
the end of each term of this Agreement for an additional three (3) year term
unless either party hereto provides notice to the other at least ninety (90)
days prior to the expiration of any term.
5. Place of Employment. Optometrist's principal place of work
shall be located where designated by the Practice.
6. Compensation. During the Employment Period, subject to all
the terms and conditions of this Employment Agreement and as compensation for
all services to be rendered by Optometrist under this Employment Agreement, the
Practice shall pay to or provide Optometrist with the compensation set forth in
Schedule 6 attached to this Agreement.
7. Adherence to Standards. Optometrist shall comply with the
written policies, standards, rules and regulations of the Practice from time to
time established for all employees of the Practice.
8. Review of Performance. The Practice may periodically review
and evaluate the performance of Optometrist under this Employment Agreement
with Optometrist.
9. Expenses. The Practice may reimburse Optometrist for
reasonable, ordinary and necessary expenses incurred by him in connection with
his employment hereunder that have been approved in advance by the Practice;
provided, however, Optometrist shall render to the Practice a complete and
accurate accounting of all such expenses in accordance with the substantiation
requirements of Section 274 of the Internal Revenue Code of 1986, as amended
(the "Code"), as a condition precedent to such reimbursement.
10. Termination with Cause by the Practice. This Employment
Agreement may be terminated with Cause (as hereinafter defined) by the Practice
provided that the Practice shall (i) give Optometrist the Notice of Termination
(as hereinafter defined) and (ii) pay Optometrist his annual base salary
through the Date of Termination (as hereinafter defined) at the rate in effect
at the time the Notice of Termination is given plus any bonus or incentive
compensation which have been earned or have become payable pursuant to the
terms of any compensation or benefit plan or have vested as of the Date of
Termination, but which have not yet been paid.
11. Definitions. In addition to the words and terms elsewhere
defined in this Employment Agreement, certain capitalized words and terms used
in this Employment Agreement shall have the meanings given to them by the
definitions and descriptions in this Section 11 unless the context or use
indicates another or different meaning or intent, and such definition shall be
equally applicable to both the singular and plural forms of any of the
capitalized words and terms herein defined. The following words and terms are
defined terms under this Employment Agreement:
11.01 Cause. A termination with "Cause" by the Practice
shall mean a termination of this Employment Agreement for any of the following
reasons:
Exhibit 4.1C - Page 3
<PAGE> 78
(i) Optometrist's failure to promptly and adequately
perform the duties assigned by Practice after being notified by the Practice of
the specific act(s) constituting such failure and being given a period of
thirty (30) days after notification by the Practice to correct such failure;
(ii) upon Optometrist's breach of any provision of
this Employment Agreement which remains uncured for a period of thirty (30)
days after notification by Practice of the specific nature of the breach;
(iii) for good cause which shall include
insubordination, conduct reflecting moral turpitude, conduct diminishing the
goodwill or reputation of the Practice, conduct disloyal to the Practice,
material violation of any representation, warranty or covenant of this
Agreement; conviction of any felony, or suspension or revocation of
Optometrist's license to practice optometry;
(iv) upon Optometrist's death; or
(v) upon Optometrist's disability if the
disability renders Optometrist unable to practice optometry on a full-time
basis for a period of more than ninety (90) days in any consecutive six (6)
month period.
11.02 Date of Termination. "Date of Termination" shall mean
the date specified in the Notice of Termination which shall not be less than
thirty (30) days from the date such Notice of Termination is given unless the
Notice of Termination is provided pursuant to Sections 11.01(iii), (iv) or (v),
in which case the Date of Termination shall be the date that Notice of
Termination is received by the Optometrist.
11.03 Notice of Termination. "Notice of Termination" shall
mean a written notice which shall indicate the specific termination provision
in this Employment Agreement relied upon; provided, however, no such purported
termination shall be effective without such Notice of Termination.
12. Fees and Expenses. The prevailing party in any contest or
dispute under this Employment Agreement shall receive from the other party all
legal fees and related expenses (including the costs of experts, evidence and
counsel incurred by the prevailing party in any and all proceedings arising out
of this Employment Agreement, including trial, appellate and bankruptcy
proceedings.
13. Notices. For the purposes of this Employment Agreement,
notices and all other communications provided for in the Employment Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or sent by certified mail, return receipt requested, postage prepaid,
or by expedited (overnight) courier with an established national reputation,
shipping prepaid or billed to sender, in either case addressed to the
respective addresses last given by each party in writing to the other (provided
that all notices to the Practice shall be directed to the attention of the
Practice with a copy to the Secretary of the Practice). All notices and
communication shall be deemed to have been received on the date of delivery
thereof, on the third business day after the mailing thereof, or on the second
day after deposit thereof with an expedited courier service, except that notice
of change of address shall be effective only upon receipt.
14. Life Insurance. The Practice may, at any time after the
execution of this Employment Agreement, apply for and procure as owner and for
its own benefit, life insurance on Optometrist, in such
Exhibit 4.1C - Page 4
<PAGE> 79
amounts and in such form or forms as the Practice may determine. Optometrist
shall, at the request of the Practice, submit to such medical examinations,
supply such information, and execute such documents as may be required by the
insurance company or companies to whom the Practice has applied for such
insurance. Optometrist hereby represents that to his knowledge there are no
facts or circumstances that would preclude the Practice from obtaining life
insurance on Optometrist.
15. Proprietary Information and Inventions. Optometrist
understands and acknowledges that:
15.01 Trust. Optometrist's employment creates a relationship
of confidence and trust between Optometrist and the Practice (and by virtue of
the Business Management Agreement entered into by the Practice and Vision 21,
Optometrist's employment creates a relationship of confidence and trust between
the Optometrist and Vision 21) with respect to certain information applicable
to the business of the Practice and Vision 21, which may be made known to
Optometrist by the Practice or Vision 21 or learned by Optometrist during the
Employment Period.
15.02 Proprietary Information. The Practice and Vision 21
possess and will continue to possess information that has been created,
discovered, or developed by, or has otherwise become known to, the Practice or
Vision 21 (including, without limitation, information created, discovered, or
developed by or made known to Optometrist during the period of or arising out
of employment by the Practice) or in which property rights have been or may be
assigned or otherwise conveyed to the Practice or Vision 21, which information
has commercial value in the respective businesses in which the Practice and
Vision 21 are engaged and is treated by the Practice and Vision 21 as
confidential. Except as otherwise herein provided, all such information is
hereinafter called "Proprietary Information", which term, as used herein, shall
also include, but shall not be limited to, data, functional specifications,
computer programs, know-how, research, technology, improvements, developments,
designs, marketing plans, strategies, forecasts, new products, unpublished
financial statements, budgets, projections, licenses, prices, costs, patient,
supplier and potential acquisition candidates lists, and patient files and
records. Notwithstanding anything contained in this Employment Agreement to
the contrary, the term "Proprietary Information" shall not include (i)
information which is in the public domain, (ii) information which is published
or otherwise becomes part of the public domain through no fault of Optometrist,
(iii) information which Optometrist can demonstrate was in Optometrist's
possession at the time of disclosure and was not acquired by Optometrist
directly or indirectly from the Practice or Vision 21 on a confidential basis,
(iv) information which becomes available to Optometrist on a non-confidential
basis from a source other than the Practice or Vision 21 and which source, to
the best of Optometrist's knowledge, did not acquire the information on a
confidential basis or (v) information required to be disclosed by any federal
or state law, rule or regulation or by any applicable judgment, order or decree
or any court or governmental body or agency having jurisdiction in the
premises.
All Proprietary Information shall be the sole property of the Practice
and Vision 21 and their respective assigns. Optometrist assigns to the
Practice and Vision 21 any rights Optometrist may have or acquire in such
Proprietary Information. At all times, both during Optometrist's employment by
the Practice and after its termination or expiration, Optometrist shall keep in
strictest confidence and trust all Proprietary Information, and Optometrist
shall not use or disclose any Proprietary Information without the written
consent of the Practice and Vision 21, except as may be necessary in the
ordinary course of performing Optometrist's duties as an employee of the
Practice. This Section 15 shall survive the termination or expiration of this
Employment Agreement.
Exhibit 4.1C - Page 5
<PAGE> 80
16. Patient Files and Surrender of Documents. To the extent
permitted by law, all records contained in the files of patients shall be the
property of the Practice. Optometrist shall, at the request of the Practice,
promptly surrender to the Practice any patient files, records, or x-rays, as
well as any Proprietary Information or document, memorandum, record, patient
record, letter or other paper in his possession or under his control relating
to the operation, business or affairs of the Practice or Vision 21.
17. Prior Employment Agreements; Successor Employment Agreements.
Optometrist represents and warrants that Optometrist's performance of all the
terms of this Employment Agreement and as an employee of the Practice does not,
and will not, breach any agreement to keep in confidence proprietary
information acquired by Optometrist in confidence or in trust prior to
Optometrist's employment by the Practice. Optometrist has not entered into,
and shall not enter into, any agreement, either written or oral, which is in
conflict with this Employment Agreement or which would be violated by
Optometrist's entering into, or carrying out his obligations under, this
Employment Agreement. Following the expiration of the term of this Employment
Agreement, Optometrist shall, if he intends to continue his relationship with
the Practice, execute a new Employment Agreement with the Practice in
substantially the form of Exhibit 4.1C of the Business Management Agreement.
18. Restrictive Covenant. Optometrist acknowledges and recognizes
(i) that Optometrist shall come into possession of Proprietary Information and
(ii) the highly competitive nature of the respective businesses of the Practice
and Vision 21 and, accordingly, agrees that in consideration of the premises
contained herein Optometrist will not, during the period of Optometrist's
employment by the Practice and for a period of one (1) year following the date
of expiration or termination of this Employment Agreement, directly or
indirectly (i) except as otherwise permitted by the terms of this Employment
Agreement, practice optometry or engage in the business of managing optometry
practices or related eye care optometric facilities within the area described
in Schedule 18, whether such engagement shall be as an employer, officer,
director, owner, employee, consultant, stockholder, partner or other
participant. Optometrist further agrees that during the period of
Optometrist's employment by Practice, and for a period of three (3) years
following the termination or expiration of this Employment Agreement,
Optometrist will not, directly or indirectly, (i) solicit any employee or
consultant of Vision 21 or the Practice for the purposes of hiring or retaining
such employee or consultant, (ii) utilize the services of any entity engaged in
the business of managing optometry practices or related eye care or optometric
facilities other than Vision 21, or (iii) contact any present or prospective
client of Vision 21 to solicit such person or entity to enter into a management
contract with any organization other than Vision 21. If Optometrist violates
this Section, Optometrist shall pay to Vision 21 the sum of Three Hundred
Thousand Dollars ($300,000) as agreed upon liquidated damages. The Optometrist
acknowledges that such sum is reasonable in light of the resulting loss of
intangible asset value associated with the Optometrist's breach of this
restrictive covenant. Optometrist further agrees that (i) such liquidated
damages shall be in addition to the remedies available to the Practice and
Vision 21 as set forth in Section 19 below, (ii) Vision 21 is a third-party
beneficiary of this Section 18, (iii) this Section 18 is intended for the
benefit of Vision 21, (iv) this Section 18 may be enforced by the Practice's
and Vision 21's successors and/or assigns, and (v) the enforcement of this
Section 18 will not violate public policy. This Section 18 shall survive the
termination or expiration of this Employment Agreement. Notwithstanding the
foregoing, Vision 21 shall not have any right to enforce any provisions of this
Employment Agreement if the Business Management Agreement terminates pursuant
to Section 6.2(a) of the Business Management Agreement.
19. Remedies. Optometrist acknowledges and agrees that the
Practice's and Vision 21's remedy at law for a breach or a threatened breach of
the provisions herein would be inadequate, and in
Exhibit 4.1C - Page 6
<PAGE> 81
recognition of this fact, in the event of a breach or threatened breach by
Optometrist of any of the provisions of this Employment Agreement, it is agreed
that the Practice and Vision 21 shall be entitled to equitable relief in the
form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be available,
without posting bond or other security. Optometrist acknowledges that the
granting of a temporary injunction, a temporary restraining order or other
permanent injunction merely prohibiting Optometrist from engaging in the
practice of optometry or engaging in the management of any optometric practice
during the prohibited period within the prohibited area would not be an
adequate remedy upon breach or threatened breach of this Employment Agreement,
and consequently agrees, upon any such breach or threatened breach, to the
granting of injunctive relief prohibiting Optometrist from engaging in any
activities prohibited by this Employment Agreement. No remedy herein conferred
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to any other remedy given
hereunder now or hereinafter existing at law or in equity or by statute or
otherwise. It is expressly understood and agreed by Optometrist that although
the parties consider the restrictions contained in this Employment Agreement to
be reasonable, if a court determines that the time or territory or any other
restriction contained in this Employment Agreement is an unenforceable
restriction on the activities of Optometrist, such provision in this Employment
Agreement shall not be rendered void but shall be deemed to be amended to apply
as to such maximum time and territory and to such extent as such court may
judicially determine or indicate to be reasonable. This Section 19 shall
survive the termination or expiration of this Employment Agreement.
20. Business Management Agreement. Optometrist agrees not to
commit any act or engage in any omission that would cause the Practice to
breach the Business Management Agreement with Vision 21.
21. Modification and Waiver. No provision of this Employment
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by Optometrist and
such officer as may be specifically designated by the Board of Directors of the
Practice and by such officer as may be specifically designated by the Board of
Directors of Vision 21. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Employment Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time, and such waiver shall not operate
or be construed as a waiver of any subsequent breach of the same provision or
condition by any of the Practice, Optometrist or Vision 21.
22. Headings. Headings used in this Employment Agreement are for
convenience only and shall not be used to interpret or construe its provisions.
23. Amendments. No amendments or variations of the terms and
conditions of this Employment Agreement shall be valid unless the same are in
writing and signed by all of the parties hereto.
24. Severability. The invalidity or unenforceability of any
provision of this Employment Agreement, whether in whole or in part, shall not
in any way affect the validity and/or enforceability of any other provision
herein contained. Any invalid or unenforceable provision shall be deemed
severable to the extent of any such invalidity or unenforceability. It is
expressly understood and agreed that while the Practice and Optometrist
consider the restrictions contained in this Employment Agreement reasonable
Exhibit 4.1C - Page 7
<PAGE> 82
for the purpose of preserving for the Practice the good will, other proprietary
rights and intangible business value of the Practice, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Employment Agreement is an
unreasonable or otherwise unenforceable restriction against Optometrist, the
provisions of such clause shall not be rendered void but shall be deemed
amended to apply as to maximum time and territory and to such other extent as
such court may judicially determine or indicate to be reasonable.
25. Third-Party Beneficiary. Vision 21 is a third-party
beneficiary of Sections 4, 15, 18, 19 and 25 of this Employment Agreement and
the restrictive covenants contained in this Employment Agreement are intended
for the benefit of Vision 21.
26. Successors and Assigns. The Practice's and Vision 21's
successors and/or assigns are authorized to enforce the restrictive covenants
contained in this Employment Agreement.
27. Governing Law. This Employment Agreement shall be construed
and enforced pursuant to the laws of the State in which the Practice conducts
its business.
28. Counterparts. This Employment Agreement may be executed in
more than one (1) counterpart and each counterpart shall be considered an
original.
IN WITNESS WHEREOF, this Employment Agreement has been duly executed
by the Practice and Optometrist as of the date first above written.
"PRACTICE"
GILLETTE & ASSOCIATES, #6965, P.A.
By:
------------------------------------
Theodore N. Gillette, its President
"OPTOMETRIST"
----------------------------------------
, O.D.
Exhibit 4.1C - Page 8
<PAGE> 83
Exhibit 4.2B
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
OPTOMETRIST EMPLOYMENT AGREEMENT
(NON-SHAREHOLDER)
This Optometrist Employment Agreement (this "Employment Agreement")
dated as of ____________, 19__, is by and between Gillette & Associates, #6965,
P.A., a Florida professional association (the "Practice"), and
_______________________________, an individual (the "Optometrist").
R E C I T A L S:
A. The Practice is a professional corporation organized under the
laws of the State of Florida (the "State") and is authorized to practice
optometry in the State through licensed individuals.
B. The Practice desires to employ Optometrist upon the terms and
subject to the terms and conditions set forth in this Employment Agreement.
C. The Optometrist is licensed to practice optometry in the State
and desires to be employed by the Practice upon the terms and subject to the
conditions set forth in this Employment Agreement.
D. The Practice and Vision 21, Inc. ("Vision 21") have entered
into a Business Management Agreement (the "Business Management Agreement")
whereby Vision 21 has agreed to have its professional employees execute
employment agreements in a form substantially the same as this Employment
Agreement, and it is intended that except as otherwise limited herein, Vision
21 be a third-party beneficiary of the restrictive covenants contained in this
Employment Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
promises, covenants and conditions herein contained and for other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound hereby agree as
follows:
1. Employment. The Practice hereby employs Optometrist, and
Optometrist hereby accepts employment with the Practice, all upon the terms and
subject to the conditions set forth in this Employment Agreement.
2. Duties and Responsibilities.
2.01 Full Time Practice of Optometry. The Optometrist is
employed pursuant to the terms of this Employment Agreement to practice
optometry on behalf of the Practice. The Optometrist shall devote
substantially all of his time, best efforts and attention to the practice of
optometry on behalf of the Practice and shall provide quality patient care. In
addition to the foregoing duties, the Optometrist shall undertake additional
duties as directed by the Practice. During the term hereof and any renewal,
the Optometrist shall not, without the written consent of the Practice and
Vision 21, (1) render professional services to or for any person, firm,
corporation or other organization for compensation; or (2) engage in any
activity that competes with the interest of the Practice or Vision 21 whether
Optometrist is acting by himself or as an officer, director, shareholder,
employee, partner or fiduciary. Any consent granted to the Optometrist shall
be revocable by the Practice or Vision 21 at any time upon thirty (30) days'
notice, and the Optometrist agrees to cease and desist upon receipt of such
notice. Notwithstanding the above, the Practice recognizes that the
Optometrist shall have the right to engage in those matters expressly described
<PAGE> 84
on Schedule 2.01 attached hereto so long as such permitted activities do not
result in materially reduced services to the Practice as compared to the
Optometrist's previous services to his practice and so long as the same does
not materially impact the Optometrist's ability to perform hereunder or
materially impact the Optometrist's anticipated productivity.
2.02 Subject to Board Standards and Requirements. The
Practice recognizes that professional regulatory groups and bodies such as the
State Board of Optometry may from time to time establish standards and
requirements with regard to the practice of optometry by optometrists licensed
to practice optometry. All restrictions contained herein with respect to the
duties and obligations of the Optometrist shall be subject to said standards
and requirements of the aforesaid groups and bodies.
3. Authority and Control of Practice.
Subject to Section 2.02 above and to the extent permitted by law:
3.01 The Optometrist recognizes that the Practice shall
have complete authority with regard to the acceptance for treatment of or the
refusal to treat any patient and the Practice shall have complete authority
with regard to the establishment of the appropriate fee for professional
service.
3.02 The Practice shall direct and control the assignment
of patients to the Optometrist. Such determination shall be solely by the
Practice and in the best interests of the patient and the Practice. The
Optometrist agrees to treat such patients as are assigned to him by the
Practice. The Optometrist recognizes that patients treated by him may
subsequently be assigned to other employees.
3.03 The Optometrist shall perform all professional
services as are assigned to him by the Practice and all work performed by the
Practice shall be subject to the review and study of the Practice.
3.04 The performance of services by the Optometrist on
behalf of the Practice shall be performed at such times and at such places as
shall be determined by the Practice and in accordance with such rules as the
Practice may establish.
3.05 Hours of employment of the Optometrist shall be
determined by the Practice within reasonable standards within the profession.
3.06 The optometrist of record for each patient treated by
Optometrist shall be one of the individual owners of the Practice.
4. Term of Employment. The term of employment of Optometrist by the
Practice pursuant to this Employment Agreement shall be for two (2) years (the
"Employment Period") commencing on the date of this Agreement (the
"Commencement Date") unless otherwise terminated earlier under the provisions
of this Employment Agreement. The term of this Agreement shall renew
automatically at the end of each term of this Agreement for an additional two
(2) year term unless either party hereto provides notice to the other at least
ninety (90) days prior to the expiration of the term.
5. Place of Employment. Optometrist's principal place of work shall
be located where designated by the Practice.
Exhibit 4.2B - Page 2
<PAGE> 85
6. Compensation. During the Employment Period, subject to all the
terms and conditions of this Employment Agreement and as compensation for all
services to be rendered by Optometrist under this Employment Agreement, the
Practice shall pay to or provide Optometrist with the compensation set forth in
Schedule 6 attached to this Agreement.
7. Adherence to Standards. Optometrist shall comply with the
written policies, standards, rules and regulations of the Practice from time to
time established for all employees of the Practice.
8. Review of Performance. The Practice may periodically review and
evaluate the performance of Optometrist under this Employment Agreement with
Optometrist.
9. Expenses. The Practice may reimburse Optometrist for reasonable,
ordinary and necessary expenses incurred by him in connection with his
employment hereunder that have been approved in advance by the Practice;
provided, however, Optometrist shall render to the Practice a complete and
accurate accounting of all such expenses in accordance with the substantiation
requirements of Section 274 of the Internal Revenue Code of 1986, as amended
(the "Code"), as a condition precedent to such reimbursement.
10. Termination with Cause by the Practice. This Employment
Agreement may be terminated with Cause (as hereinafter defined) by the Practice
provided that the Practice shall (i) give Optometrist the Notice of Termination
(as hereinafter defined) and (ii) pay Optometrist his annual base salary
through the Date of Termination (as hereinafter defined) at the rate in effect
at the time the Notice of Termination is given plus any bonus or incentive
compensation which have been earned or have become payable pursuant to the
terms of any compensation or benefit plan or have vested as of the Date of
Termination, but which have not yet been paid.
11. Termination without Cause by the Practice or with Cause by
the Optometrist. This Employment Agreement may be terminated by the Practice
without cause or by the Optometrist with cause and in the event that the
Practice terminates the Optometrist without cause, the Practice shall give
written notice to the Optometrist at least ninety (90) days prior to the Date
of Termination.
12. Definitions. In addition to the words and terms elsewhere
defined in this Employment Agreement, certain capitalized words and terms used
in this Employment Agreement shall have the meanings given to them by the
definitions and descriptions in this Section 12 unless the context or use
indicates another or different meaning or intent, and such definition shall be
equally applicable to both the singular and plural forms of any of the
capitalized words and terms herein defined. The following words and terms are
defined terms under this Employment Agreement:
12.01 Cause. A termination with "Cause" by the Practice
shall mean a termination of this Employment Agreement for any of the following
reasons:
(i) Optometrist's failure to promptly and adequately
perform the duties assigned by Practice after being notified by the Practice of
the specific act(s) constituting such failure and being given a period of
thirty (30) days after notification by the Practice to correct such failure;
(ii) upon Optometrist's breach of any provision of
this Employment Agreement which remains uncured for a period of thirty (30)
days after notification by Practice of the specific nature of the breach;
Exhibit 4.2B - Page 3
<PAGE> 86
(iii) for good cause which shall include
absenteeism, theft, dishonesty, insubordination, conduct reflecting moral
turpitude, conduct diminishing the goodwill or reputation of the Practice;
conduct disloyal to the Practice, violation of any representation, warranty or
covenant of this Agreement; conviction of any felony, or suspension or
revocation of Optometrist's license to practice optometry;
(iv) upon Optometrist's death; or
(v) upon Optometrist's disability if the
disability renders Optometrist unable to practice optometry on a full-time
basis for a period of more than ninety (90) days in any consecutive six (6)
month period.
12.02 Date of Termination. "Date of Termination" shall mean
the date specified in the Notice of Termination.
12.03 Notice of Termination. "Notice of Termination" shall
mean a written notice which shall indicate the specific termination provision
in this Employment Agreement relied upon; provided, however, no such purported
termination shall be effective without such Notice of Termination.
13. Fees and Expenses. The prevailing party in any contest or
dispute under this Employment Agreement shall receive from the other party all
legal fees and related expenses (including the costs of experts, evidence and
counsel) incurred by the prevailing party in any and all proceedings as a
result of a contest or dispute arising out of this Employment Agreement
including trial, appellate and bankruptcy proceedings.
14. Notices. For the purposes of this Employment Agreement, notices
and all other communications provided for in the Employment Agreement shall be
in writing and shall be deemed to have been duly given when personally
delivered or sent by certified mail, return receipt requested, postage prepaid,
or by expedited (overnight) courier with an established national reputation,
shipping prepaid or billed to sender, in either case addressed to the
respective addresses last given by each party in writing to the other (provided
that all notices to the Practice shall be directed to the attention of the
Practice with a copy to the Secretary of the Practice. All notices and
communication shall be deemed to have been received on the date of delivery
thereof, on the third business day after the mailing thereof, or on the second
day after deposit thereof with an expedited courier service, except that notice
of change of address shall be effective only upon receipt.
15. Life Insurance. The Practice may, at any time after the
execution of this Employment Agreement, apply for and procure as owner and for
its own benefit, life insurance on Optometrist, in such amounts and in such
form or forms as the Practice may determine. Optometrist shall, at the request
of the Practice, submit to such medical examinations, supply such information,
and execute such documents as may be required by the insurance company or
companies to whom the Practice has applied for such insurance. Optometrist
hereby represents that to his knowledge there are no facts or circumstances
that would preclude the Practice from obtaining life insurance on Optometrist.
16. Proprietary Information and Inventions. Optometrist understands
and acknowledges that:
16.01 Trust. Optometrist's employment creates a relationship
of confidence and trust between Optometrist and the Practice with respect to
certain information applicable to the business of the
Exhibit 4.2B - Page 4
<PAGE> 87
Practice, and Vision 21 which may be made known to Optometrist by the Practice
or Vision 21 or learned by Optometrist during the Employment Period.
16.02 Proprietary Information. The Practice and Vision 21
possess and will continue to possess information that has been created,
discovered, or developed by, or otherwise become known to, the Practice or
Vision 21 (including, without limitation, information created, discovered or
developed by, or made known to Optometrist during the period of or arising out
of employment by the Practice) or in which property rights have been or may be
assigned or otherwise conveyed to the Practice or Vision 21, which information
has commercial value in the respective businesses in which the Practice and
Vision 21 are engaged and is treated by the Practice and Vision 21 as
confidential. Except as otherwise herein provided, all such information is
hereinafter called "Proprietary Information", which term, as used herein, shall
also include, but shall not be limited to, data, functional specifications,
computer programs, know-how, research, technology, improvements, developments,
designs, marketing plans, strategies, forecasts, new products, unpublished
financial statements, budgets, projections, licenses, prices, costs, patient,
supplier and potential acquisition candidates lists, and patient files and
records. Notwithstanding anything contained in this Employment Agreement to
the contrary, the term "Proprietary Information" shall not include (i)
information which is in the public domain, (ii) information which is published
or otherwise becomes part of the public domain through no fault of Optometrist,
(iii) information which Optometrist can demonstrate was in Optometrist's
possession at the time of disclosure and was not acquired by Optometrist
directly or indirectly from the Practice or Vision 21 on a confidential basis,
(iv) information which becomes available to Optometrist on a non-confidential
basis from a source other than the Practice or Vision 21 and which source, to
the best of Optometrist's knowledge, did not acquire the information on a
confidential basis or (v) information required to be disclosed by any federal
or state law, rule or regulation or by any applicable judgment, order or decree
or any court or governmental body or agency having jurisdiction in the
premises.
All Proprietary Information shall be the sole property of the Practice
and Vision 21 and their respective assigns. Optometrist assigns to the
Practice and Vision 21 any rights Optometrist may have or acquire in such
Proprietary Information. At all times, both during Optometrist's employment by
the Practice and after its termination or expiration, Optometrist shall keep in
strictest confidence and trust all Proprietary Information, and Optometrist
shall not use or disclose any Proprietary Information without the written
consent of the Practice and Vision 21, except as may be necessary in the
ordinary course of performing Optometrist's duties as an employee of the
Practice. This Section 16 shall survive the termination or expiration of this
Employment Agreement.
17. Patient Files and Surrender of Documents. To the extent
permitted by law, all records contained in the files of patients shall be the
property of the Practice. Optometrist shall, at the request of the Practice,
promptly surrender to the Practice any patient files, records, or x-rays, as
well as any Proprietary Information or document, memorandum, record, patient
record, letter or other paper in his possession or under his control relating
to the operation, business or affairs of the Practice or Vision 21.
18. Prior Employment Agreements. Optometrist represents and
warrants that Optometrist's performance of all the terms of this Employment
Agreement and as an employee of the Practice does not, and will not, breach any
agreement to keep in confidence proprietary information acquired by Optometrist
in confidence or in trust prior to Optometrist's employment by the Practice.
Optometrist has not entered into, and shall not enter into, any agreement,
either written or oral, which is in conflict with this Employment Agreement or
which would be violated by Optometrist's entering into, or carrying out his
obligations under, this Employment Agreement.
Exhibit 4.2B - Page 5
<PAGE> 88
19. Restrictive Covenant. Optometrist acknowledges and recognizes
(i) that Optometrist shall come into possession of Proprietary Information and
(ii) the highly competitive nature of the respective businesses of the Practice
and Vision 21 and, accordingly, agrees that in consideration of the premises
contained herein Optometrist will not, during the period of Optometrist's
employment by the Practice and for a period of one (1) year following the date
of expiration or termination of this Employment Agreement (unless terminated
without cause by the Practice), directly or indirectly (i) except as otherwise
permitted by the terms of this Employment Agreement, practice optometry or
engage in the business of managing optometry practices or related eye care
optometric facilities within the area described in Schedule 19, whether such
engagement shall be as an employer, officer, director, owner, employee,
consultant, stockholder, partner or other participant. Optometrist further
agrees that during the period of Optometrist's employment by Practice, and for
a period of one (1) year following the termination or expiration of this
Employment Agreement, Optometrist will not, directly or indirectly, (i) solicit
any employee or consultant of Vision 21 for the purposes of hiring or retaining
such employee or consultant, (ii) utilize the services of any entity engaged in
the business of managing optometry practices or related eye care or optometric
facilities other than Vision 21, or (iii) contact any present or prospective
client of Vision 21 to solicit such person or entity to enter into a management
contract with any organization other than Vision 21. Optometrist further
agrees that (i) Vision 21 is a third-party beneficiary of this Section 19, (ii)
this Section 19 is intended for the benefit of Vision 21, (iii) this Section 19
may be enforced by Practice's and Vision 21's successors and/or assigns, and
(iv) the enforcement of this Section 19 will not violate public policy. This
Section 19 shall survive the termination or expiration of this Employment
Agreement. Notwithstanding the foregoing, Vision 21 shall not have any right
to enforce any provisions of this Employment Agreement if the Business
Management Agreement terminates pursuant to Section 6.2(a) of the Business
Management Agreement.
20. Remedies. Optometrist acknowledges and agrees that the
Practice's and Vision 21's remedy at law for a breach or a threatened breach of
the provisions herein would be inadequate, and in recognition of this fact, in
the event of a breach or threatened breach by Optometrist of any of the
provisions of this Employment Agreement, it is agreed that the Practice and
Vision 21 shall be entitled to, equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available, without posting bond
or other security. Optometrist acknowledges that the granting of a temporary
injunction, a temporary restraining order or other permanent injunction merely
prohibiting Optometrist from engaging in the practice of optometry or engaging
in the management of any optometric practice during the prohibited period
within the prohibited area would not be an adequate remedy upon breach or
threatened breach of this Employment Agreement, and consequently agrees upon
any such breach or threatened breach to the granting of injunctive relief
prohibiting Optometrist from engaging in any activities prohibited by this
Employment Agreement. No remedy herein conferred is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and
shall be in addition to any other remedy given hereunder now or hereinafter
existing at law or in equity or by statute or otherwise. It is expressly
understood and agreed by Optometrist that although the parties consider the
restrictions contained in this Employment Agreement to be reasonable, if a
court determines that the time or territory or any other restriction contained
in this Employment Agreement is an unenforceable restriction on the activities
of Optometrist, as such provision in this Employment Agreement shall not be
rendered void but shall be deemed to be amended as to apply to such maximum
time and territory and to such extent as such court may judicially determine or
indicate to be reasonable. This Section 20 shall survive the termination or
expiration of this Employment Agreement.
Exhibit 4.2B - Page 6
<PAGE> 89
21. Business Management Agreement. Optometrist agrees not to commit
any act or engage in any omission that would cause the Practice to breach the
Business Management Agreement with Vision 21.
22. Modification and Waiver. No provision of this Employment
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by Optometrist and
such officer as may be specifically designated by the Board of Directors of the
Practice and by such officer as may be specifically designated by the Board of
Directors of Vision 21. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Employment Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time, and such waiver shall not operate
or be construed as a waiver of any subsequent breach of the same provision or
condition by any of the Practice, Optometrist or Vision 21.
23. Headings. Headings used in this Employment Agreement are for
convenience only and shall not be used to interpret or construe its provisions.
24. Amendments. No amendments or variations of the terms and
conditions of this Employment Agreement shall be valid unless the same are in
writing and signed by all of the parties hereto.
25. Severability. The invalidity or unenforceability of any
provision of this Employment Agreement, whether in whole or in part, shall not
in any way affect the validity and/or enforceability of any other provision
herein contained. Any invalid or unenforceable provision shall be deemed
severable to the extent of any such invalidity or unenforceability. It is
expressly understood and agreed that while the Practice and Optometrist
consider the restrictions contained in this Employment Agreement reasonable for
the purpose of preserving for the Practice the good will, other proprietary
rights and intangible business value of the Practice, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in this Employment Agreement is an
unreasonable or otherwise unenforceable restriction against Optometrist, the
provisions of such clause shall not be rendered void but shall be deemed
amended to apply as to maximum time and territory and to such other extent as
such court may judicially determine or indicate to be reasonable.
26. Third Party Beneficiary. Vision 21 is a third-party beneficiary
of Sections 4, 16, 17, 19, 20 and 25 of this Employment Agreement and the
restrictive covenants contained in this Employment Agreement are intended for
the benefit of Vision 21. Except as otherwise provided herein, this Employment
Agreement shall not confer any rights or remedies upon any person other than
the Practice, ophthalmologist and Vision 21 and their respective successors and
permitted assigns.
27. Successors and Assigns. The Practice's and Vision 21's
successors and/or assigns are authorized to enforce the restrictive covenants
contained in this Employment Agreement.
28. Governing Law. This Employment Agreement shall be construed and
enforced pursuant to the laws of the State in which the Practice conducts its
business.
29. Counterparts. This Employment Agreement may be executed in more
than one (1) counterpart and each counterpart shall be considered an original.
Exhibit 4.2B - Page 7
<PAGE> 90
IN WITNESS WHEREOF, this Employment Agreement has been duly executed
by the Practice and Optometrist as of the date first above written.
"PRACTICE"
GILLETTE & ASSOCIATES, #6965, P.A.
By
----------------------------------
Theodore N. Gillette, its President
"OPTOMETRIST"
-------------------------------------
Exhibit 4.2B - Page 8
<PAGE> 91
Exhibit 4.2C
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
List of Non-shareholder Professionals
in Non-standard Employment Employment Contracts
1. None.
<PAGE> 92
Exhibit 4.17
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
SHAREHOLDERS' UNDERTAKING TO MAINTAIN PRACTICE'S
CORPORATE EXISTENCE AND ENFORCEMENT OF COVENANTS
NOT TO COMPETE
As an inducement to the Business Manager to enter into this Business
Management Agreement with the Practice or as required in the Business
Management Agreement, each of the undersigned person(s), having an ownership
interest in the Practice, irrevocably and unconditionally covenants and agrees
to maintain in good standing the corporate existence of the Practice under the
laws of the State and to cause the Practice to use its best efforts to enforce
employment agreements (including those covenants not to compete requirements
described in Sections 4.1 and 4.2) against any individuals violating such
employment agreements (and covenants not to compete). The undersigned persons
further unconditionally covenant and agree to indemnify and hold harmless
Business Manager from and against any and all claims requirements, demands,
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees, resulting in any manner from the failure of the Practice to
remain in good standing under the laws of the State or the failure of the
Practice to use its best efforts to enforce those employment agreements and
covenants not to compete described in Section 4.1 and 4.2 of such Business
Management Agreement, a copy of which has been delivered to the undersigned for
his review. The undersigned acknowledges that he or she has received adequate
consideration for the execution hereof. After a period of five (5) years from
December 1, 1996, this Undertaking may be assumed by a successor Shareholder or
Shareholders, in accordance with the terms and conditions set forth in Section
4.1 of the Business Management Agreement, whereupon the undersigned shall be
released to the extent of such assumption, provided that any such successor
Shareholder executes a form similar to this.
IN WITNESS WHEREOF, the undersigned(s) have executed this
Shareholders' Undertaking as of the day and year written opposite such
shareholder's name.
Date: December 1, 1996
---------------------------------
Theodore N. Gillette
Date: December 1, 1996
---------------------------------
Mark Sarno
Date: December 1, 1996
---------------------------------
Mark Beiler
<PAGE> 93
Exhibit 5.1
to Business Management Agreement among Gillette & Associates,
noninterested members of the Board of Directors and the
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
Management Fee Percentage
1. The Management Fee Percentage shall be such percentage as is
areed to from time to time and approved by Independent Audit Committee of the
Company upon its creation. Should the parties ever fail to agree as to the
gross percentage the same shall be based upon the fair market value for such
services as determined by Ernst & Young or such other big 6 accounting firm
agreed to by the parties or in the event of disagreement, as seleced by the
Company.
<PAGE> 94
Exhibit 6.4(f)
to Business Management Agreement among Gillette & Associates,
#6965, P.A. (the "Practice"), and Vision 21, Inc. ("Business
Manager")
SHAREHOLDERS' UNDERTAKING TO CARRY OUT
PRACTICE'S PURCHASE OBLIGATION
As an inducement to the Business Manager to enter into this Business
Management Agreement with the Practice or as required in Business Management
Agreement, each of the undersigned person(s), having an ownership interest in
the Practice, irrevocably and unconditionally covenants and agrees subject to
the limitations contained in the Business Management Agreement to (i) cause the
Practice to carry out the purchase obligation described in Section 6.4(f) of
the Business Management Agreement, (ii) personally execute and deliver the
personal guarantees and security agreements referred to in Section 6.4(f) of
such Business Management Agreement, a copy of which has been delivered to the
undersigned for his review, and (iii) execute the documents described in
Section 6.6. The undersigned acknowledges that he or she has received adequate
consideration for the execution hereof.
IN WITNESS WHEREOF, the undersigned(s) have executed this
Shareholders' Undertaking as of the day and year written opposite such
shareholder's name.
Date: December 1, 1996
---------------------------------
Theodore N. Gillette
Date: December 1, 1996
---------------------------------
Mark Sarno
Date: December 1, 1996
---------------------------------
Mark Beiler
<PAGE> 1
EXHIBIT 10.25
"CONFIDENTIAL TREATMENT REQUESTED
BY VISION TWENTY-ONE, INC."
ASSET PURCHASE AGREEMENT
DATED: DECEMBER 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. AAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. ACCOUNTS RECEIVABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. ACQUISITION PROPOSAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5. AFFILIATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. APPLICABLE LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. ASSUMED CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8. ASSUMED OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9. AUDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11. BUSINESS MANAGEMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12. BUSINESS RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13. CASH COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14. CLAIM NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16. CLOSING DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17. PROPOSED PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18. CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.19. COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20. COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
1.21. COMPANY BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22. COMPANY BALANCE SHEET DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23. COMPENSATION PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24. COMPETING BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25. COMPETITOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26. CONFIDENTIAL INFORMATION MEMORANDUM. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27. CONTROLLED GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.28. CORPORATION LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.29. DAMAGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.30. ELECTION PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.31. EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32. EMPLOYEE POLICIES AND PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33. EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34. ENVIRONMENTAL LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.35. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.36. EXCHANGE ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37. FBCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.38. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.39. GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.40. GOVERNMENTAL AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.41. INDEMNIFIED PARTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.42. INDEMNIFYING PARTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
1.43. INDEMNITY NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.44. INITIAL PUBLIC OFFERING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.45. INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.46. INVENTORY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.47. LEASE ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.48. LEASED PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.49. IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.50. MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.51. MEDICAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.52. NONMEDICAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.53. NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.54. OPTOMETRIST EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.55. OPTOMETRIST EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.56. PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.57. PERMITTED ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.58. PERSONAL PROPERTY LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.59. PHYSICIAN EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.60. PHYSICIAN EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.61. PRACTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.62. PREPAID ITEMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.63. PROFESSIONAL EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.64. PROPRIETARY RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
1.65. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.66. PURCHASE PRICE ADJUSTMENT AMOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.67. REAL PROPERTY LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.68. REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.69. RELATED ACQUISITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.70. SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.71. SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.72. SECURITIES ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.73. STATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.74. TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.75. TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.76. THIRD PARTY CLAIM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.77. TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.78. VISION 21 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. PURCHASE AND SALE OF NONMEDICAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1. PURCHASE AND SALE OF NONMEDICAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 7
2.2. NO SALE OF MEDICAL ASSETS; OTHER EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . 9
2.3. ASSUMPTION OF OBLIGATIONS AND LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 9
2.4. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5. THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6. PURCHASE PRICE ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7. SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8. ALLOCATION OF PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PHYSICIAN . . . . . . . . . . . . . . . . 11
3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. . . . . . . . . . . . . . . . . . . . . 12
3.2. CONTINUITY OF BUSINESS ENTERPRISE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3. AUTHORIZATION AND VALIDITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4. COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5. CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7. LIABILITIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8. EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. CASH COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. COMPENSATION PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
C. EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
D. EMPLOYEE POLICIES AND PROCEDURES. . . . . . . . . . . . . . . . . . . . . . 14
E. UNWRITTEN AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
F. LABOR COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
G. UNIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
H. ALIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.9. EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A. IDENTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. EXAMINATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. PROHIBITED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 16
E. CLAIMS AND LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
F. QUALIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
G. FUNDING STATUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
H. EXCISE TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
I. MULTIEMPLOYER PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
J. PENSION BENEFIT GUARANTY CORPORATION. . . . . . . . . . . . . . . . . . . . 16
K. RETIREES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
L. OTHER COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10. ABSENCE OF CERTAIN CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C>
3.11. TITLE; LEASED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A. REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
B. PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
C. LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12. COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
A. COMMITMENTS; DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
B. NO CANCELLATION OR TERMINATION OF
COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.13. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.14. PROPRIETARY RIGHTS AND INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.15. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
A. FILING OF TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
B. PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
C. NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS
OR AUDITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
D. NO EXTENSION OF LIMITATION PERIOD. . . . . . . . . . . . . . . . . . . . . 23
E. ALL WITHHOLDING REQUIREMENTS SATISFIED. . . . . . . . . . . . . . . . . . . 23
F. FOREIGN PERSON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.17. FINDER'S FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.18. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19. CONDITION OF FIXED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.20. DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.21. BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22. OWNERSHIP INTERESTS OF INTERESTED PERSONS; AFFILIATIONS. . . . . . . . . . . . . . . . 24
3.23. INVESTMENTS IN COMPETITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.24. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
A. ENVIRONMENTAL LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
B. PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
C. SUPERFUND LIST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C> <C>
3.25. CERTAIN PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.26. MEDICAL WASTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.27. MEDICARE AND MEDICAID PROGRAMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.28. FRAUD AND ABUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.29. PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.30. PROHIBITIONS ON THE CORPORATE PRACTICE OF MEDICINE. . . . . . . . . . . . . . . . . . 27
3.31. ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.32. CONSISTENT TREATMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.33. ACCOUNTS RECEIVABLE/PAYABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.34. PROJECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.35. INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.36. TANGIBLE PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.37. LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.38. CONTRACT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.39. PREPAID ITEMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.40. COMPLETENESS OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.41. DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4. REPRESENTATIONS AND WARRANTIES OF THE PHYSICIAN . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1. VALIDITY; PHYSICIAN CAPACITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2. NO VIOLATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3. CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4. CERTAIN PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
vii
<PAGE> 9
<TABLE>
<S> <C> <C>
4.5. FINDER'S FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.6. OWNERSHIP OF INTERESTED PERSONS; AFFILIATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.7. INVESTMENTS IN COMPETITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.8. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.9. PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10. STAFF PRIVILEGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.11. INTENTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. REPRESENTATIONS AND WARRANTIES OF VISION 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.1. ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2. CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.4. AUTHORIZATION AND VALIDITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.5. COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6. CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.7. FINDER'S FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8. CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9. VISION 21 FINANCIAL STATEMENTS; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10. LIABILITIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.11. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.12. INSOLVENCY PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.13. EMPLOYMENT OF COMPANY'S EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
viii
<PAGE> 10
<TABLE>
<S> <C> <C>
6. SECURITIES LAW MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1. INVESTMENT REPRESENTATIONS AND COVENANTS OF PHYSICIAN. . . . . . . . . . . . . . . . . 35
6.2. CURRENT PUBLIC INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7. COVENANTS OF THE COMPANY AND THE PHYSICIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.1. CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2. BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3. ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4. NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.5. APPROVALS OF THIRD PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6. EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7. CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.8. CAPITAL ASSETS; PAYMENTS OF LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . 39
7.9. MORTGAGES, LIENS AND GUARANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10. ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11. DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.12. REQUIREMENTS TO EFFECT THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . 40
7.13. PHYSICIAN ACCOUNTS PAYABLE AND PHYSICIAN RETAINED EQUITY. . . . . . . . . . . . . . . 40
7.14. PHYSICIAN EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.15. OPTOMETRIST EMPLOYMENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.16 TERMINATION OF RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.17. DELIVERY OF SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.18. ASSIGNMENT OF FEES FOR MEDICAL AND OPTOMETRY SERVICES. . . . . . . . . . . . . . . . . 41
</TABLE>
ix
<PAGE> 11
<TABLE>
<S> <C> <C>
8. COVENANTS OF VISION 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1. CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.2. NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3. LICENSES AND PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4. RELEASE OF PHYSICIAN FROM PRACTICE LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 42
9. COVENANTS OF VISION 21, THE COMPANY AND THE PHYSICIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1. FILINGS; OTHER ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2. AMENDMENT OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3. FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4. RELEASE OF PHYSICIAN FROM PRACTICE LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 45
10. CONDITIONS PRECEDENT OF VISION 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.2. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3. LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.4. PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.5. NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.6. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.7. CERTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.8. CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.9. DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.10. FINANCIAL AUDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.11. MEDICARE AUDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
x
<PAGE> 12
<TABLE>
<S> <C> <C>
10.12. EXEMPTION UNDER STATE SECURITIES LAWS. . . . . . . . . . . . . . . . . . . . . . . . . 46
10.13. ASSIGNMENT OF PROFESSIONAL EMPLOYEES' RIGHTS IN ACCOUNTS RECEIVABLE. . . . . . . . . . 46
11. CONDITIONS PRECEDENT OF THE COMPANY AND THE PHYSICIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.1. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3. LEGAL OPINIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4. PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. . . . . . . . . . . . . . . . . . . . . . 47
11.6. CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7. NO CHANGE IN VOTING OR OWNERSHIP CONTROL. . . . . . . . . . . . . . . . . . . . . . . 47
11.8. NO MATERIAL ADVERSE CHANGE; DELIVERY OF AMENDED CONFIDENTIAL
INFORMATION MEMORANDUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.1. DELIVERIES OF THE COMPANY AND THE PHYSICIAN. . . . . . . . . . . . . . . . . . . . . . 47
12.2. DELIVERIES OF VISION 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.3. RELEASE OF ESCROW MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13. POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.1. FURTHER INSTRUMENTS OF TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.2. PRACTICE ADVISORY COUNCIL; LOCAL ADVISORY COUNCIL; NATIONAL APPEALS
COUNCIL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
14.1. INDEMNIFICATION BY THE COMPANY AND PHYSICIAN. . . . . . . . . . . . . . . . . . . . . 52
14.2. INDEMNIFICATION BY VISION 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
xi
<PAGE> 13
<TABLE>
<S> <C> <C>
14.3. CONDITIONS OF INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.4. REMEDIES NOT EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14.5. COSTS, EXPENSES AND LEGAL FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
14.6. INDEMNIFICATION LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
14.7. TAX BENEFITS; INSURANCE PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
14.8. PAYMENT OF INDEMNIFICATION OBLIGATION. . . . . . . . . . . . . . . . . . . . . . . . . 56
15. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
15.1. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
15.2. EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16. PHYSICIAN EMPLOYMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16.1. PHYSICIAN EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16.2. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17. NON-COMPETITION AND CONFIDENTIALITY COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
17.1. PHYSICIAN AND COMPANY NON-COMPETITION COVENANT. . . . . . . . . . . . . . . . . . . . 59
17.2. PHYSICIAN AND COMPANY CONFIDENTIALITY COVENANT. . . . . . . . . . . . . . . . . . . . 61
17.3. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
18. DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
18.1. MEDIATION AND ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19.1. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19.2. REMEDIES NOT EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19.3. PARTIES BOUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
xii
<PAGE> 14
<TABLE>
<S> <C> <C>
19.4. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
19.5. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.6. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . 64
19.7. CONFIDENTIALITY AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.8. REFORMATION CLAUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.9. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.10. ATTORNEYS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.11. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.12. ANNOUNCEMENTS AND PRESS RELEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.13. NO TAX REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.14. NO RIGHTS AS STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
19.15. MULTIPLE COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
19.16. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
19.17. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
19.18. FORM OF TRANSACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
xiii
<PAGE> 15
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated effective as
of December 1, 1996, is by and among LINDSTROM, SAMUELSON & HARDTEN
OPHTHALMOLOGY ASSOCIATES, P.A., a Minnesota professional association (the
"Company"), RICHARD L. LINDSTROM, M.D., THOMAS W. SAMUELSON, M.D., and DAVID R.
HARDTEN, M.D., (collectively, the "Physician"), and VISION 21, INC., a Florida
corporation ("Vision 21").
R E C I T A L S
A. Physician is a physician licensed to practice medicine in
the State (as defined herein) and currently conducts an ophthalmology practice
through the Company and through optometrist employees currently conducts an
optometry practice through the Company.
B. Physician owns all of the issued and outstanding shares of
capital stock of the Company.
C. Vision 21 provides business management services and
facilities for eye care professionals and related businesses.
D. The Company desires to sell, assign and transfer all of its
assets to the extent permitted by law and Vision 21 desires to purchase, assume
and acquire such assets and assume certain liabilities of the Company in
exchange for capital stock of Vision 21 and other consideration, all as more
specifically provided herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
1.1. AAA. The term "AAA" shall mean the American
Arbitration Association.
1.2. Accountants. The term "Accountants" shall mean
the accounting firm for Vision 21.
1.3. Accounts Receivable. The term "Accounts
Receivable" shall have the meaning set forth in Section 2.1(b).
1.4. Acquisition Proposal. The term "Acquisition
Proposal" shall have the meaning set forth in Section 3.31.
1
<PAGE> 16
1.5. Affiliate. The term "Affiliate" with respect to
any person or entity shall mean a person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by or is under
common control with, such person or entity.
1.6. Applicable Laws. The term "Applicable Laws"
shall have the meaning set forth in Section 19.8.
1.7. Assumed Contracts. The term "Assumed Contracts"
shall have the meaning set forth in Section 2.1(e).
1.8. Assumed Obligations. The term "Assumed
Obligations" shall have the meaning set forth in Section 2.3.
1.9. Audit. The term "Audit" shall have the meaning
set forth in Section 3.6.
1.10. Business. The term "Business" shall have the
meaning set forth in Section 19.1(b)(i).
1.11. Business Management Agreement. The term
"Business Management Agreement" shall mean the Business Management Agreement
entered into between the Company and Vision 21 at the Closing.
1.12. Business Records. The term "Business Records"
shall have the meaning set forth in Section 2.1(g).
1.13. Cash Compensation. The term "Cash Compensation"
shall have the meaning set forth in Section 3.8(a).
1.14. Claim Notice. The term "Claim Notice" shall have
the meaning set forth in Section 14.3(a).
1.15. Closing. The term "Closing" shall mean the
consummation of the transactions contemplated by this Agreement.
1.16. Closing Date. The term "Closing Date" shall mean
December 1, 1996, or such other date as mutually agreed upon by the parties.
1.17. Proposed Purchase Price Adjustment. The term
"Proposed Purchase Price Adjustment" shall have the meaning set forth in
Section 2.6(b).
1.18. Code. The term "Code" shall mean the Internal
Revenue Code of 1986, as amended.
2
<PAGE> 17
1.19. Commitments. The term "Commitments" shall have
the meaning set forth in Section 3.12(a).
1.20. Common Stock. The term "Common Stock" or "Vision
21 Common Stock" shall mean the common stock, par value $.01 per share, of
Vision 21.
1.21. Company Balance Sheet. The term "Company Balance
Sheet" shall have the meaning set forth in Section 3.6.
1.22. Company Balance Sheet Date. The term "Company
Balance Sheet Date" shall have the meaning set forth in Section 3.6.
1.23. Compensation Plans. The term "Compensation
Plans" shall have the meaning set forth in Section 3.8(b).
1.24. Competing Business. The term "Competing
Business" shall have the meaning set forth in Section 17.1(b).
1.25. Competitor. The term "Competitor" shall mean any
person or entity which, individually or jointly with others, whether for its
own account or for that of any other person or entity, owns, or holds any
ownership or voting interest in any person or entity engaged in, the practice
of ophthalmology, the practice of optometry, the operation of out patient eye
surgical facilities, the operation of refractive surgery centers and the
operation of optical shops; provided, however, that such term shall not include
any Affiliate of Vision 21 or any entity with which Vision 21 has an agreement
similar to the Business Management Agreement in effect.
1.26. Confidential Information Memorandum. The term
"Confidential Information Memorandum" shall mean that certain disclosure
memorandum distributed by Vision 21 to the Company and Physician dated as of
September 27, 1996, and any amendments or revisions thereto.
1.27. Controlled Group. The term "Controlled Group"
shall have the meaning set forth in Section 3.9(f).
1.28. Corporation Law. The term "Corporation Law"
shall mean the statutes, regulations and laws governing business corporations
and professional associations in the State.
1.29. Damages. The term "Damages" shall have the
meaning set forth in Section 14.1.
1.30. Election Period. The term "Election Period"
shall have the meaning set forth in Section 16.3(a).
3
<PAGE> 18
1.31. Employee Benefit Plans. The term "Employee
Benefit Plans" shall have the meaning set forth in Section 3.9(a).
1.32. Employee Policies and Procedures. The term
"Employee Policies and Procedures" shall have the meaning set forth in Section
3.8(d).
1.33. Employment Agreements. The term "Employment
Agreements" shall have the meaning set forth in Section 3.8(c).
1.34. Environmental Laws. The term "Environmental
Laws" shall have the meaning set forth in Section 3.24(a).
1.35. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.36. Exchange Act. The term "Exchange Act" shall mean
the Securities Exchange Act of 1934, as amended.
1.37. FBCA. The term "FBCA" shall mean the Florida
Business Corporation Act.
1.38. Financial Statements. The term "Financial
Statements" shall have the meaning set forth in Section 3.6.
1.39. GAAP. The term "GAAP" shall mean generally
accepted accounting principles, applied on a consistent basis with prior
periods, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity or other practices and procedures as
may be approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of the determination.
1.40. Governmental Authority. The term "Governmental
Authority" shall mean any national, state, provincial, local or tribunal
governmental, judicial or administrative authority or agency.
1.41. Indemnified Party. The term "Indemnified Party"
shall have the meaning set forth in Section 14.3(a).
1.42. Indemnifying Party. The term "Indemnifying
Party" shall have the meaning set forth in Section 14.3(a).
1.43. Indemnity Notice. The term "Indemnity Notice"
shall have the meaning set forth in Section 14.3(d).
4
<PAGE> 19
1.44. Initial Public Offering. The term "Initial
Public Offering" shall mean the potential initial underwritten public offering
of Vision 21 Common Stock contemplated by Vision 21.
1.45. Insurance Policies. The term "Insurance
Policies" shall have the meaning set forth in Section 3.13.
1.46. Inventory. The term "Inventory" shall have the
meaning set forth in Section 2.1(a).
1.47. Lease Assignments. The term "Lease Assignments"
shall have the meaning set forth in Section 11.3(j).
1.48. Leased Property. The term "Leased Property"
shall have the meaning set forth in Section 2.1(d).
1.49. IRS. The term "IRS" shall mean the Internal
Revenue Service.
1.50. Material Adverse Effect. The term "Material
Adverse Effect" shall mean a material adverse effect on the Nonmedical Assets
and the Company's business, operations, condition (financial or otherwise) or
results of operations, taken as a whole, considering all relevant facts and
circumstances.
1.51. Medical Assets. The term "Medical Assets" shall
have the meaning set forth in Section 2.2.
1.52. Nonmedical Assets. The term "Nonmedical Assets"
shall mean all of the assets of the Company except for the Medical Assets, as
such assets are more fully described in Section 2.1.
1.53. Note. The term "Note" shall mean the
subordinated promissory note, to be delivered to the Physician at the Closing.
1.54. Optometrist Employee. The term "Optometrist
Employee" shall mean those licensed optometrists who are employees of the
Company, but are not shareholders.
1.55. Optometrist Employment Agreement. The term
"Optometrist Employment Agreement" shall mean the Optometrist Employment
Agreement to be executed between any Optometrist Employee and the Company.
1.56. Payors. The term "Payors" shall have the meaning
set forth in Section 3.27.
5
<PAGE> 20
1.57. Permitted Encumbrances. The term "Permitted
Encumbrances" shall have the meaning set forth in Section 3.11(b).
1.58. Personal Property Leases. The term "Personal
Property Leases" shall have the meaning set forth in Section 2.1(c).
1.59. Physician Employee. The term "Physician
Employee" shall mean those licensed physicians who are employees of the
Company, but are not shareholders.
1.60. Physician Employment Agreement. The term
"Physician Employment Agreement" shall mean the Physician Employment Agreement
to be executed between Physician and the Company, and between any Physician
Employee and the Company.
1.61. Practice. The term "Practice" shall mean the
ophthalmology, optometry and all other vision related health-care practices
conducted from time to time by the Company prior to and after the Closing Date.
1.62. Prepaid Items. The term "Prepaid Items" shall
have the meaning set forth in Section 2.1(m).
1.63. Professional Employee. The term "Professional
Employee" shall mean any Physician Employee or Optometrist Employee.
1.64. Proprietary Rights. The term "Proprietary
Rights" shall have the meaning set forth in Section 3.14.
1.65. Purchase Price. The term "Purchase Price" shall
mean the consideration set forth in Section 2.4 of this Agreement.
1.66. Purchase Price Adjustment Amount. The term
"Purchase Price Adjustment Amount" shall have the meaning set forth in Section
2.6(c).
1.67. Real Property Leases. The term "Real Property
Leases" shall have the meaning set forth in Section 2.1(d).
1.68. Registration Statement. The term "Registration
Statement" shall have the meaning set forth in Section 9.1.
1.69. Related Acquisitions. The term "Related
Acquisitions" shall mean the pending acquisitions by Vision 21 with third
parties which are expected to be completed simultaneously with this
Transaction.
1.70. SEC. The term "SEC" shall mean the Securities
and Exchange Commission.
6
<PAGE> 21
1.71. Securities. The term "Securities" shall mean the
Note and the shares of Vision 21 Common Stock which shall be delivered to the
Company under the terms of the Note.
1.72. Securities Act. The term "Securities Act" shall
mean the Securities Act of 1933, as amended.
1.73. State. The term "State" shall mean the State in
which the Company is incorporated.
1.74. Tangible Personal Property. The term "Tangible
Personal Property" shall have the meaning set forth in Section 2.1(f).
1.75. Tax Returns. The term "Tax Returns" shall have
the meaning set forth in Section 3.15(a).
1.76. Third Party Claim. The term "Third Party Claim"
shall have the meaning set forth in Section 14.3(a).
1.77. Transaction. The term "Transaction" shall mean
the purchase and sale of the Nonmedical Assets and the assumption of the
Assumed Obligations pursuant to this Agreement.
1.78. Vision 21 Financial Statements. The term "Vision
21 Financial Statements" shall have the meaning set forth in Section 5.8.
2. PURCHASE AND SALE OF NONMEDICAL ASSETS.
2.1. Purchase and Sale of Nonmedical Assets. Subject
to the terms and conditions herein set forth, and in reliance upon the
representations and warranties set forth herein, the Company agrees to sell,
convey, assign, transfer and deliver to Vision 21, and Vision 21 agrees to
purchase, assume, accept and acquire, the assets consisting of all the assets
(other than the Medical Assets specified in Section 2.2 hereof) owned by the
Company as of the Closing Date, of every kind, character and description,
whether tangible, real, personal, or mixed, and wheresoever located, whether
carried on the books of the Company or not carried on the books of the Company
due to having been expended, fully depreciated, or otherwise (the "Nonmedical
Assets"), including without limitation the following (except to the extent that
any of the following are specifically enumerated as Medical Assets in Section
2.2 hereof) to the extent permitted by applicable law:
(a) All of the inventory owned by the Company ("Inventory");
(b) All of the accounts receivable or other rights to receive
payment owing to the Company ("Accounts Receivable");
7
<PAGE> 22
(c) All of the Company's rights in, to and under all leases of
supplies, instruments, equipment, furniture, machinery and other items of
tangible personal property ("Personal Property Leases"), including, without
limitation, the Personal Property Leases described on Schedule 2.1(c);
(d) All of the Company's rights as a lessee in, to and under
all real property lease agreements (such real property lease agreements are
hereinafter referred to as "Real Property Leases" and the parcels of real
property in which the Company has a leasehold interest and that are subject to
the Real Property Leases are hereinafter referred to as "Leased Property"),
including, without limitation, estates created by, and rights conferred under,
the Real Property Leases described on Schedule 2.1(d), and any and all estates,
rights, titles and interests in, to and under all warehouses, storage
facilities, buildings, works, structures, fixtures, landings, constructions in
progress, improvements, betterments, installations, and additions constructed
or located on or affixed to the Leased Property;
(e) All of the Company's rights in, to and under all contracts,
agreements, leases, insurance policies, purchase orders and commitments (the
"Assumed Contracts"), including, without limitation, the Assumed Contracts
described on Schedule 2.1(e);
(f) All tangible personal property (including supplies,
instruments, equipment, furniture and machinery) owned by the Company
("Tangible Personal Property"), including, without limitation, the Tangible
Personal Property described on Schedule 2.1(f);
(g) All books and records of the Company, including, without
limitation, all credit records, payroll records, computer records, computer
programs, contracts, agreements, operating manuals, schedules of assets,
correspondence, books of account, files, papers, books and all other public and
confidential business records (together the "Business Records"), whether such
Business Records are in hard copy form or are electronically or magnetically
stored;
(h) All franchises, licenses, permits, certificates, approvals
and other governmental authorizations necessary to own and operate any of the
other Nonmedical Assets, a complete and correct list of which is set forth on
Schedule 2.1(h);
(i) All (i) United States and foreign patents, patent
applications, trademarks, trademark applications and registrations, service
marks, service mark applications and registrations, copyrights, copyright
applications and registrations and trade names of the Company; (ii) proprietary
data and technical, manufacturing know-how and information (and all materials
embodying such information) of the Company; (iii) developments, discoveries,
inventions, ideas and trade secrets of the Company; and (iv) rights to sue for
past infringement;
(j) All of the Company's right, title and interest in, to and
under all telephone numbers used in connection with the Practice, including all
extensions thereto;
8
<PAGE> 23
(k) All rights in, to and under all representations,
warranties, covenants and guaranties made or provided by third parties to or
for the benefit of the Company with respect to any of the other Nonmedical
Assets;
(m) All cash in registers or petty cash drawers (which shall on
the Closing Date be at least ninety percent (90%) of the average daily cash
balance held in such locations in the twelve (12) month period preceding the
Closing Date); and
(n) All of the Company's prepaid expenses, prepaid insurance,
deposits and other similar items ("Prepaid Items").
If and to the extent the assignment of any personal property lease,
real property lease, contract, agreement, purchase order, work order,
commitment, license, permit, certificate or approval listed on the foregoing
Schedules shall require the consent of another party thereto, then (i) such
personal property lease, real property lease, contract, agreement, purchase
order, work order, commitment, license, permit, certificate or approval shall
constitute a Personal Property Lease, Real Property Lease, Assumed Contract or
License, as the case may be, only upon and subject to receipt of such consent;
(ii) such personal property lease, contract, agreement, purchase order, work
order, commitment, license, permit, certificate or approval shall not be a
Personal Property Lease, Real Property Lease, Assumed Contract or License, as
the case may be, if and for so long as the attempted assignment would
constitute a breach thereof; and (iii) the Company shall cooperate fully with
Vision 21 (or Vision 21's successor-in-interest) in seeking such consent or
reasonable arrangement designed to provide to Vision 21 (or such
successor-in-interest) the benefits, claim or rights arising thereunder.
2.2. No Sale of Medical Assets; Other Excluded Assets.
The Company shall not sell, convey, assign, transfer or deliver to Vision 21,
and Vision 21 shall not be obligated to purchase, accept or acquire (or make
any payments or otherwise discharge any liability or obligation of the Company
with respect to), the Medical Assets of the Company as set forth on Schedule
2.2 and those other assets listed on the other Schedules attached hereto which
by law cannot be acquired by Vision 21 which shall also be deemed to include
(a) life insurance policies covering the life of any employee of the Company,
and (b) personal effects listed on Schedule 2.2(b); and (c) cash and cash
equivalents in banks, certificates of deposit, commercial paper and securities
owned by the Company (but excluding cash held in registers or petty cash
drawers on the Closing Date); and (d) those assets of which the entire costs of
maintenance are deemed to be "Practice Expenses" as defined in the Business
Management Agreement.
2.3. Assumption of Obligations and Liabilities. At
the Closing, Vision 21 shall assume and agree to pay or perform, promptly as
they become due, only those obligations and liabilities of the Company
expressly set forth on Schedule 2.3 (the "Assumed Obligations") which shall
exclude the Business Management Agreement. Except for the Assumed Obligations,
Vision 21 shall not assume or be deemed to have assumed and shall not be
responsible for any other obligation or liability of the Company, direct or
indirect, known or unknown, absolute or
9
<PAGE> 24
contingent, including without limitation (i) any and all obligations regarding
any foreign, Federal, state or local income, sales, use, franchise or other tax
liabilities, (ii) any and all obligations or liabilities relating to any fees
or expenses of the Company's or Physicians' counsel, accountants or other
experts incident to the negotiation and preparation of any of the documents
contemplated herein and consummation of the transactions contemplated thereby,
and (iii) any and all liabilities relating to or arising from the provision of
professional medical or optometric services (or failure to provide professional
medical or optometric services) prior to the Closing Date.
2.4. Purchase Price. Vision 21 agrees that, subject
to the terms and conditions of this Agreement, and in full consideration for
the aforesaid sale, transfer, conveyance, assignment and delivery of the
Nonmedical Assets of the Company to Vision 21, and the acceptance by Vision 21
of such Nonmedical Assets and the assumption of the Assumed Obligations of the
Company by Vision 21, Vision 21 shall deliver to the Company at the Closing the
consideration (the "Purchase Price") set forth in Schedule 2.4A which shall be
paid pursuant to a Note in substantially the form attached hereto and made a
part hereof as Exhibit 2.4B.
2.5. The Closing. The Closing shall take place on the
Closing Date at the offices of Shumaker, Loop & Kendrick, 101 E. Kennedy
Boulevard, Suite 2800, Tampa, Florida 33602 or at such other location in the
State as the parties shall mutually agree.
2.6. Purchase Price Adjustments.
(a) The Purchase Price shall be subject to
adjustment to the extent that Current Assets (as defined herein) or Current
Liabilities Assumed (as defined herein) materially differ from the amounts
customarily arising in the ordinary course of business of the Company as of
November 30, 1996. The term "Current Assets" shall mean petty cash, Accounts
Receivable, prepaid expenses, Inventory, supplies and other current assets
(excluding cash in banks, certificates of deposit, other cash equivalents,
current portion of capital leases and prepaid Income Taxes). The term "Current
Liabilities Assumed" shall mean the audited balances as of November 30, 1996 of
trade accounts payable, accrued payroll, accrued payroll taxes, accrued
benefits, and other current liabilities (excluding notes payable, current
portion of capital leases and long-term debt and income and franchise taxes and
accrued shareholder expenses). The adjustment shall be settled in cash (which
shall be set-off from moneys due the Company pursuant to the Business
Management Agreement) or Vision 21 Common Stock at Vision 21's option. The
parties also agree that to the extent the adjustments materially impact the
goodwill created by the transaction, there shall be an adjustment for the
related impact of net income created by the change in amortization of such
goodwill and the Purchase Price shall be increased or reduced to reflect the
impact on net income settled in cash or Vision 21 Common Stock at Vision 21's
option.
(b) Within sixty (60) days following the Closing
Date, Vision 21 shall present to the Physician its Purchase Price adjustment
(the "Proposed Purchase Price Adjustment") calculated in accordance with
Section 2.6(a) hereof. The Physician shall, within
10
<PAGE> 25
thirty (30) days after the delivery by Vision 21 of the Proposed Purchase Price
Adjustment, complete his review thereof. In the event that the Physician
believes that the Proposed Purchase Price Adjustment has not been prepared on
the basis set forth in Section 2.6(a) or otherwise contests any item set forth
therein, the Physician shall, on or before the last day of such 30 day period,
so object to Vision 21 in writing, setting forth a specific description of the
nature of the objection and the corresponding adjustments the Physician
believes should be made. If no objection is received by Vision 21 on or before
the last day of such 30 day period, then the Proposed Purchase Price Adjustment
delivered by Vision 21 shall be final. If an objection has been made and
Vision 21 and the Physician are unable to resolve all of their disagreements
with respect to the proposed adjustments within 15 days following the delivery
of the Physician's objection, the dispute shall be submitted to arbitration as
provided in Section 18.1 except that the arbitrator shall be instructed to
deliver his determination of the dispute to the parties no later than 30 days
after the arbitration hearing. Vision 21 shall provide to the Physician and
his accountants full access to all relevant books, records and work papers
utilized in preparing the Proposed Purchase Price Adjustment.
2.7. Subsequent Actions. If, at any time after the
Closing Date, Vision 21 shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Vision 21 its
right, title or interest in, to or under any of the rights, properties or
assets of the Company acquired or to be acquired by Vision 21 as a result of,
or in connection with, the Transaction, or otherwise to carry out this
Agreement, the officers and directors of Vision 21 shall, at the sole cost and
expense of Vision 21, be authorized to execute and deliver, in the name and on
behalf of the Company, such deeds, bills of sale, assignments and assurances,
and to take and do, in the name and on behalf of the Company, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in Vision 21 or otherwise to carry out this Agreement.
2.8. Allocation of Purchase Price. The Purchase Price
shall be allocated among the Nonmedical Assets as set forth on Schedule 2.8.
Each of Vision 21, the Company and the Physician covenants and agrees that he
or it shall not take a position that is in any way inconsistent with the terms
of this Section 2.8 on any income tax return, before any governmental agency
charged with the collection of any income tax or in any judicial proceeding.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PHYSICIAN. The Company and the Physician, jointly and severally, represent and
warrant to Vision 21 that the following are true and correct as of the date
hereof, and shall be true and correct through the Closing Date as if made on
that date; when used in this Section 3, the term "best knowledge" shall mean in
the case of the Company the best knowledge of those individuals listed on
Schedule 3:
11
<PAGE> 26
3.1. Organization and Good Standing; Qualification.
The Company is a professional association duly organized, validly existing and
in good standing under the laws of the State, with all requisite corporate
power and authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company is not duly qualified and
licensed to do business in any other jurisdiction. The Company does not have
any assets, employees or offices in any state other than the State. Except as
set forth on Schedule 3.1, neither the Company, the Physician nor any
Professional Employee owns, directly or indirectly, any of the capital stock of
any other corporation or any equity, profit sharing, participation or other
interest in any corporation, partnership, joint venture or other entity that is
engaged in a business that is a Competitor.
3.2. Continuity of Business Enterprise. Except as set
forth on Schedule 3.2, and except as contemplated by this Agreement, there has
not been any sale, distribution or spin-off of significant assets of the
Company or any of its Affiliates other than in the ordinary course of business
within the two (2) year period preceding the date of this Agreement.
3.3. Authorization and Validity. The execution,
delivery and performance by the Company of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby to be performed by the Company, have been duly
authorized by the Company. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
Company has obtained, in accordance with applicable law and its Articles or
Certificate of Incorporation and Bylaws, the approval of its stockholders
necessary for the consummation of the transactions contemplated hereby.
3.4. Compliance. Except as disclosed on Schedule 3.4,
the execution and delivery of the documents contemplated hereunder and the
consummation of the transactions contemplated thereby by the Company will not
(i) violate any provision of the Company's organizational documents, (ii)
violate any material provision of or result in the breach of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under, any mortgage, lien, lease, contract,
license, instrument or any other agreement to which the Company is a party,
(iii) result in the creation or imposition of any material lien, charge,
pledge, security interest or other material encumbrance upon any property of
the Company or (iv) violate or conflict with any order, award, judgment or
decree or other material restriction or to the best of the Company's knowledge
violate or conflict with any law, ordinance or regulation to which the Company
or its property is subject.
3.5. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by the
12
<PAGE> 27
Company or the consummation by such party of the transactions contemplated
thereby, except for those consents or approvals set forth on Schedule 3.5.
3.6. Financial Statements. The Company has furnished
to Vision 21 its unaudited balance sheet and related unaudited statements of
income, retained earnings and cash flows for its prior three (3) full fiscal
years, and its unaudited interim balance sheet for the fiscal period ended
September 30, 1996 (the "Company Balance Sheet", and the date thereof shall be
referred to as the "Company Balance Sheet Date") and related unaudited
statements of income, retained earnings and cash flows for the twelve months
then ended (all collectively, with the related notes thereto, the "Financial
Statements"). The Financial Statements fairly present the financial condition
and results of operations of the Company as of the dates and for the periods
indicated except as otherwise indicated in the Financial Statements. The
Company and the Physician expressly warrant that they will have prior to the
Closing fairly, accurately and completely provided all necessary information
requested in or relevant to the preparation of the audit to be conducted by the
Accountants or their designees prior to Closing (the "Audit"). The cost of the
Audit shall be paid by Vision 21 and all materials prepared by Vision 21's
Accountants in connection with the Audit shall be solely the property of Vision
21.
3.7. Liabilities and Obligations. Except as set forth
on Schedule 3.7, the Financial Statements reflect all liabilities of the
Company, accrued, contingent or otherwise that would be required to be
reflected thereon, or in the notes thereto, prepared in accordance with GAAP,
except for liabilities and obligations incurred in the ordinary course of
business since the Company Balance Sheet Date. Except as set forth in the
Financial Statements or on Schedule 3.7, the Company is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and the Company does not know of any valid basis for the assertion of
any other claims or liabilities of any nature or in any amount.
3.8. Employee Matters.
a. Cash Compensation. Schedule 3.8(a)
contains a complete and accurate list of the names, titles and annual cash
compensation as of the Closing Date, including without limitation wages,
salaries, bonuses (discretionary and formula) and other cash compensation (the
"Cash Compensation") of all employees of the Company. In addition, Schedule
3.8(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of employees of the Company during the current fiscal year
and the immediately preceding fiscal year and (ii) any promised increases in
Cash Compensation of employees of the Company that have not yet been effected.
b. Compensation Plans. Schedule 3.8(b)
contains a complete and accurate list of all compensation plans, arrangements
or practices (the "Compensation Plans") sponsored by the Company or to which
the Company contributes on behalf of its employees, other than Employment
Agreements listed on Schedule 3.8(c) and Employee Benefit
13
<PAGE> 28
Plans listed on Schedule 3.9(a). The Compensation Plans include without
limitation plans, arrangements or practices that provide for performance
awards, and stock ownership or stock options. The Company has provided or made
available to Vision 21 a copy of each written Compensation Plan and a written
description of each unwritten Compensation Plan. Except as set forth on
Schedule 3.8(b), each of the Compensation Plans can be terminated or amended at
will by the Company.
c. Employment Agreements. Except as set
forth on Schedule 3.8(c), the Company is not a party to any employment
agreement ("Employment Agreements") with respect to any of its employees.
Employment Agreements include without limitation employee leasing agreements,
employee services agreements and non-competition agreements.
d. Employee Policies and Procedures.
Schedule 3.8(d) contains a complete and accurate list of all employee manuals
and all material policies, procedures and work-related rules (the "Employee
Policies and Procedures") that apply to employees of the Company. The Company
has provided or made available to Vision 21 a copy of all written Employee
Policies and Procedures and a written description of all material unwritten
Employee Policies and Procedures.
e. Unwritten Amendments. Except as
described on Schedule 3.8(b), 3.8(c), or 3.8(d), no material unwritten
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans or Employee Policies and
Procedures.
f. Labor Compliance. To the best
knowledge of the Company and the Physician, the Company has been and is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except for any such failures to be in
compliance that, individually or in the aggregate, would not result in a
Material Adverse Effect, and the Company is not liable for any arrearages of
wages or penalties for failure to comply with any of the foregoing. The
Company has not, to the best of Physician's and the Company's knowledge,
engaged in any unfair labor practices or discriminated on the basis of race,
color, religion, sex, national origin, age, disability or handicap in its
employment conditions or practices that would, individually or in the
aggregate, result in a Material Adverse Effect. Except as set forth on
Schedule 3.10(f), there are no (i) unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the actual knowledge of the
Company and the Physician, threatened against the Company before any federal,
state or local court, board, department, commission or agency (nor, to the best
knowledge of the Company and the Physician, does any valid basis therefor
exist) or (ii) existing or, to the actual knowledge of the Company, threatened
labor strikes, disputes, grievances, controversies or other labor troubles
affecting the Company (nor, to the best knowledge of the Company and the
Physician, does any valid basis therefor exist).
14
<PAGE> 29
g. Unions. The Company has never been a
party to any agreement with any union, labor organization or collective
bargaining unit. No employees of the Company are represented by any union,
labor organization or collective bargaining unit. Except as set forth on
Schedule 3.8(g), to the actual knowledge of the Company, none of the employees
of the Company has threatened to organize or join a union, labor organization
or collective bargaining unit.
h. Aliens. All employees of the Company
are, to the best knowledge of the Company, citizens of, or are authorized in
accordance with federal immigration laws to be employed in, the United States.
3.9. Employee Benefit Plans.
a. Identification. Schedule 3.9(a)
contains a complete and accurate list of all employee benefit plans (within the
meaning of Section 3(3) of ERISA sponsored by the Company or to which the
Company contributes on behalf of its employees and all employee benefit plans
previously sponsored or contributed to on behalf of its employees within the
three (3) years preceding the date hereof (the "Employee Benefit Plans"). The
Company has provided or made available to Vision 21 copies of all plan
documents, determination letters, pending determination letter applications,
trust instruments, insurance contracts, administrative services contracts,
annual reports, actuarial valuations, summary plan descriptions, summaries of
material modifications, administrative forms and other documents that
constitute a part of or are incident to the administration of the Employee
Benefit Plans. In addition, the Company has provided or made available to
Vision 21 a written description of all existing practices engaged in by the
Company that constitute Employee Benefit Plans. Except as set forth on
Schedule 3.9(a) and subject to the requirements of the Code and ERISA, each of
the Employee Benefit Plans can be terminated or amended at will by the Company.
Except as set forth on Schedule 3.9(a), no unwritten amendment exists with
respect to any Employee Benefit Plan. Except as set forth on Schedule
3.9(b)-(l), each of the following paragraphs is true and correct.
b. Administration. To the best knowledge
of the Company and the Physician, each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, result in a Material Adverse Effect. The
Company and the Physician have (i) made all necessary filings with respect to
such Employee Benefit Plans, including the timely filing of Form 5500 if
applicable, and (ii) made all necessary filings, reports and disclosures
pursuant to and have complied with all requirements of the IRS Voluntary
Compliance Resolution Program, if applicable, with respect to all profit
sharing retirement plans and pension plans in which employees of the Company
participate.
c. Examinations. Except as set forth on
Schedule 3.9(c), the Company has not received any notice that any Employee
Benefit Plan is currently the subject
15
<PAGE> 30
of an audit, investigation, enforcement action or other similar proceeding
conducted by any state or federal agency.
d. Prohibited Transactions. To the best
knowledge of the Company and the Physician, no prohibited transactions (within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA) have
occurred with respect to any Employee Benefit Plans.
e. Claims and Litigation. No pending or,
to the actual knowledge of the Company and the Physician, threatened, claims,
suits, or other proceedings exist with respect to any Employee Benefit Plan
other than normal benefit claims filed by participants or beneficiaries.
f. Qualification. As set forth in more
detail on Schedule 3.9(f), the Company has received a favorable determination
letter or ruling from the IRS for each of the Employee Benefit Plans intended
to be qualified within the meaning of Section 401(a) of the Code and/or
tax-exempt within the meaning of Section 501(a) of the Code. Except as set
forth on Schedule 3.9(e), no proceedings exist or, to the actual knowledge of
the Company have been threatened that could result in the revocation of any
such favorable determination letter or ruling.
g. Funding Status. To the best knowledge
of the Company and the Physician, no accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether or not waived, exists with respect
to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning of Section 412(n)(6)(B) of the Code) in
which the Company is a member ("Controlled Group"). With respect to each
Employee Benefit Plan subject to Title IV of ERISA, the assets of each such
plan are at least equal in value to the present value of accrued benefits
determined on an ongoing basis as of the date hereof. The Company does not
sponsor any Employee Benefit Plan described in Section 501(c)(9) of the Code.
None of the Employee Benefit Plans are subject to actuarial assumptions.
h. Excise Taxes. Neither the Company nor
any member of a Controlled Group has any liability to pay excise taxes with
respect to any Employee Benefit Plan under applicable provisions of the Code or
ERISA.
i. Multiemployer Plans. Neither the
Company nor any member of a Controlled Group is or ever has been obligated to
contribute to a multiemployer plan within the meaning of Section 3(37) of
ERISA.
j. Pension Benefit Guaranty Corporation.
None of the Employee Benefit Plans are subject to the requirements of Title IV
of ERISA.
k. Retirees. The Company has no
obligation or commitment to provide medical, dental or life insurance benefits
to or on behalf of any of its employees who
16
<PAGE> 31
may retire or any of its former employees who have retired except as may be
required pursuant to the continuation of coverage provisions of Section 4980B
of the Code and Sections 501 through 508 of ERISA.
l. Other Compensation. Except as set
forth on Schedule 3.8(a), 3.8(b), 3.8(c), 3.8(d) and 3.9(a), neither the
Company, the Physician nor any Professional Employee is a party to any
compensation or debt arrangement with any person relating to the provision of
healthcare related services other than arrangements with the Company or the
Physician.
3.10. Absence of Certain Changes. Except as set forth
on Schedule 3.10 or as contemplated by this Agreement, since the Company
Balance Sheet Date, the Company has not:
a. suffered a Material Adverse Effect,
whether or not caused by any deliberate act or omission of the Company or the
Physician;
b. contracted for the purpose of
acquiring any capital asset having a cost in excess of $5,000 or made any
single expenditure in excess of $5,000;
c. incurred any indebtedness for borrowed
money (other than short-term borrowings in the ordinary course of business), or
issued or sold any debt securities;
d. incurred or discharged any material
liabilities or obligations except in the ordinary course of business;
e. paid any amount on any indebtedness
prior to the due date, forgiven or cancelled any claims or any debt in excess
of $5,000, or released or waived any rights or claims except in the ordinary
course of business;
f. mortgaged, pledged or subjected to any
security interest, lien, lease or other charge or encumbrance any of its
properties or assets (other than statutory liens arising in the ordinary course
of business or other liens that do not materially detract from the value or
interfere with the use of such properties or assets);
g. suffered any damage or destruction to
or loss of any assets (whether or not covered by insurance) that has,
individually or in the aggregate, resulted in a Material Adverse Effect;
h. acquired or disposed of any assets
having an aggregate value in excess of $5,000, except in the ordinary course of
business;
i. written up or written down the
carrying value of any of its assets, other than accounts receivable in the
ordinary course of business;
17
<PAGE> 32
j. changed the costing system or
depreciation methods of accounting for its assets in any material respect;
k. lost or terminated any employee,
patient, customer or supplier that has, individually or in the aggregate,
resulted in a Material Adverse Effect;
l. increased the compensation of any
director, officer, key employee or consultant, except as disclosed on Schedule
3.8(a);
m. increased the compensation of any
employee (except for increases in the ordinary course of business consistent
with past practice) or hired any new employee who is expected to receive
annualized compensation of at least $15,000;
n. made any payments to or loaned any
money to any person or entity referred to in Section 3.22;
o. formed or acquired or disposed of any
interest in any corporation, partnership, joint venture or other entity;
p. redeemed, purchased or otherwise
acquired, or sold, granted or otherwise disposed of, directly or indirectly,
any of its capital stock or securities, or agreed to change the terms and
conditions of any such capital stock, securities or rights;
q. entered into any agreement providing
for total payments in excess of $5,000 in any twelve (12) month period with any
person or group, or modified or amended in any material respect the terms of
any such existing agreement, except in the ordinary course of business;
r. entered into, adopted or amended any
Employee Benefit Plan, except as contemplated hereby or the other agreements
contemplated hereby; or
s. entered into any other commitment or
transaction or experienced any other event that would materially interfere with
its performance under this Agreement or any other agreement or document
executed or to be executed pursuant to this Agreement, or otherwise has,
individually or in the aggregate, resulted in a Material Adverse Effect.
3.11. Title; Leased Assets.
a. Real Property. The Company does not
own any interest (other than leasehold interests referred to on Schedule
3.11(c)) in real property. The leased real property referred to on Schedule
3.11(c) constitutes the only real property necessary for the conduct of the
Company's business.
18
<PAGE> 33
b. Personal Property. Except as set
forth on Schedule 3.11(b), the Company and/or the Physician has good, valid and
marketable title to all the personal property constituting the Nonmedical
Assets. The personal property constituting the Nonmedical Assets constitute
the only personal property necessary for the conduct of the Company's business
(except for the Medical Assets). Upon consummation of the transactions
contemplated hereby, such interest in the Nonmedical Assets shall be free and
clear of all security interests, liens, claims and encumbrances, other than
those set forth on Schedule 3.11(b) (the "Permitted Encumbrances") and
statutory liens arising in the ordinary course of business or other liens that
do not materially detract from the value or interfere with the use of such
properties or assets.
c. Leases. A list and brief description
of (i) all leases of real property and (ii) leases of personal property
involving rental payments within any twelve (12) month period in excess of
$12,000, in either case to which the Company is a party, either as lessor or
lessee, are set forth on Schedule 3.11(c). All such leases are valid and, to
the knowledge of the Company, enforceable in accordance with their respective
terms except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
3.12. Commitments.
a. Commitments; Defaults. Except as set
forth on Schedule 3.12 or as otherwise disclosed pursuant to this Agreement,
the Company is not a party to nor bound by, nor are the Nonmedical Assets or
the assets or the business of the Company bound by, whether or not in writing,
any of the following (collectively, "Commitments"):
i) partnership or joint
venture agreement;
ii) guaranty or suretyship,
indemnification or contribution agreement or performance bond;
iii) debt instrument, loan
agreement or other obligation relating to indebtedness for borrowed money or
money lent or to be lent to another;
iv) contract to purchase real
property;
v) agreement with dealers or
sales or commission agents, public relations or advertising agencies,
accountants or attorneys (other than in connection with this Agreement and the
transactions contemplated hereby) involving total payments within any twelve
(12) month period in excess of $2,000 and which is not terminable on thirty
(30) days' notice or without penalty;
vi) agreement relating to any
material matter or transaction in which an interest is held by a person or
entity that is an Affiliate of the Company or the Physician;
19
<PAGE> 34
vii) agreement for the
acquisition of services, supplies, equipment, inventory, fixtures or other
property involving more than $2,000 in the aggregate;
viii) powers of attorney;
ix) contracts containing
non-competition covenants;
x) agreement providing for the
purchase from a supplier of all substantially all of the requirements of the
Company of a particular product or services;
xi) agreements regarding
clinical research;
xii) agreements with Payors and
contracts to provide medical or health care services; or
xiii) any other agreement or
commitment not made in the ordinary course of business or that is material to
the business, operations, condition (financial or otherwise) or results of
operations of the Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Vision 21. Except as set forth on Schedule 3.12
and to the Company's best knowledge, there are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that,
with the giving of notice or lapse of time or both, would constitute defaults
by the Company or, to the best knowledge of the Company, any other party to a
material Commitment, and no penalties have been incurred nor are amendments
pending, with respect to the material Commitments, except as described on
Schedule 3.12. The Commitments are in full force and effect and are valid and
enforceable obligations of the Company, and to the best knowledge of the
Company, are valid and enforceable obligations of the other parties thereto, in
accordance with their respective terms, and no defenses, off-sets or
counterclaims have been asserted or, to the best knowledge of the Company, may
be made by any party thereto (other than the Company), nor has the Company
waived any rights thereunder, except as described on Schedule 3.12. Except as
set forth on Schedule 3.12, no consents or approvals are required under the
terms of any agreement listed on Schedule 3.12 in connection with the
transactions contemplated herein, including, without limitation, the transfer
of any such agreement pursuant to this Agreement.
b. No Cancellation or Termination of
Commitment. Except as disclosed pursuant to this Agreement or contemplated
hereby and except where such default would not have a Material Adverse Effect
on the Practice, (i) neither the Company nor the Physician has received notice
of any plan or intention of any other party to any Commitment to exercise any
right to cancel or terminate any Commitment, and the Company does not know of
any fact that would justify the exercise of such a right; and (ii) neither the
Company nor the
20
<PAGE> 35
Physician currently contemplates, or has reason to believe any other person
currently contemplates, any amendment or change to any Commitment.
3.13. Insurance. The Company, the Physician and each
Professional Employee carries property, liability, malpractice, workers'
compensation and such other types of insurance pursuant to the insurance
policies listed and briefly described on Section 3.13 (the "Insurance
Policies"). The Insurance Policies are all of the insurance policies of the
Company, the Physician and each Professional Employee relating to the business
of the Company and the Nonmedical Assets. All of the Insurance Policies are
issued by insurers of recognized responsibility, and, to the best knowledge of
the Company, are valid and enforceable policies, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. Except as set forth in
Schedule 3.13, no consent or approval is required for, and no other impediment
or restriction exists that will prohibit or limit, the transfer of any such
Insurance Policies included within the Nonmedical Assets in accordance with the
terms of this Agreement. All Insurance Policies shall be maintained in force
without interruption up to and including the Closing Date. True, complete and
correct copies of all Insurance Policies have been provided or made available
to Vision 21. Except as set forth on Schedule 3.13, neither the Company nor
the Physician has received any notice or other communication from any issuer of
any Insurance Policy cancelling such policy, materially increasing any
deductibles or retained amounts thereunder, and to the actual knowledge of the
Company, no such cancellation or increase of deductibles, retainages or
premiums is threatened. Except as set forth on Schedule 3.13, neither the
Company, the Physician nor any Professional Employee has any outstanding
claims, settlements or premiums owed against any Insurance Policy, and the
Company, the Physician and each Professional Employee has given all notices or
has presented all potential or actual claims under any Insurance Policy in due
and timely fashion. Except as set forth on Schedule 3.13, since January 1,
1994, neither the Company, the Physician nor any Professional Employee has
filed a written application for any professional liability insurance coverage
which has been denied by an insurance agency or carrier, and the Company, the
Physician and each Professional Employee has been continuously insured for
professional malpractice claims for at least the past seven (7) years (or such
shorter periods of time that any Professional Employee has been licensed to
practice medicine). Schedule 3.13 also sets forth a list of all claims under
any Insurance Policy in excess of $10,000 per occurrence filed by the Company,
the Physician and each Professional Employee since January 1, 1994.
3.14. Proprietary Rights and Information. Set forth on
Schedule 3.14 is a true and correct description of the following ("Proprietary
Rights"):
a. all trademarks, trade-names, service
marks and other trade designations, including common law rights, registrations
and applications therefor, and all patents and applications therefor currently
owned, in whole or in part, by the Company, and all licenses, royalties,
assignments and other similar agreements relating to the foregoing to which the
Company is a party (including the expiration date thereof if applicable); and
21
<PAGE> 36
b. all agreements relating to technology,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other healthcare providers), or which it licenses or authorizes others to use.
The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, such ownership or use does not conflict,
infringe or violate the rights of any other person. Except as disclosed on
Schedule 3.14, no consent of any person will be required for the use thereof by
Vision 21 upon consummation of the transactions contemplated hereby and the
Proprietary Rights are freely transferable. No claim has been asserted by any
person to the ownership of or for infringement by the Company of the
proprietary right of any other person, and the Company does not know of any
valid basis for any such claim. To the best knowledge of the Company and the
Physician, the Company has the right to use, free and clear of any adverse
claims or rights of others, all trade secrets, customer lists and proprietary
information required for the marketing of all merchandise and services formerly
or presently sold or marketed by it.
3.15. Taxes.
a. Filing of Tax Returns. The Company
has duly and timely filed (in accordance with any extensions duly granted by
the appropriate governmental agency, if applicable) with the appropriate
governmental agencies all federal, state, local or foreign income, excise,
corporate, franchise, property, sales, use, payroll, withholding, provider,
value added and other tax returns and reports (collectively the "Tax Returns")
required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns or
reports are complete and accurate in all material respects and properly reflect
the taxes of the Company for the periods covered thereby.
b. Payment of Taxes. Except for such
items as the Company may be disputing in good faith by proceedings in
compliance with applicable law, which are described on Schedule 3.15, (i) the
Company has paid all taxes, penalties, assessments and interest that have
become due with respect to any Tax Returns that it has filed and has properly
accrued on its books and records for all of the same that have not yet become
due, and (ii) the Company is not delinquent in the payment of any tax,
assessment or governmental charge.
c. No Pending Deficiencies,
Delinquencies, Assessments or Audits. Except as set forth on Schedule 3.15,
the Company has not received any notice that any tax deficiency or delinquency
has been asserted against the Company. There is no unpaid assessment, proposal
for additional taxes, deficiency or delinquency in the payment of any of the
taxes of the Company that could be asserted by any taxing authority. There is
no taxing authority audit of the Company pending, or to the actual knowledge of
the Company, threatened, and the results of any completed audits are properly
reflected in the Financial Statements. The Company has not, to its best
knowledge, violated any federal, state, local or foreign tax law.
22
<PAGE> 37
d. No Extension of Limitation Period.
The Company has not granted an extension to any taxing authority of the
limitation period during which any tax liability may be assessed or collected.
e. All Withholding Requirements
Satisfied. All monies required to be withheld by the Company and paid to
governmental agencies for all income, social security, unemployment insurance,
sales, excise, use, and other taxes have been collected or withheld and paid to
the respective governmental agencies.
f. Foreign Person. Neither the Company
nor the Physician is a foreign person, as such term is referred to in Section
1445(f)(3) of the Code.
3.16. Compliance with Laws. The Company has not
failed, and neither the Company nor the Physician is aware of any failure by
the Physician or any Professional Employee to comply with all applicable laws,
regulations and licensing requirements relating to the operation of the
Practice or failure to file with the proper authorities all necessary
statements and reports except where the failure to so comply or file would not,
individually or in the aggregate, result in a Material Adverse Effect. There
are no existing violations by the Company, and neither the Company nor the
Physician is aware of any existing violations by the Physician or any
Professional Employee of any federal, state or local law or regulation that
could, individually or in the aggregate, result in a Material Adverse Effect.
The Company, the Physician and each Professional Employee possesses all
necessary licenses, franchises, permits and governmental authorizations for the
conduct of the Company's business as now conducted, all of which are listed
(with expiration dates, if applicable) on Schedule 3.16. Except as set forth
on Schedule 3.16, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded by any such licenses, franchises, permits or
government authorizations, except for any such default, breach or violation
that would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth on Schedule 3.16, since January 1, 1993, neither
the Company, the Physician nor, to the knowledge of the Company based on a
certificate in writing obtained from each Professional Employee, any
Professional Employee has received any notice from any federal, state or other
governmental authority or agency having jurisdiction over its, his or her
properties or activities, or any insurance or inspection body, that its, his or
her operations or any of its, his or her properties, facilities, equipment, or
business practices fail to comply with any applicable law, ordinance,
regulation, building or zoning law, or requirement of any public or
quasi-public authority or body, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
3.17. Finder's Fee. Except as set forth on Schedule
3.17, the Company has not incurred any obligation for any finder's, brokers or
agent's fee in connection with the transactions contemplated hereby.
3.18. Litigation. Except as described on Schedule 3.18
or otherwise disclosed pursuant to this Agreement, there are no legal actions
or administrative proceedings
23
<PAGE> 38
or investigations instituted, to the actual knowledge of the Company or the
Physician, which affect or could affect the Practice, the Nonmedical Assets or
the operation, business, condition (financial or otherwise), or results of
operations of the Company which (i) if successful could, individually or in the
aggregate, have a Material Adverse Effect or (ii) could adversely affect the
ability of the Company or the Physician to effect the transactions contemplated
hereby. Neither the Company nor the Physician is (a) subject to any continuing
court or administrative order, judgment, writ, injunction or decree applicable
specifically to the Nonmedical Assets, the Company or to its business, assets,
operations or employees or (b) in default with respect to any such order,
judgment, writ, injunction or decree. The Company has no knowledge of any
valid basis for any such action, proceeding or investigation. Except as set
forth on Schedule 3.18, all medical malpractice claims asserted, general
liability incidents and incident reports have been submitted to the Company's
insurer therefor. All claims made or threatened against the Company in excess
of its deductible are covered under its Insurance Policies.
3.19. Condition of Fixed Assets. All of the fixtures,
structures and equipment reflected in the Financial Statements and used by the
Company in its business, are in good condition and repair, subject to normal
wear and tear, and conform in all material respects with all applicable
ordinances, regulations and other laws, and the Company has no actual knowledge
of any latent defects therein.
3.20. Distributions and Repurchases. No distribution,
payment or dividend of any kind has been declared or paid by the Company on any
of its capital stock since the Company Balance Sheet Date. No repurchase of
any of the Company's capital stock has been approved, effected or is pending,
or is contemplated by the Board of Directors of the Company.
3.21. Banking Relations. Set forth on Schedule 3.21 is
a complete and accurate list of all borrowing and investing arrangements that
the Company has with any bank or other financial institution, indicating with
respect to each relationship the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the
person or persons authorized in respect thereof.
3.22. Ownership Interests of Interested Persons;
Affiliations. Except as set forth on Schedule 3.22, no officer, supervisory
employee or director of the Company, or their respective spouses, children or
Affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier of the Company or any
organization that has a material contract or arrangement with the Company.
Except as may be disclosed pursuant to this Agreement, neither the Company, nor
any of its directors, officers, employees or consultants, nor any Affiliate of
such person is, or within the last three (3) years was, a party to any
contract, lease, agreement or arrangement, including, but not limited to, any
joint venture or consulting agreement with any physician, hospital, pharmacy,
home health agency or other person which is in a position to make or influence
referrals to, or otherwise generate business for, the Company.
24
<PAGE> 39
3.23. Investments in Competitors. Except as disclosed
on Schedule 3.23, neither the Company nor the Physician owns directly or
indirectly any interests or has any investment in any person that is a
Competitor of the Company.
3.24. Environmental Matters.
a. Environmental Laws. To the best
knowledge of the Company and the Physician, neither the Company nor any of the
Nonmedical Assets (including the leased real property described on Schedule
3.11(c)) are currently in violation of, or subject to any existing, pending or,
to the actual knowledge of the Company threatened, investigation or inquiry by
any governmental authority or to any remedial obligations under, any federal,
state or local laws or regulations pertaining to health or the environment
("Environmental Laws"), except for any such violations, investigations or
inquiries that would not, individually or in the aggregate, result in a
Material Adverse Effect.
b. Permits. The Company is not required
to obtain, and has no knowledge of any reason Vision 21 will be required to
obtain, any permits, licenses or similar authorizations to occupy, operate or
use any buildings, improvements, fixtures and equipment owned or leased by the
Company by reason of any Environmental Laws.
c. Superfund List. To the best knowledge
of the Company, none of the Nonmedical Assets (including the Company's leased
real property described on Schedule 3.11(c)) are on any federal or state
"Superfund" list or subject to any environmentally related liens, except such
liens as would not, individually or in the aggregate, result in a Material
Adverse Effect.
3.25. Certain Payments. Neither the Company nor any
director, officer or employee of the Company acting for or on behalf of the
Company, has paid or caused to be paid, directly or indirectly, in connection
with the business of the Company:
a. to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or
b. any contribution to any political
party or candidate (other than from personal funds of directors, officers or
employees not reimbursed by their respective employers or as otherwise
permitted by applicable law).
3.26. Medical Waste. With respect to the generation,
transportation, treatment, storage, and disposal, or other handling of medical
waste, to the best knowledge of the Company and the Physician, the Company has
complied with all material federal, state or local laws or regulations
pertaining to medical waste.
3.27. Medicare and Medicaid Programs. The Company, the
Physician and each Professional Employee is qualified for participation in the
Medicare and Medicare programs
25
<PAGE> 40
and is party to provider agreements for such programs which are in full force
and effect with no events of default having occurred thereunder. The Company,
the Physician and each Professional Employee has timely filed all claims or
other reports required to be filed prior to the Closing Date with respect to
the purchase of services by third-party payors ("Payors"), including but not
limited to Medicare and Medicaid programs, except where the failure to file
would not, individually or in the aggregate, result in a Material Adverse
Effect. All such claims or reports are complete and accurate in all material
respects. The Company, the Physician and each Professional Employee has paid
or has properly recorded on the Financial Statements all actually known and
undisputed refunds, discounts or adjustments which have become due pursuant to
such claims, and neither the Company, the Physician nor any Professional
Employee has any material liability to any Payor with respect thereto, except
as has been reserved for in the Company Balance Sheet. There are no pending
appeals, overpayment determinations, adjustments, challenges, audits,
litigation, or notices of intent to reopen Medicare and/or Medicaid claims
determinations or other reports required to be filed by the Company, the
Physician or any Professional Employee in order to be paid by a Payor for
services rendered. Neither the Company, nor any of its directors, officers,
employees, consultants or the Physician has been convicted of, or pled guilty
or nolo contendere to, patient abuse or neglect, or any other Medicare or
Medicaid program-related offense. Neither the Company, nor its directors,
officers, the Physician, or to the best of the Company's knowledge, its
employees or consultants, has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs,
including but not limited to, defrauding a government program, loss of a
license to provide health services, and failure to provide quality care.
3.28. Fraud and Abuse. To the best knowledge of the
Company and the Physician, the Company, its officers and directors, the
Professional Employees, and the other persons and entities providing
professional services for the Company, have not engaged in any activities which
are prohibited under 42 U.S.C. Section Section 1320-7, 7a or 7b or 42 U.S.C.
Section 1395nn (subject to the exceptions set forth in such legislation), or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following:
a. knowingly and willfully making or
causing to be made a false statement or representation of a material fact in
any application for any benefit or payment;
b. knowingly and willfully making or
causing to be made a false statement or representation of a material fact for
use in determining rights to any benefit or payment;
c. failure to disclose knowledge by a
Medicare or Medicaid claimant of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to fraudulently secure such benefit or payment;
26
<PAGE> 41
d. knowingly and willfully offering,
paying, soliciting or receiving any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind (i) in return for referring an individual to a person for the furnishing
or arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering, or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service, or item for which payment may
be made in whole or in part by Medicare or Medicaid; and
e. referring a patient for designated
health services (as defined in 42 U.S.C. Section 1395nn) to or providing
designated health services to a patient upon a referral from an entity or
person with which the Physician or the Professional Employee or an immediate
family member has a financial relationship, and to which no exception under 42
U.S.C. Section 1395nn applies.
3.29. Payors. Schedule 3.29 sets forth a true, correct
and complete list of the names and addresses of each Payor, including any
private pay patient as a single payor, of the Company's services which
accounted for more than 10% of the revenues of the Company in the three (3)
previous fiscal years. Except as set forth on Schedule 3.29, the Company has
good relations with such Payors and none of such Payors has notified the
Company that it intends to discontinue its relationship with the Company or to
deny any claims submitted to such Payor for payment.
3.30. Prohibitions on the Corporate Practice of
Medicine. To the best of the Company's and the Physician's knowledge, the
actions, transactions or relationships arising from, and contemplated by this
Agreement, do not violate any law, rule or regulation relating to the corporate
practice of medicine. The Company and the Physician accordingly agree that the
Company and the Physician will not, in an attempt to void or nullify any
document contemplated herein or any relationship involving Vision 21, the
Company or the Physician, sue, claim, aver, allege or assert that any such
document contemplated herein or any such relationship violates any law, rule or
regulation relating to the corporate practice of medicine and expressly warrant
that this Section is valid and enforceable by Vision 21, and recognize that
Vision 21 has relied upon the statements herein in closing this Transaction.
3.31. Acquisition Proposals. Except for the
negotiations, offers and agreements with Vision 21 and its representatives, the
Company has not received during the twelve (12) month period preceding the date
of this Agreement any proposal or offer (including, without limitation, any
proposal or offer of its stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, the Company (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") nor has the Company or any of its employees, agents, representatives
or stockholders engaged in any negotiations concerning, or provided any
confidential information or data to, or had any discussions with, any person
27
<PAGE> 42
relating to an Acquisition Proposal, or otherwise facilitated any effort or
attempted to make or implement an Acquisition Proposal.
3.32. Consistent Treatment of Expenses. The Company
has, in presenting information concerning the Company's expenses to Vision 21
for the purpose of determining the Company's value, separated out those
expenses which shall be borne by the Company in a manner which is consistent
with the treatment of expenses which shall be the responsibility of the Company
pursuant to the Business Management Agreement.
3.33. Accounts Receivable/Payable. The Accounts
Receivable of the Company relating to the ownership and operation of the
Practice reflected on the Company Balance Sheet, to the extent uncollected on
the date hereof, are, and the accounts receivable of the Company relating to
the ownership and operation of the Practice to be reflected on the books of the
Company on the Closing Date will be, valid, existing and collectible within six
months from the Closing Date (taking into consideration the allowance for
doubtful accounts set forth in the Financial Statements) using reasonably
diligent collection methods taking into account the size and nature of the
receivable, and represent amounts due for goods sold and delivered or services
performed. There are not, and on the date of Closing there will not be, any
refunds, discounts, set-offs, defenses, counterclaims or other adjustments
payable or assessable with respect to the Accounts Receivable. The Company has
collected Accounts Receivable only in the ordinary course and has not changed
collection procedures or methods nor accelerated the pace of such collection
efforts in anticipation of the transactions contemplated in this Agreement.
The Company has paid accounts payable in the ordinary course and has not
changed payment procedures or methods nor delayed the timing of such payments
in anticipation of the transactions contemplated in this Agreement.
3.34. Projections. There is no fact, development or
threatened development with respect to the markets, products, services,
clients, patients, facilities, personnel, vendors, suppliers, operations,
assets or prospects of the Practice which are known to the Company or the
Physician which would materially adversely affect the projected fiscal year
1997 earnings of the Company disclosed to Vision 21 by Physician, other than
such conditions as may affect as a whole the economy or the practice of
medicine generally.
3.35. Inventory. Except as set forth on Schedule 3.35,
to the best of the Company's and the Physician's knowledge: (i) the Inventory
is in its originally manufactured condition, fit for the use for which it was
intended, free from any known defect and in a quantity and quality usable in
the ordinary course of business; (ii) the Inventory does not contain material
amounts of items that are slow-moving, obsolete or of below-standard quality;
(iii) the qualities and quantities of Inventory are reasonable and warranted in
the present and anticipated circumstances of the Practice; and (iv) there has
been no decrease in the physical Inventory since the Company Balance Sheet Date
other than in the ordinary course of business.
3.36. Tangible Personal Property. Except as set forth
on Schedule 3.36, the Company's Tangible Personal Property is in good operating
condition, working order and repair
28
<PAGE> 43
(normal wear and tear excepted) and is fully suitable for the uses for which it
is employed in the conduct of the Practice.
3.37. Leases. With respect to each of the Real
Property Leases and Personal Property Leases, except as set forth on Schedule
3.37:
(a) such lease is legal, valid, binding, enforceable
and in full force and effect;
(b) such lease will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing;
(c) no party to such lease is in material breach or
default, and no event has occurred that, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification or
acceleration thereunder;
(d) no party to such lease has repudiated in writing
any provision thereof;
(e) there are no disputes, oral agreements or
forbearance programs in effect as to such lease; and
(f) The Company has performed and satisfied in full
each material obligation to be performed by the Company under such lease.
3.38. Contract Rights. Except as set forth on Schedule
3.38, each of the Assumed Contracts is valid and enforceable and is in full
force and effect, and there is no material default or existing condition that,
with the giving of notice or the passage of time, would constitute such a
default by any parties thereto. The Company has performed and satisfied in
full each material obligation required to be performed by the Company under
each Assumed Contract. If services are to be provided to the Company under any
of such Assumed Contracts, such services have been and are being performed
satisfactorily and in a timely manner, substantially in accordance with the
terms of such Assumed Contract.
3.39. Prepaid Items. Except as described on Schedule
3.13, Each of the Prepaid Items may be transferred to Vision 21 without the
necessity of obtaining any consent or approval.
3.40. Completeness of Assets. The Nonmedical Assets,
together with the Medical Assets, include all the properties used to conduct
the Practice as presently conducted.
3.41. Disclosure. To the best of the Company's and the
Physician's knowledge, no representation, warranty or statement made by the
Company or the Physician in this Agreement or any of the exhibits or schedules
hereto, or any agreements, certificates, documents or instruments delivered or
to be delivered to Vision 21 in accordance with this
29
<PAGE> 44
Agreement or the other documents contemplated herein, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Company and the Physician do not know of any fact or condition (other than
general economic conditions or legislative or administrative changes in
health-care delivery) which materially adversely affects, or in the future may
materially affect, the condition, properties, assets, liabilities, business,
operations or prospects of the Practice which has not been set forth herein or
in the Schedules provided herewith.
4. REPRESENTATIONS AND WARRANTIES OF THE PHYSICIAN. The
Physician represents and warrants to Vision 21 that the following are true and
correct as of the date hereof, and shall be true and correct through the
Closing Date as if made on that date:
4.1. Validity; Physician Capacity. This Agreement,
the Physician Employment Agreement, and each other agreement contemplated
hereby or thereby have been, or will be as of the Closing Date, duly executed
and delivered by the Physician and constitute or will constitute legal, valid
and binding obligations of the Physician, enforceable against the Physician in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies. The Physician has legal capacity to
enter into and perform this Agreement and his Physician Employment Agreement.
4.2. No Violation. Except as set forth on Schedule
4.2, neither the execution, delivery or performance of this Agreement, other
agreements of the Physician contemplated hereby or thereby, nor the
consummation of the transactions contemplated hereby or thereby, will (a)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, indenture or other
instrument under which the Physician is bound or to which any of his property
or the shares of common stock of the Company are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon any of his property or the shares of common stock of the Company or (b) to
the best knowledge of the Physician, violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body.
4.3. Consents. Except as may be required under the
Exchange Act, the Securities Act, the Corporation Law and state securities
laws, or otherwise disclosed pursuant to this Agreement, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, or any other person is required to authorize, or
is required in connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of the Physician.
4.4. Certain Payments. The Physician has not paid or
caused to be paid, directly or indirectly, in connection with the business of
the Company:
30
<PAGE> 45
a. to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or
b. any contribution to any political
party or candidate (other than from personal funds not reimbursed by the
Company or as otherwise permitted by applicable law).
4.5. Finder's Fee. Except as set forth on Schedule
4.5, the Physician has not incurred any obligation for any finder's, broker's
or agent's fee in connection with the transactions contemplated hereby.
4.6. Ownership of Interested Persons; Affiliations.
Except as set forth on Schedule 4.6, neither the Physician nor his spouse,
children or Affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier of the Company
or any organization that has a material contact or arrangement with the
Company. Neither the Physician nor any of his Affiliates is, or with the last
three (3) years was, a party to any contract, lease, agreement or arrangement,
including, but not limited to, any joint venture or consulting agreement with
any physician, hospital, pharmacy, home health agency or other person which is
in a position to make or influence referrals to, or otherwise generate business
for, the Company.
4.7. Investments in Competitors. Except as disclosed
on Schedule 4.7, the Physician does not own directly or indirectly any
interests or have any investment in any person that is a Competitor of the
Company.
4.8. Litigation. Except as disclosed on Schedule 4.8,
there are no claims, actions, suits, proceedings (arbitration or otherwise) or
investigations pending or, to the Physician's knowledge, threatened against the
Physician at law or at equity in any court or before or by any Governmental
Authority, and, to the Physician's knowledge, there are no, and have not been
any, facts, conditions or incidents that may result in any such actions, suits,
proceedings (arbitration or otherwise) or investigations. Except as set forth
on Schedule 4.10, there have been no disciplinary, revocation or suspension
proceedings or similar types of claims, actions or proceedings, hearings or
investigations against the Physician or the Company.
4.9. Permits. To the best of the Physician's
knowledge, the Physician has all permits, licenses, orders and approvals of all
Governmental Authorities necessary to perform the services performed by the
Physician in connection with the conduct of the Practice. All such permits,
licenses, orders and approvals are in full force and effect and no suspension
or cancellation of any of them is pending or threatened. To the best of the
Physician's knowledge, none of such permits, licenses, orders or approvals will
be adversely affected by the consummation of the transactions contemplated
herein. The Physician is a participating physician, as such term is defined by
the Medicare and Medicaid programs, and the Physician
31
<PAGE> 46
has not been disciplined, sanctioned or excluded from either the Medicare or
Medicaid programs and has not been subject to any plan of correction imposed by
any professional review body.
4.10. Staff Privileges. Schedule 4.10 lists all
hospitals at which the Physician has full staff privileges. Such staff
privileges have not been revoked, surrendered, suspended or terminated, and to
the Physician's knowledge, there are no, and have not been any, facts,
conditions or incidents that may result in any such revocation, surrender,
suspension or termination.
4.11. Intentions. Except as set forth on Schedule
4.11, the Physician intends to continue practicing medicine on a full-time
basis for at least the next five (5) years with the Company and does not know
of any fact or condition that materially adversely affects, or in the future
may materially adversely affect, his ability or intention to practice medicine
on a full-time basis for the next five (5) years with the Company.
5. REPRESENTATIONS AND WARRANTIES OF VISION 21. Vision 21
represents and warrants to the Company and the Physician that the following are
true and correct as of the date hereof and shall be true and correct as of the
Closing Date; when used in this Section 5, the term "best knowledge" shall mean
the best knowledge of those individuals listed on Schedule 5:
5.1. Organization and Good Standing. Vision 21 is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Florida, with all requisite corporation power and
authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. At or prior to Closing, Vision 21 will be
qualified to do business as a foreign corporation in the jurisdictions listed
on Schedule 5.1.
5.2. Capitalization. The authorized capital stock of
Vision 21 consists of 50,000,000 shares of Vision 21 Common Stock, of which
5,465,673 shares are issued and outstanding. Immediately prior to the Closing,
the authorized capital stock of Vision 21 will consist of 50,000,000 shares of
Vision 21 Common Stock, of which 5,465,673 shares will be issued and
outstanding.
5.3. Corporate Records. The copies of the Articles of
Incorporation and Bylaws, and all amendments thereto, of Vision 21 that have
been delivered or made available to the Company and the Physician are true,
correct and complete copies thereof, as in effect on the date hereof. The
minute books of Vision 21, copies of which have been delivered or made
available to the Company and the Physician, contain accurate minutes of all
meetings of, and accurate consents to all actions taken without meetings by,
the Board of Directors (and any committees thereof) and the stockholders of
Vision 21, since its formation.
5.4. Authorization and Validity. The execution,
delivery and performance by Vision 21 of this Agreement and the other
agreements contemplated hereby, and the
32
<PAGE> 47
consummation of the transactions contemplated hereby and thereby, have been
duly authorized by Vision 21. This Agreement and each other agreement
contemplated hereby to be executed by Vision 21 have been or will be as of the
Closing Date duly executed and delivered by Vision 21 and constitute or will
constitute legal, valid and binding obligations of Vision 21, enforceable
against Vision 21 in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.5. Compliance. The execution and delivery of the
documents contemplated hereunder and the consummation of the transactions
contemplated thereby by Vision 21 shall not (i) violate any provision of Vision
21's organizational documents, (ii) violate any material provision of or result
in the breach of or entitle any party to accelerate (whether after the giving
of notice or lapse of time or both) any material obligation under, any
mortgage, lien, lease, contract, license, instrument or any other agreement to
which Vision 21 is a party, (iii) result in the creation or imposition of any
material lien, charge, pledge, security interest or other material encumbrance
upon any property of Vision 21 or (iv) violate or conflict with any order,
award, judgment or decree or other material restriction or to the best of
Vision 21's knowledge violate or conflict with any law, ordinance or regulation
to which Vision 21 or its property is subject.
5.6. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by Vision 21 or the consummation
by such party of the transactions contemplated thereby, except for those
consents or approvals set forth on Schedule 5.6.
5.7. Finder's Fee. Except as disclosed on Schedule
5.7, Vision 21 has not incurred any obligation for any finder's, broker's or
agent's fee in connection with the transactions contemplated hereby.
5.8. Capital Stock. The issuance and delivery by
Vision 21 of shares of Vision 21 Common Stock in connection with the Note have
been duly and validly authorized by all necessary corporate action on the part
of Vision 21. The shares of Vision 21 Common Stock to be issued in connection
with the Note, when issued in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable and will not have been issued
in violation of any preemptive rights, rights of first refusal or similar
rights of any of Vision 21's stockholders, or any federal or state law,
including, without limitation, the registration requirements of applicable
federal and state securities laws.
5.9. Vision 21 Financial Statements; Confidential
Information Memorandum. The balance sheet of Vision 21 as of September 30,
1996 and the related statements of income of Vision 21 for the first nine (9)
months of Vision 21's 1996 fiscal year, without giving effect to the Related
Acquisitions, including the costs incurred during such fiscal year associated
with any Registration Statement, shall be contained in the Confidential
33
<PAGE> 48
Information Memorandum to be provided to the Physician and the Company by
Vision 21 prior to the Closing (collectively, with the related notes thereto,
the "Vision 21 Financial Statements"). The Vision 21 Financial Statements (a)
fairly present the financial condition and results of operations of Vision 21,
without giving effect to the Related Acquisitions, as of the dates and for the
periods indicated; and (b) have been prepared in conformity with GAAP (subject
to normal year-end adjustments and the absence of notes for any unaudited
interim financial statement), except as otherwise indicated in the Vision 21
Financial Statements. Subject to the foregoing and the other qualifications
contained elsewhere in this Agreement, to the best knowledge of Vision 21, the
Confidential Information Memorandum, as amended on December 1996, is true and
correct in all material respects.
5.10. Liabilities and Obligations. Except as disclosed
on Schedule 5.10, the Vision 21 Financial Statements shall reflect all material
liabilities of Vision 21, accrued, contingent or otherwise, that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with GAAP. Except as set forth on Schedule 5.10 or in the Vision
21 Financial Statements, Vision 21 is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity,
and Vision 21 does not know of any valid basis for the assertion of any other
claims or liabilities of any nature or in any amount.
5.11. Compliance with Laws. Vision 21 has not failed
to comply with any applicable laws, regulations and licensing requirements or
failed to file with the proper authorities any necessary statements and reports
except where the failure to so comply or file would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no existing
violations by Vision 21 of any federal, state or local law or regulation that
could, individually or in the aggregate, result in a Material Adverse Effect.
Vision 21 possesses all necessary licenses, franchises, permits and
governmental authorizations for the conduct of Vision 21's business as now
conducted and after the Closing, as contemplated in this Agreement. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government
authorizations, except for any such default, breach or violation that would
not, individually or in the aggregate, have a Material Adverse Effect. Since
January 1, 1993, Vision 21 has not received any notice from any federal, state
or other governmental authority or agency having jurisdiction over its
properties or activities, or any insurance or inspection body, that its
operations or any of its properties, facilities, equipment, or business
practices fail to comply with any applicable law, ordinance, regulation,
building or zoning law, or requirement of any public or quasi-public authority
or body, except where failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect.
5.12. Insolvency Proceedings. Vision 21 is not
currently under the jurisdiction of a Federal or state court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
34
<PAGE> 49
5.13. Employment of Company's Employees. Vision 21
does not currently intend to change the existing composition or employment
terms of any of the non-professional personnel which have employment
arrangements with the Company on the effective date of this Agreement (except
as is necessary for Vision 21 to employ such individuals pursuant to the
Business Management Agreement). Vision 21 reserves the right, however, to
change the number, composition or employment terms of such non-professional
personnel in the future.
6. SECURITIES LAW MATTERS.
6.1. Investment Representations and Covenants of
Physician.
a. Physician understands that the
Securities will not be registered under the Securities Act or any state
securities laws on the grounds that the issuance of the Securities is exempt
from registration pursuant to Section 4(2) of the Securities Act under the
Securities Act and applicable state securities laws, and that the reliance of
Vision 21 on such exemptions is predicated in part on the Physician's
representations, warranties, covenants and acknowledgements set forth in this
Section.
b. Except as disclosed on Schedule 6.1(b)
attached hereto, Physician represents and warrants that Physician is an
"accredited investor" or "sophisticated investor" as defined under the
Securities Act and state "Blue Sky" laws, or that Physician has utilized, to
the extent necessary to be deemed a sophisticated investor under the Securities
Act and State "Blue Sky" laws, the assistance of a professional advisor.
c. Physician represents and warrants that
the Securities to be acquired by Physician upon consummation of the
transactions described in this Agreement will be acquired by Physician for
Physician's own account, not as a nominee or agent, and without a view to
resale or other distribution within the meaning of the Securities Act and the
rules and regulations thereunder, except as contemplated in this Agreement, and
that Physician will not distribute any of the Securities in violation of the
Securities Act. All Securities shall bear a restrictive legend in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAWS."
In addition, the Securities shall bear any legend required by the
securities or "Blue Sky" laws of any state where Physician resides as well as
any other legend deemed appropriate by Vision 21 or its counsel.
d. Physician represents and warrants that
the address set forth below Physician's name on Schedule 6.1(d) is Physician's
principal residence.
35
<PAGE> 50
e. Physician (i) acknowledges that the
Securities issued to Physician at the Closing must be held indefinitely by
Physician unless subsequently registered under the Securities Act or an
exemption from registration is available, (ii) is aware that any routine sales
of Securities made pursuant to Rule 144 under the Securities Act may be made
only in limited amounts and in accordance with the terms and conditions of that
Rule and that in such cases where the Rule is not applicable, compliance with
some other registration exemption will be required, (iii) is aware that Rule
144 is not currently available for use by Physician for resale of any of the
Securities to be acquired by Physician upon consummation of the transactions
described in this Agreement, and (iv) acknowledges and agrees that the transfer
of the Securities shall be further restricted by the "lock-up" provisions
contained in the Registration Rights Agreement in the form of Exhibit 12.1(o),
whereby the Company shall be treated as an "affiliate" of Vision 21 under Rule
144.
f. Physician represents and warrants to
Vision 21 that Physician, either alone or together with the assistance of
Physician's own professional advisor, has such knowledge and experience in
financial and business matters such that Physician is capable of evaluating the
merits and risks of Physician's investment in any of the Securities to be
acquired by Physician upon consummation of the transactions described in this
Agreement.
g. Physician confirms that Physician has
received and read the Confidential Information Memorandum of Vision 21 dated
September 27, 1996 and the December 1996 Supplement thereto. Physician also
confirms that Physician has had the opportunity to ask questions of and receive
answers from Vision 21 concerning the terms and conditions of Physician's
investment in the Securities, and the Physician has received to Physician's
satisfaction, such additional information, in addition to that set forth
herein, about Vision 21's operations and the terms and conditions of the
offering as Physician has requested.
h. In order to ensure compliance with the
provisions of paragraph (c) hereof, Physician agrees that after the Closing
Physician will not sell or otherwise transfer or dispose of Securities or any
interest therein (unless such shares have been registered under the Securities
Act) without first complying with either of the following conditions, the
expenses and costs of satisfaction of which shall be fully borne and paid for
by Physician:
i) Vision 21 shall have
received a written legal opinion from legal counsel, which opinion and counsel
shall be satisfactory to Vision 21 in the exercise of its reasonable judgment,
or a copy of a "no-action" or interpretive letter of the Securities and
Exchange Commission specifying the nature and circumstances of the proposed
transfer and indicating that the proposed transfer will not be in violation of
any of the registration provisions of the Securities Act and the rules and
regulations promulgated thereunder; or
ii) Vision 21 shall have
received an opinion from its own counsel to the effect that the proposed
transfer will not be in violation of any of the registration provisions of the
Securities Act and the rules and regulations promulgated thereunder.
36
<PAGE> 51
Physician also agrees that the certificates or instruments representing the
Securities to be issued to Physician pursuant to this Agreement may contain a
restrictive legend noting the restrictions on transfer described in this
Section and required by federal and applicable state securities laws, and that
appropriate "stop-transfer" instructions will be given to Vision 21's transfer
agent, if any, provided that this Section 6.1(h) shall no longer be applicable
to any Securities following their transfer pursuant to a registration statement
effective under the Securities Act or in compliance with Rule 144 or if the
opinion of counsel referred to above is to the further effect that transfer
restrictions and the legend referred to herein are no longer required in order
to establish compliance with any provisions of the Securities Act.
i. Physician understands that although an
Initial Public Offering is contemplated by Vision 21, there are no assurances
that an Initial Public Offering will occur or if it does occur that it will be
successful.
j. Physician agrees that he shall be
considered an "affiliate" of Vision 21 for purposes of Rule 144 and agrees to
the restrictions and limitations imposed by Rule 144 on affiliates. Physician
further agrees that he shall be considered an affiliate of Vision 21 for Rule
144 purposes even if he does not meet the technical definition of "affiliate"
under Rule 144.
6.2. Current Public Information. At all times
following the registration of any of Vision 21's securities under the
Securities Act or Exchange Act pursuant to which Vision 21 becomes subject to
the reporting requirements of the Exchange Act, Vision 21 shall use
commercially reasonable efforts to comply with the requirements of Rule 144
under the Securities Act, as such Rule may be amended from time to time (or any
similar rule or regulation hereafter adopted by the SEC) regarding the
availability of current public information to the extent required to enable any
holder of shares of Common Stock to sell such shares without registration under
the Securities Act pursuant to Rule 144 (or any similar rule or regulation).
7. COVENANTS OF THE COMPANY AND THE PHYSICIAN. The Company
and the Physician, jointly and severally, agree that between the date hereof
and the Closing (with respect to the Company's covenants, the Physician agrees
to use his best efforts to cause the Company to perform):
7.1. Consummation of Agreement. The Company and the
Physician shall use their best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and conditions;
provided, however, that this covenant shall not require the Company or the
Physician to make any expenditures that are not expressly set forth in this
Agreement or otherwise contemplated herein.
7.2. Business Operations. The Company shall operate
its business in the ordinary course. The Company and the Physician shall use
their best efforts to preserve the
37
<PAGE> 52
business of the Company intact. Neither the Company nor the Physician shall
take any action that would, individually or in the aggregate, result in a
Material Adverse Effect.
7.3. Access. The Company and the Physician shall, at
reasonable times during normal business hours and on reasonable notice, permit
Vision 21 and its authorized representatives, including without limitation, the
Accountants, reasonable access to, and make available for inspection, all of
the assets and business of the Company, including its employees, customers and
suppliers, and permit Vision 21 and its authorized representatives to inspect
and, at Vision 21's sole cost and expense, make copies of all documents,
records (other than patient medical records) and information with respect to
the affairs of the Company, including, without limitation, the Financial
Statements, as Vision 21 and its representatives may request, all for the sole
purpose of permitting Vision 21 to become familiar with the business and assets
and liabilities of the Company.
7.4. Notification of Certain Matters. The Company and
the Physician shall promptly inform Vision 21 in writing of (a) any notice of,
or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by the Company or the
Physician subsequent to the date of this Agreement and prior to the Closing
Date under any Commitment material to the Company's condition (financial or
otherwise), operations, assets, liabilities or business and to which it is
subject; or (b) any material adverse change in the Company's condition
(financial or otherwise), operations, assets, liabilities or business.
7.5. Approvals of Third Parties. As soon as
practicable after the date hereof, the Company and the Physician shall secure
all necessary approvals and consents of landlords with respect to the real
property described on Schedule 2.1(d) to the consummation of the transactions
contemplated hereby and shall use their best efforts to secure all necessary
approvals and consents of other third parties to the consummation of the
transactions contemplated hereby; provided, however, that this covenant shall
not require the Company or the Physician to make any material expenditures that
are not expressly set forth in this Agreement or otherwise contemplated herein.
7.6. Employee Matters. Except as set forth in
Schedule 3.8(a) or as otherwise contemplated by this Agreement, the Company
shall not, without the prior written approval of Vision 21, except as required
by law:
a. increase the cash compensation of the
Physician or any other employees of the Company (other than in the ordinary
course of business and consistent with past practice);
b. adopt, amend or terminate any
Compensation Plan;
c. adopt, amend or terminate any
Employment Agreement;
38
<PAGE> 53
d. adopt, amend or terminate any
Employee Policies and Procedures;
e. adopt, amend or terminate any
Employee Benefit Plan;
f. take any action that could deplete the
assets of any Employee Benefit Plan, other than payment of benefits in the
ordinary course to participants and beneficiaries;
g. fail to pay any premium or
contribution due or with respect to any Employee Benefit Plan;
h. fail to file any return or report with
respect to any Employee Benefit Plan;
i. institute, settle or dismiss any
employment litigation except as could not, individually or in the aggregate,
result in a Material Adverse Effect;
j. enter into, modify, amend or terminate
any agreement with any union, labor organization or collective bargaining unit;
or
k. take or fail to take any action with
respect to any past or present employee of the Company that would, individually
or in the aggregate, result in a Material Adverse Effect.
7.7. Contracts. Except with Vision 21's prior written
consent, the Company shall not assume or enter into any contract, lease,
license, obligation, indebtedness, commitment, purchase or sale except in the
ordinary course of business that is material to the Company's business, nor
will it waive any material right or cancel any material contract, debt or
claim.
7.8. Capital Assets; Payments of Liabilities. The
Company shall not, without the prior written approval of Vision 21 (a) acquire
or dispose of any capital asset having a fair market value of $5,000 or more,
or acquire or dispose of any capital asset outside of the ordinary course of
business or (b) discharge or satisfy any lien or encumbrance or pay or perform
any obligation or liability other than (i) liabilities and obligations
reflected in the Financial Statements or (ii) current liabilities and
obligations incurred in the usual and ordinary course of business since the
Company Balance Sheet Date and, in either case (i) or (ii) above, only as
required by the express terms of the agreement or other instrument pursuant to
which the liability or obligation was incurred.
7.9. Mortgages, Liens and Guaranties. The Company
shall not, without the prior written approval of Vision 21, enter into or
assume any mortgage, pledge, conditional sale or other title retention
agreement, permit any security interest, lien, encumbrance or claim
39
<PAGE> 54
of any kind to attach to any of its assets (other than statutory liens arising
in the ordinary course of business and other liens that do not materially
detract from the value or interfere with the use of such assets), whether now
owned or hereafter acquired, or guarantee or otherwise become contingently
liable for any obligation of another, except obligations arising by reason of
endorsement for collection and other similar transactions in the ordinary
course of business, or make any capital contribution or investment in any
person.
7.10. Acquisition Proposals. The Company and the
Physician agree that from the date of this Agreement through the earlier of the
Closing Date or January 1, 1997, (a) neither the Physician nor the Company nor
any of its officers and directors shall, and the Physician and the Company
shall direct and use their best efforts to cause the Company's employees,
agents, and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any Acquisition
Proposal or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; (b) the Physician and the Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and each will take the necessary steps to inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.10; and (c) the Physician and the
Company will notify Vision 21 immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company or the Physician.
7.11. Distributions and Repurchases. No distribution,
payment or dividend of any kind will be declared or paid by the Company with
respect of its capital stock, nor will any repurchase of any of the Company's
capital stock be approved or effected.
7.12. Requirements to Effect the Transaction. The
Company and the Physician shall use their best efforts to take, or cause to be
taken, all actions necessary to effect the Transaction under applicable law.
7.13. Physician Accounts Payable and Physician Retained
Equity. The Company shall, and the Physician shall cause the Company, to pay
in a timely manner the accounts payable of the Physician. Except as
contemplated herein, the Company shall not, and the Physician shall not permit
the Company to, make payment of all or any portion of any retained equity of
the Company at any time prior to Closing.
7.14. Physician Employment Agreements. The Company and
the Physician shall cause, at or immediately prior to Closing, each Physician
Employee (except for those non-shareholder Physician Employees identified on
Schedule 7.14) who is then an employee of the Company and Physician agrees at
or immediately prior to Closing (i) to terminate his employment agreement, if
any, with the Company by mutual consent without any liability therefor on the
part of the Company and (ii) to enter into a new Physician Employment
40
<PAGE> 55
Agreement with the Company in accordance with the terms of the Business
Management Agreement.
7.15. Optometrist Employment Agreements. The Company
and the Physician shall cause, at or immediately prior to Closing, each
Optometrist Employee who is then an employee of the Company (i) to terminate
his existing employment agreement, if any, with the Company by mutual consent
without any liability therefor on the part of the Company and (ii) to enter
into a new Optometrist Employment Agreement with the Company in accordance with
the terms of the Business Management Agreement.
7.16. Termination of Retirement Plans. Prior to
Closing, the Physician shall cause the Company to take all steps necessary to
discontinue benefits accruals under any Employee Benefit Plan that is intended
to be a qualified employee retirement plan under Section 401(a) of the Code (a
"Retirement Plan") effective as of Closing or as soon thereafter as may be
practical.
Subsequent to Closing, the Company and Vision 21 shall
review the extent to which the Company can resume contributions to the
Retirement Plan without violating the qualification requirements of Sections
410(b) and 401(a)(4) of the Code, taking into account any employees of Vision
21 who would be "leased employees" of the Company under Section 414(n) of the
Code. If Vision 21 and the Company mutually agree that such qualification
requirements can be satisfied, the Company may elect to continue the Retirement
Plan and make contributions in accordance with its terms, provided that the
Company shall agree to cover at its own expense any Vision 21 employees who are
leased employees if such coverage is required to maintain the tax-qualified
status of the Retirement Plan.
7.17. Delivery of Schedules. The Company and the
Physician shall deliver to Vision 21 all schedules required to be delivered by
them prior to the Closing.
7.18. Assignment of Fees for Medical and Optometry
Services. On or prior to the Closing Date, the Company shall obtain an
irrevocable assignment from all Professional Employees of any and all of their
rights to receive payment for the provision of ophthalmology or optometry
services which are part of the Accounts Receivable to Vision 21 existing on the
Closing Date, except for those fees specified and set forth on Schedule 7.18.
Each Professional Employee shall undertake to endorse any payments received on
account of such services to the order of Vision 21 and to take such other
action as may be necessary to confirm to Vision 21 the rights to collect and
retain for its own account such Accounts Receivable. The Company shall cause
its Professional Employees to agree that such security interest of such
lender(s) is intended to be a first priority security interest and is superior
to any right, title or interest which may be asserted by such Professional
Employees with respect to the Accounts Receivable or the proceeds thereof. In
the event that the assignment of rights described in this Section shall be
deemed, for any reason, to be ineffective as an outright assignment, the
Company shall cause each Professional Employee to agree that such Professional
Employee shall be deemed, effective as of the Closing Date, to have granted to
Vision 21 a first priority lien on and security interest
41
<PAGE> 56
in and to any and all interests of such Professional Employee in any of the
Accounts Receivable, and all proceeds with respect thereto, to secure the
collection by Vision 21 of all Accounts Receivable, and this Agreement shall be
deemed to be a security agreement to the extent necessary to give effect to the
foregoing. The Company shall cause each Professional Employee to execute and
deliver, all such financing statements as the Company or Vision 21 may request
in order to perfect such security interest. The Company shall not suffer any
Professional Employee to grant any other lien on or security interest in or to
such Accounts Receivable or any proceeds thereof.
8. COVENANTS OF VISION 21. Vision 21 agrees that between the
date hereof and the Closing:
8.1. Consummation of Agreement. Vision 21 shall use
its best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and conditions and take all corporate and
other actions necessary to approve the Transaction; provided, however, that
this covenant shall not require Vision 21 to make any expenditures that are not
expressly set forth in this Agreement or otherwise contemplated herein.
8.2. Notification of Certain Matters. Vision 21 shall
promptly inform the Company and the Physician in writing of (a) any notice of,
or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by Vision 21 subsequent
to the date of this Agreement and prior to the Closing Date under any Vision 21
Commitment material to Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business and to which it is subject; or (b)
any material adverse change in Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business.
8.3. Licenses and Permits. Vision 21 shall use its
best efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, statute, rule, regulation or ordinance, or otherwise
necessary or desirable to consummate the Transaction or provide the services
contemplated by the Business Management Agreement and to conduct the intended
business of Vision 21.
8.4. Release of Physician From Practice Liabilities.
Vision 21 shall use its best efforts to obtain from third party creditors the
release of Physician from any personal liabilities relating to the Practice
which are identified on Schedule 8.4 and assumed by Vision 21 pursuant to the
terms of this Agreement.
9. COVENANTS OF VISION 21, THE COMPANY AND THE PHYSICIAN.
Vision 21, the Company and the Physician agree as follows:
42
<PAGE> 57
9.1. Filings; Other Action.
a. Vision 21, the Company and the
Physician shall cooperate to promptly prepare and file at Vision 21's expense
with the SEC, a Registration Statement on Form S-1 (or other appropriate form)
to be filed by Vision 21 in connection with any Initial Public Offering of
Vision 21 (including the prospectus constituting a part thereof, the
"Registration Statement"). Vision 21 shall obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, and the Company and the Physician
shall furnish all information concerning the Company, the Nonmedical Assets and
the Physician as may be reasonably requested in connection with any such
action.
b. Each of the Company, the Physician and
Vision 21 represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in a Registration
Statement, by exhibit or otherwise, will, at the time the Registration
Statement and each amendment and supplement thereof, if any, becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Company, the Physician, and Vision 21 shall
agree as to the information and documents supplied by the Company and the
Physician for inclusion in the Registration Statement and shall indicate such
information and documents in a letter to be delivered at least ten (10) days
prior to the initial filing of the Registration Statement with the SEC. The
Company and the Physician shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act.
c. The Physician and the Company shall,
upon request, furnish Vision 21 with all information concerning himself,
itself, their respective partners, the Company's subsidiaries, directors,
officers, and stockholders, and including financial statements with respect to
the same, any consents (and information necessary to obtain such consents) and
such other matters as may be reasonably requested by Vision 21 in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application made
by or on behalf of each such party or any of the Company's subsidiaries to any
governmental entity in connection with the Transaction, any Initial Public
Offering and the other transactions contemplated by this Agreement.
9.2. Amendment of Schedules. Each party hereto agrees
that, with respect to the representations and warranties of such party
contained in this Agreement, such party shall have the continuing obligation
until the Closing to attach, supplement or amend promptly the Schedules with
respect to any matter that would have been or would be required to be set forth
or described in the Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein; provided
that no amendment or supplement to a Schedule that constitutes or reflects a
material adverse change to the Company or the Nonmedical Assets may be made
unless Vision 21 consents to such amendment or supplement,
43
<PAGE> 58
and no amendment or supplement to a Schedule that constitutes or reflects a
material adverse change to Vision 21 may be made unless the Company and the
Physician consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 10.1 and 11.1 have been fulfilled, the
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 9.2. In the event that the Company is required to
amend or supplement a Schedule in accordance with this Section 9.2 and Vision
21 does not consent to such amendment or supplement, or Vision 21 is required
to amend or supplement a Schedule in accordance with this Section 9.2 and the
Company and the Physician do not consent, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 15.1(d) or Section 15.1(e)
as appropriate.
9.3. Fees and Expenses.
a. Vision 21 shall pay all costs of the
Audit of the Company's Financial Statements and financial records by Vision
21's auditors (or auditors designated by Vision 21's auditors). All items
prepared by Vision 21's auditors in connection with the Audit ("Prepared Audit
Materials") shall be for use solely by Vision 21; provided, however, that the
Company may utilize the Prepared Audit Materials solely in connection with its
review of Vision 21's calculation of the Purchase Price. The Prepared Audit
Materials shall not be deemed to include those items which customarily remain
the property of auditors such as their working papers and memos.
b. In the event the Transaction is not
consummated, the Company and Physician shall not be entitled to copies or
originals of the Prepared Audit Materials unless the Company or Physician pay
for or reimburses Vision 21 for all expenses of the auditor in connection with
the Audit in advance of receiving the Prepared Audit Materials (either from
Vision 21 or its auditor). For purposes of this Agreement, Audit expenses
shall include all expenses related to the Audit as well as expenses incurred to
present the financial statements in accordance with GAAP and all schedules
related thereto.
c. Each of the Company and Vision 21
shall pay the costs and expenses of their own legal counsel with respect to
legal services rendered in connection with the preparation and negotiation of
this Agreement and the transactions contemplated hereby.
d. In the event that an Initial Public
Offering does not take place for any reason whatsoever, Vision 21 (but not the
Company or the Physician) shall have sole responsibility for the payment of all
legal fees (except as set forth in Section 9.3(c)), accounting fees (except as
set forth in Section 9.3(c)), underwriters' expenses and other fees, costs and
expenses associated solely in connection with the preparation of any
Registration Statement relating to such Initial Public Offering.
e. If any Initial Public Offering is
consummated as contemplated by this Agreement, all legal fees, audit fees,
printing costs, filing fees, blue sky fees and
44
<PAGE> 59
underwriters' discounts and fees associated solely with the Initial Public
Offering shall be paid by Vision 21 from the proceeds of the Initial Public
Offering, except for those expenses, fees and underwriters' discounts related
to any shares sold by the Physician.
9.4. Release of Physician From Practice Liabilities.
Vision 21 shall use its best efforts to obtain the release of the Physician
from any liabilities relating to the Practice of which the Physician and the
Company are jointly obligated which are set forth on Schedule 9.4.
10. CONDITIONS PRECEDENT OF VISION 21. Except as may be waived
in writing by Vision 21, the obligations of Vision 21 hereunder are subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions precedent:
10.1. Representations and Warranties. The
representations and warranties of the Company and the Physician contained
herein shall have been true and correct in all material respects when initially
made and shall be true and correct in all material respects as of the Closing
Date.
10.2. Covenants. The Company and the Physician shall
have performed and complied in all material respects with all covenants
required by this Agreement to be performed and complied with by the Company or
the Physician prior to the Closing Date.
10.3. Legal Opinion. Counsel to the Company and the
Physician shall have delivered to Vision 21 their opinions, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 10.3 which
Vision 21, Vision 21's counsel, the underwriters of the Initial Public Offering
and their counsel shall be permitted to rely upon.
10.4. Proceedings. No action, proceeding or order by
any court or governmental body or agency shall have been threatened orally or
in writing, asserted, instituted or entered to restrain or prohibit the
carrying out of the transactions contemplated hereby.
10.5. No Material Adverse Change. No material adverse
change in the condition (financial or otherwise), operations, assets,
liabilities or business of the Company shall have occurred since the Company
Balance Sheet Date, whether or not such change shall have been caused by the
deliberate act or omission of the Company or the Physician.
10.6. Government Approvals and Required Consents. The
Company, the Physician and Vision 21 shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Company or any of its
employees are a party).
10.7. Certification. Neither the Company nor the
Physician shall have received any notice of or been made a party to any
judicial or administrative proceeding, or
45
<PAGE> 60
threatened to so be made a party, in any action or proceeding that seeks to
deny the continued use or receipt of any necessary permit, license,
authorization, certification or approval under the Medicare and Medicaid
programs to provide ophthalmology or optometry services.
10.8. Closing Deliveries. Vision 21 shall have
received all documents and agreements, duly executed and delivered in form
reasonably satisfactory to Vision 21, referred to in Section 12.1.
10.9. Due Diligence. Vision 21 shall have completed to
its satisfaction a due diligence review of the Company and the Physician.
10.10. Financial Audit. Vision 21 shall have approved
in Vision 21's sole discretion an audit of the Company and the Practice which
audit shall have been performed by an accounting firm designated by Vision 21
at the sole expense of Vision 21.
10.11. Medicare Audit. Vision 21 shall have approved in
Vision 21's sole discretion a Medicare audit of the Company and the Practice
which audit shall be at the sole expense of Vision 21.
10.12. Exemption Under State Securities Laws. The
transfer of Vision 21's Securities to the Physician as contemplated in this
Agreement shall qualify for one or more exemptions from registration under the
State's securities laws. Vision 21 shall pay all filing fees in connection
with any filing required to qualify the transfer of the Securities for such
exemption(s).
10.13. Assignment of Professional Employees' Rights in
Accounts Receivable. The Company shall have caused the Professional Employees
to assign any and all of their rights with respect to Accounts Receivable to
Vision 21 and shall cause such Professional Employees to execute such other
agreements and instruments as contemplated in Section 7.18.
11. CONDITIONS PRECEDENT OF THE COMPANY AND THE PHYSICIAN.
Except as may be waived in writing by the Company and the Physician, the
obligations of the Company and the Physician hereunder are subject to
fulfillment at or prior to the Closing Date of each of the following conditions
precedent:
11.1. Representations and Warranties. The
representations and warranties of Vision 21 contained herein shall be true and
correct in all respects when initially made and shall be true and correct in
all material respects as of the Closing Date.
11.2. Covenants. Vision 21 shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by it prior to the Closing
Date.
46
<PAGE> 61
11.3. Legal Opinions. Counsel to Vision 21 shall have
delivered to the Company and the Physician their opinion, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 11.3.
11.4. Proceedings. No action, proceeding or order by
any court or governmental body or agency shall have been threatened in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
11.5. Government Approvals and Required Consents. The
Company, the Physician and Vision 21 shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Company or any of its
employees are a party).
11.6. Closing Deliveries. The Company and the
Physician shall have received all documents, instruments and agreements, duly
executed and delivered in form reasonably satisfactory to the Company, referred
to in Section 12.2.
11.7. No Change in Voting or Ownership Control. There
shall have been no changes in the voting or ownership control of Vision 21 from
the date first above written to the Closing Date.
11.8. No Material Adverse Change; Delivery of Amended
Confidential Information Memorandum. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of Vision 21 shall have occurred since the end of the last fiscal period
reported in the Vision 21 Financial Statements, whether or not such change
shall have been caused by the deliberate act or omission of Vision 21. Vision
21 shall deliver an amended Confidential Information Memorandum updating the
information contained in the initial Confidential Information Memorandum on or
before December 1996, and the Company and the Physician shall have the right
not to close the transactions contemplated in this Agreement if they determine,
based upon their review of the amended Confidential Information Memorandum,
that a material adverse change has occurred with respect to the condition
(financial or otherwise), operations, assets, liabilities or business of Vision
21.
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS.
12.1. Deliveries of the Company and the Physician. At
or prior to December 24, 1996, the Company and the Physician shall deliver to
Vision 21, c/o Shumaker, Loop & Kendrick, LLP, counsel to Vision 21, the
following, all of which shall be in a form reasonably satisfactory to Vision 21
and shall be held by Shumaker, Loop & Kendrick, LLP in escrow pending Closing,
pursuant to an escrow agreement or letter in form and substance mutually
acceptable to the parties hereto:
47
<PAGE> 62
a. a copy of resolutions of the Board of
Directors of the Company authorizing (i) the execution, delivery and
performance of this Agreement and all related documents and agreements, and
(ii) the consummation of the Transaction, certified by the Secretary of the
Company as being true and correct copies of the originals thereof subject to no
modifications or amendments;
b. a certificate of the President of the
Company, and of the Physician, dated the Closing Date, as to the truth and
correctness of the representations and warranties of the Company and the
Physician contained herein, on and as of the Closing Date;
c. a certificate of the President of the
Company, and of the Physician, dated the Closing Date, (i) as to the
performance of and compliance in all material respects by the Company and the
Physician with all covenants contained herein on and as of the Closing Date and
(ii) certifying that all conditions precedent of the Company and the Physician
to the Closing have been satisfied;
d. a certificate of the Secretary of the
Company certifying as to the incumbency of the directors and officers of each
such corporation and as to the signatures of such directors and officers who
have executed documents delivered pursuant to the Agreement on behalf of each
such corporation;
e. a certificate, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the state of
incorporation for the Company establishing that the Company is in existence,
has paid all franchise or similar taxes, if any, and, if applicable, otherwise
is in good standing to transact business in its state of organization;
f. certificates, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the states in
which the Company is qualified to do business, to the effect that the Company
is qualified to do business and, if applicable, is in good standing as a
foreign corporation in each of such states;
g. an opinion of counsel to the Company
and Physicians dated as of the Closing Date, in form and substance satisfactory
to Vision 21, which Vision 21, Vision 21's counsel and the underwriters of any
Initial Public Offering and their counsel are permitted to rely upon and which
shall include an opinion, subject to normal and customary exceptions that to
the best of their knowledge the transactions and arrangements contemplated by
this Agreement are in conformity with State laws, rules and regulations
governing the practice of medicine.
h. such appropriate documents of
transfer, including bills of sale, endorsements, assignments, drafts, checks or
other instruments, as to all of the Nonmedical Assets, and any other
appropriate instruments in such reasonable or customary form as shall be
requested by Vision 21 and its counsel;
48
<PAGE> 63
i. such instruments satisfactory to
Vision 21 that all liens, claims, pledges, security interests and other
encumbrances on all of the Nonmedical Assets have been released;
j. all authorizations, consents, permits
and licenses referenced in Section 3.5;
k. the executed Business Management
Agreement in substantially the form attached hereto as Exhibit 12.1 (k), as
revised in accordance with changes reasonably deemed necessary or advisable by
legal counsel retained by Vision 21 in the State to address regulatory and
compliance issues;
l. an executed Physician Employment
Agreement between the Company and the Physician in substantially the form
attached hereto as Exhibit 12.1 (l);
m. an executed Physician Employment
Agreement between the Company and each Physician Employee who is then an
employee of the Company in substantially the form attached hereto as Exhibit
12.1 (m);
n. an executed Optometrist Employment
Agreement between the Company and each Optometrist Employee who is then an
employee of the Company in substantially the form attached hereto as Exhibit
12.1 (n);
o. an executed Registration Rights
Agreement between Vision 21 and the Company in substantially the form attached
hereto as Exhibit 12.1 (o) (the "Registration Rights Agreement");
p. a non-foreign affidavit, as such
affidavit is referred to in Section 1445 (b) (2) of the Code, of the Physician,
signed under a penalty of perjury and dated as of the Closing Date, to the
effect that the Physician is a United States citizen or a resident alien (and
thus not a foreign person) and providing the Physician's United States taxpayer
identification number;
q. an assignment to Vision 21 of each
lease for real property described on Schedule 2.1(d) (the "Lease Assignments"),
or if desired by Vision 21, a new lease or leases between the landlords under
such leases and Vision 21 in form and substance reasonably satisfactory to
Vision 21; and
r. such other instrument or instruments
of transfer prepared by Vision 21 as shall be necessary or appropriate, as
Vision 21 or its counsel shall reasonably request, to carry out and effect the
purpose and intent of this Agreement.
49
<PAGE> 64
12.2. Deliveries of Vision 21. At or prior to December
24, 1996, Vision 21 shall deliver to the Company and the Physician, c/o
Shumaker, Loop & Kendrick, LLP, counsel to Vision 21, the following, all of
which shall be in a form reasonably satisfactory to the Company and the
Physician and shall be held by Shumaker, Loop & Kendrick, LLP in escrow pending
Closing, pursuant to an escrow agreement or letter in form and substance
mutually acceptable to the parties hereto:
a. a copy of the resolutions of the Board
of Directors of Vision 21 authorizing (i) the execution, delivery and
performance of this Agreement, and all related documents and agreements, and
(ii) the consummation of the Transaction, certified by Vision 21's Secretary as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
b. a certificate of an officer of Vision
21 dated the Closing Date as to the truth and correctness of the
representations and warranties of Vision 21 contained herein, on and as of the
Closing Date;
c. a certificate of an officer of Vision
21 dated the Closing Date, (i) as to the performance and compliance of Vision
21 with all covenants contained herein on and as of the Closing Date and (ii)
certifying that all conditions precedent of Vision 21 to the Closing have been
satisfied;
d. a certificate, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the State of
Florida establishing that Vision 21 is in existence, has paid all franchise or
similar taxes, if any, and, if applicable, otherwise is in good standing to
transact business in such state;
e. certificates (or photocopies thereof),
dated within ten (10) days prior to the Closing Date, of the Secretary of State
of each state in which Vision 21 is qualified to do business, to the effect
that Vision 21 is qualified to do business and, if applicable, is in good
standing as a foreign corporation in each of such states;
f. an opinion of Shumaker, Loop &
Kendrick, LLP, counsel to Vision 21, dated as of the Closing Date, pursuant to
Section 11.3;
g. the executed Registration Rights
Agreement;
h. the executed Lease Assignments;
i. the Note in the original principal
amount set forth in this Agreement;
j. the Agreement to Continue Practice
After Transfer Event and Stock Pledge; and
50
<PAGE> 65
k. such other instrument or instruments
of transfer, prepared by the Company or the Physician as shall be necessary or
appropriate, as the Company, the Physician or their counsel shall reasonable
request, to carry out and effect the purpose and intent of this Agreement.
12.3. Release of Escrow Materials. Shumaker, Loop &
Kendrick, LLP shall release the agreements, certificates, instruments,
documents and other materials described in Sections 12.1 and 12.2 to the
appropriate parties to effectuate the transactions contemplated in this
Agreement only after all such materials have been delivered by all applicable
parties (or the parties receiving such documents have waived in writing such
delivery requirement) and after counsel for the Physician and the Company have
sent written notice to Shumaker, Loop & Kendrick, LLP stating that the
Physician and the Company have reviewed the amended Confidential Information
Memorandum and have decided, based upon such review, to consummate the
transactions contemplated in this Agreement. In the event that the Physician
and the Company elect not to consummate the transactions contemplated in this
Agreement based upon their review of the amended Confidential Information
Memorandum, and counsel for the Physician and the Company informs Shumaker,
Loop & Kendrick, LLP in writing as to such decision, Shumaker, Loop & Kendrick,
LLP shall promptly return the foregoing materials to the parties sending such
materials.
13. POST CLOSING MATTERS.
13.1. Further Instruments of Transfer. From and after
the Closing Date, at the request of Vision 21 and at Vision 21's sole cost and
expense, the Physician and the Company shall deliver any further instruments of
transfer and take all reasonable action as may be necessary or appropriate to
carry out the purpose and intent of this Agreement.
13.2. Practice Advisory Council; Local Advisory
Council; National Appeals Council. Vision 21 and the Company shall establish a
practice advisory council composed of delegates from Vision 21 and the Company
which shall advise Vision 21 and the Company and determine certain issues as
more fully described in the Business Management Agreement. Vision 21 shall
also establish a local advisory council composed of delegates from certain
practice groups acquired by Vision 21 in connection with the Related
Acquisitions. Such delegates shall be appointed from practice groups which are
located in a market area to be identified by Vision 21 and in which the Company
is located. The local advisory council board shall advise Vision 21 and the
practice groups within the market area as to policy and strategy issues and
shall determine certain types of issues and disputes between Vision 21 and such
practice groups which issues and disputes are identified in the Business
Management Agreement and other management agreements entered into between
Vision 21 and practice groups. The Company shall have the right to appoint one
(1) member to a local advisory council who shall serve an initial two (2) year
term. After the initial two-year term, election of members to the local
advisory council shall be in accordance with by-laws which shall be adopted and
amended by the local advisory council. Vision 21 shall also establish a
national appeals council which shall have, among other duties and
responsibilities, the power to adopt and amend its by-laws,
51
<PAGE> 66
to review and approve as limited herein certain decisions of the local advisory
councils, and to resolve deadlocks among the members of such local advisory
councils.
14. REMEDIES.
14.1. Indemnification by the Company and Physician.
Subject to the terms and conditions of this Agreement, the Company and the
Physician, jointly and severally, agree to indemnify, defend and hold Vision 21
and its directors, officers, members, managers, employees, agents, attorneys
and affiliates harmless from and against all losses, claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, reasonable
attorneys' fees and expenses (collectively, "Damages") asserted against or
incurred by such entities and individuals (including, but not limited to, any
reduction in payments to or revenues of the Company) arising out of or
resulting from:
a. a breach of any representation,
warranty or covenant of the Company or the Physician contained herein or in any
schedule or certificate delivered hereunder;
b. any liability under the Securities
Act, the Exchange Act or any other federal or state "Blue Sky" or securities
law or regulation, at common law or otherwise, (i) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact relating to
the Physician or the Company (including its subsidiaries, if any), and provided
to Vision 21 or its counsel by the Company or the Physician, specifically for
inclusion in a Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, (ii) arising out of or based
upon any omission or alleged omission to state therein a material fact relating
to the Physician or the Company (including its subsidiaries, if any) required
to be stated therein or necessary to make the statements therein not
misleading, and not provided to Vision 21 or its counsel by the Company or the
Physician, provided, however, that such indemnity shall not inure to the
benefit of Vision 21 to the extent that such untrue statement (or alleged
untrue statement) was made, in, or omission (or alleged omission) occurred in,
any preliminary prospectus, and such information was not so included by Vision
21 and properly delivered to shareholders of Vision 21 who acquire Vision 21
Common Stock in any Initial Public Offering;
c. any filings, reports or disclosures
made pursuant to the IRS Voluntary Compliance Resolution Program, if
applicable; and
d. any liability arising from any alleged
unlawful sale or offer to sell or transfer any of the Common Stock by
Physician.
14.2. Indemnification by Vision 21. Subject to the
terms and conditions of this Agreement, Vision 21 hereby agrees to indemnify,
defend and hold the Company and the Physician harmless from and against all
damages asserted against or incurred by it or him arising out of or resulting
from:
52
<PAGE> 67
a. a breach by Vision 21 of any
representation, warranty or covenant of Vision 21 contained therein or in any
schedule or certificate delivered hereunder;
b. any liability under the Securities
Act, the Exchange Act or any other federal or state "Blue Sky" or securities
law or regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
Vision 21, contained in any preliminary prospectus, Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to Vision 21 (including its subsidiaries),
required to be stated therein or necessary to make the statements therein not
misleading; and
c. any filings, reports or disclosures
made pursuant to the IRS Voluntary Compliance Resolution Program, if
applicable.
Notwithstanding anything in this Section 14.2, Vision 21 shall not be
liable for any Damages resulting from any matter not disclosed to Vision 21 by
any of the third parties to be acquired by Vision 21 in connection with the
Related Acquisitions.
14.3. Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
a. A party claiming indemnification under
this Agreement (an "Indemnified Party") shall promptly (and, in any event, at
least ten (10) days prior to the due date for any responsive pleadings, filings
or other documents) (i) notify the party from whom indemnification is sought
(the "Indemnifying Party") of any third-party claim or claims asserted against
the Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying
Party a written notice ("Claim Notice") describing in reasonable detail the
nature of the Third Party Claim, a copy of all papers served with respect to
such claim (if any), an estimate of the amount of damages attributable to the
Third Party Claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. Except as set forth in Section 14.6, the
failure to promptly deliver a Claim Notice shall not relieve the Indemnifying
Party of its obligations to the Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of such claim. Within thirty (30) days after
receipt of any Claim Notice (the "Election Period"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article 14 with
respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
b. If the Indemnifying Party notifies the
Indemnified Party within the Election Period that the Indemnifying Party elects
to assume the defense of the Third Party Claim, then the Indemnifying Party
shall have the right to defend, at its sole cost and
53
<PAGE> 68
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this Section 14.3(b). The Indemnifying Party shall have full control of
such defense and proceedings, including any compromise or settlement thereof.
The Indemnified Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party (but only if the Indemnified Party is entitled to
indemnification hereunder), to file, during the Election Period, any motion,
answer or other pleadings that the Indemnified Party shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party and not
prejudicial to the Indemnifying Party (it being understood and agreed that if
an Indemnified Party takes any such action that is prejudicial and causes a
final adjudication that is adverse to the Indemnifying Party, the Indemnifying
Party shall be relieved of its obligations hereunder with respect to such Third
Party Claim). If requested by the Indemnifying Party, the Indemnified Party
agrees, at the sole cost and expense of the Indemnifying Party, to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without limitation,
the making of any related counterclaim against the person asserting the Third
Party Claim or any cross-complaint against any person. The Indemnified Party
may participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to Section 14.3(b)
and shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnified Party has been advised by counsel that there may be
one or more legal defenses available to it that are different from or
additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and
upon written notification thereof, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of the Indemnified Party;
provided further that the Indemnifying Party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys at any time for the Indemnified Party, which firm shall be
designated in writing by the Indemnified Party.
c. If the Indemnifying Party fails to
notify the Indemnified Party within the Election Period that the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 14.3(b), or if
the Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 14.3(b) but fails diligently and promptly to prosecute or settle the
Third Party Claim, then the Indemnified Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party (if the Indemnified
Party is entitled to indemnification hereunder), the Third Party Claim by all
appropriate proceedings, which proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or settled. The
Indemnified Party shall have full control of such defense and proceedings,
provided, however, that the Indemnified Party may not enter into, without the
Indemnifying Party's consent, which shall not be unreasonably withheld, any
compromise or settlement of such Third Party Claim. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written
54
<PAGE> 69
notice to the Indemnified Party to the effect that the Indemnifying Party
disputes its potential liability to the Indemnified Party under this Article 14
and if such dispute is resolved in favor of the Indemnifying Party, the
Indemnifying Party shall not be required to bear the costs and expenses of the
Indemnifying Party's defense pursuant to this Section or of the Indemnifying
Party's participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all costs
and expenses of such litigation. The Indemnifying Party may participate in,
but not control any defense or settlement controlled by the Indemnified Party
pursuant to this Section 14.3(c), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation; provided, however, that
if the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party, and the
Indemnifying Party has been advised by counsel that there may be one or more
legal defenses available to the Indemnified Party, then the Indemnifying Party
may employ separate counsel and upon written notification thereof, the
Indemnified Party shall not have the right to assume the defense of such action
on behalf of the Indemnifying Party.
d. In the event any Indemnified Party
should have a claim against any Indemnifying Party hereunder that does not
involve a Third Party Claim, the Indemnified Party shall transmit to the
Indemnifying Party a written notice (the "Indemnity Notice") describing in
reasonable detail the nature of the claim, an estimate of the amount of damages
attributable to such claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not
notify the Indemnified Party within sixty (60) days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim, the claim
specified by the Indemnified Party in the Indemnity Notice shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed such claim, as provided above, such dispute shall be resolved
by mediation or arbitration as provided in Section 18.1 if the parties do not
reach a settlement of such dispute within thirty (30) days after notice of a
dispute is given.
e. Payments of all amounts owing by an
Indemnifying Party pursuant to this Article 14 relating to a Third Party Claim
shall be made within thirty (30) days after the latest of (i) the settlement of
such Third Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of such Third Party Claim or (iii) the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 14.3(d) shall be made within thirty (30)
days after the later of (i) the expiration of the sixty (60) day Indemnity
Notice period or (ii) the expiration of the period for appeal, if any, of a
final adjudication or arbitration of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
14.4. Remedies Not Exclusive. The remedies provided in
this Agreement shall not be exclusive of any other rights or remedies available
to one party against the other, either at law or in equity. This Article 14
regarding indemnification shall survive Closing.
55
<PAGE> 70
14.5. Costs, Expenses and Legal Fees. Each party
hereto agrees to pay the costs and expenses (including attorneys' fees and
expenses) incurred by the other parties in successfully (a) enforcing any of
the terms of this Agreement, or (b) proving that another party breached any of
the terms of this Agreement.
14.6. Indemnification Limitations. Notwithstanding the
provisions of Sections 14.1 and 14.2, (a) no party shall be required to
indemnify another party with respect to a breach of a representation, warranty
or covenant unless the claim for indemnification is brought within two (2)
years after the Closing Date, except that a claim for indemnification for a
breach of the representations and warranties contained in Sections 3.1, 3.2.,
3.3, 3.11, 3.14, 3.20, 4.3, 4.5, 4.8, 5.1, 5.2, 5.3, 5.4 and 6.1 may be made at
any time, and a claim for indemnification for a breach of the representations
and warranties contained in Sections 3.9, 3.15, 3.17, 3.18, 3.24, 3.25, 3.26,
3.27, 3.28, 3.30, 4.1, 4.4, 4.6, 5.6 and 5.7 may be made at any time within the
applicable statute of limitations; (b) indemnification based upon Sections
14.1(b) through (d) and 14.2(b) may be made at any time within the applicable
statute of limitations; and (c) the Physician shall not be required to
indemnify Vision 21 pursuant to Section 16.1 unless, and to the extent that,
the aggregate amount of Damages incurred by Vision 21 shall exceed an amount
equal to two percent (2%) of the total Purchase Price; and (c) the Physician
shall not be required to indemnify Vision 21 with respect to a breach of a
representation, warranty or covenant for Damages in excess of the aggregate
Purchase Price received by the Physician (other than pursuant to a requirement
to indemnify Vision 21 under Sections 3.27 or 3.28, or unless the breach
involves an intentional breach or fraud by the Physician or the Company which
shall be unlimited).
14.7. Tax Benefits; Insurance Proceeds. The total
amount of any indemnity payments owed by one party to another party to this
Agreement shall be reduced by any correlative tax benefit received by the party
to be indemnified or the net proceeds received by the party to be indemnified
with respect to recovery from third parties or insurance proceeds and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
14.8. Payment of Indemnification Obligation. In the
event that the Physician has an indemnification obligation to Vision 21
hereunder, subject to Vision 21's approval as set forth below, the Physician
may satisfy such obligation by transferring to Vision 21 such number of shares
of Vision 21 Common Stock owned by the Physician having an aggregate fair
market value (which is prior to any Initial Public Offering based upon the
valuation given at Closing hereof or after an Initial Public Offering the fair
market value at such time based on the last reported sale price of Vision 21
Common Stock on a principal national securities exchange or other exchange on
which the Vision 21 Common Stock is then listed or the last quoted ask price on
any over-the-counter market through which the Vision 21 Common Stock is then
quoted on the last trading day immediately preceding the day on which the
Physician transfers shares of Vision 21 Common Stock to Vision 21 hereunder)
equal to the indemnification obligation, provided that each of the following
conditions are satisfied:
56
<PAGE> 71
a. The Physician shall transfer to Vision
21 good, valid and marketable title to the shares of Vision 21 Common Stock,
free and clear of all adverse claims, security interests, liens, claims,
proxies, options, stockholders' agreements and encumbrances;
b. The Physician shall make such
representation and warranties as to title to the stock, absences of security
interests, liens, claims, proxies, stockholders' agreements and other
encumbrances and other matters as reasonably requested by Vision 21; and
c. The other terms and conditions of any
transaction contemplated pursuant to this Section and the effects thereof,
including any legal or tax consequences, shall be reasonably satisfactory to
Vision 21.
15. TERMINATION.
15.1. Termination. This Agreement may be terminate
and the Transaction may be abandoned:
a. at any time prior to the Closing Date
by mutual agreement of all parties;
b. at any time prior to the Closing Date
by Vision 21 if any representation or warranty of the Company or the Physician
contained in this Agreement or in any certificate or other document executed
and delivered by the Company or the Physician pursuant to this Agreement is or
becomes untrue or breached in any material respect or if the Company or the
Physician fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
c. at any time prior to the Closing Date
by the Company if any representation or warranty of Vision 21 contained in this
Agreement is or becomes untrue in any material respect or if Vision 21 fails to
comply in any material respect with any covenant or agreement contained herein,
and any such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt or written notice thereof;
d. at any time prior to the Closing Date
by the Company in the event of the failure of any of the conditions precedent
set forth in Article 13 of this Agreement;
e. at any time prior to the Closing Date
by Vision 21 in the event of the failure of any of the conditions precedent set
forth in Article 12 of this Agreement;
f. by Vision 21 if at any time prior to
the Closing Date, Vision 21 deems termination to be advisable, provided,
however, that if Vision 21 exercises its right to terminate this Agreement
under this subsection, Vision 21 shall reimburse the Company and the Physician
for all reasonable attorneys' and accountants' fees incurred by the Company
57
<PAGE> 72
and the Physician in connection with this Agreement; provided that Vision 21
shall only reimburse the Company and the Physician up to an aggregate maximum
amount of One Hundred Thousand and No/100 Dollars ($100,000.00) for such fees;
or
g. by Vision 21 or the Company if the
Transaction shall not have been consummated by December 5, 1996.
15.2. Effect of Termination. In the event this
Agreement is terminated pursuant to Section 15.1, Vision 21, the Company and
the Physician, shall each be entitled to pursue, exercise and enforce any and
all remedies, rights, powers and privileges available at law or in equity,
subject to the limitations set forth in Section 15.1. In the event of a
termination of this Agreement under the provisions of this Article 15, a party
not then in material breach of this Agreement shall stand fully released and
discharged of any and all obligations under this Agreement.
16. PHYSICIAN EMPLOYMENT AGREEMENT.
16.1. Physician Employment Agreement. The parties
acknowledge that in accordance with the terms of this Agreement, Physician, as
employee, and the Company, as employer, have entered into the Physician
Employment Agreement and that Vision 21 is entitled to enforce such Physician
Employment Agreement as an intended third party beneficiary. Physician and
Vision 21 acknowledge that Vision 21 would suffer severe harm in the event of
Physician's resignation prior to the expiration of the five (5) year term of
such Physician Employment Agreement (without first obtaining the written
consent of Vision 21) or a breach or default of Physician's obligations under
such Physician Employment Agreement, and Physician, the Company and Vision 21
agree that Vision 21 shall be entitled to recover from Physician any and all
damages incurred by Vision 21 caused by such resignation, breach or default.
Notwithstanding the foregoing, Vision 21 shall not be entitled to recover its
damages caused by such resignation, breach or default if such resignation,
breach or default was caused by: (i) the death or disability of Physician,
(ii) circumstances not caused by an act or omission of Physician and which
circumstances are beyond his control, or (iii) loss of Physician's license to
practice as an ophthalmologist, unless such loss of license is due to an act or
omission of Physician. Notwithstanding the foregoing, Physician shall have no
obligation to pay the damages contemplated in this Section 16.1 if (a) the
Business Management Agreement has been terminated pursuant to a material breach
by Vision 21, or (b) Physician cures any such breach or default of the
Physician Employment Agreement within a period of thirty (30) days after notice
from Vision 21 of such breach or default.
16.2. Survival. The parties acknowledge and agree that
this Article 16 shall survive the Closing of the transactions contemplated
herein.
58
<PAGE> 73
17. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.
17.1. Physician and Company Non-Competition Covenant.
a. The Physician and the Company
recognize that the covenants of the Physician and the Company contained in this
Section 17.1 are an essential part of this Agreement and that, but for the
agreement of the Physician and the Company to comply with such covenants,
Vision 21 would not have entered into this Agreement. The Physician and the
Company acknowledge and agree that the Physician's and the Company's covenants
not to compete are necessary to ensure the continuation of the Management
Business (as defined below) and are necessary to protect the reputation of
Vision 21, and that irreparable and irrevocable harm and damage will be done to
Vision 21 if the Physician or the Company compete with the Management Business
or Vision 21. The Physician and the Company accordingly agree that for the
periods set forth in the Business Management Agreement the Physician and the
Company shall not:
i) directly or indirectly,
either as principal, agent, independent contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner or in any other
individual or representative capacity whatsoever, either for the Physician's or
the Company's own benefit or for the benefit of any other person or entity
knowingly (A) hire, attempt to hire, contact or solicit with respect to hiring
any employee of Vision 21 (or of any of its direct or indirect subsidiaries) or
(B) induce or otherwise counsel, advise or encourage any employee of Vision 21
(or of any of its direct or indirect subsidiaries) to leave the employment of
Vision 21;
ii) act or serve, directly or
indirectly, as a principal, agent, independent contractor, consultant,
director, officer, employee, employer or advisor or in any other position or
capacity with or for, or acquire a direct or indirect ownership interest in or
otherwise conduct (whether as stockholder, partner, investor, joint venturer,
or as owner of any other type of interest), any Competing Management Business
as such term is defined herein; provided, however, that this clause (ii) shall
not prohibit the Physician or the Company from being the owner of up to 1% of
any class of outstanding securities of any company or entity if such class of
securities is publicly traded; or
iii) directly or indirectly,
either as principal, agent, independent, contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner or in any other
individual or representative capacity whatsoever, either for the Physician's or
the Company's own benefit or for the benefit of any other person or entity,
call upon or solicit any customers or clients of the Management Business;
provided however, that the Physician may send out a general notice to the
customers or clients of the Management Business announcing the termination of
his arrangement with Vision 21 and may advertise in a general manner without
violating this covenant. The parties hereto acknowledge and agree that for
purposes of this Section, patients which have in the past received medical or
optometric care
59
<PAGE> 74
from the Company and/or shall in the future receive medical or optometric care
from the Company are not deemed to be customers or clients of the Management
Business.
b. For the purposes of this Section 17.1,
the following terms shall have the meaning set forth below:
i) "Management Business" shall
mean management and administration of the non-medical aspects of medical,
ophthalmology and optometry practices.
ii) "Competing Management
Business" shall mean an individual, business, corporation, association, firm,
undertaking, company, partnership, joint venture, organization or other entity
that either (A) conducts a business substantially similar to the Management
Business within the State, or (B) provides or sells a service which is the same
or substantially similar to, or otherwise competitive with the services
provided by the Management Business within the State; provided, however, that
"Competing Management Business" shall not include Vision 21, or the Physician's
internal management and administration of the Physician's or the Company's
medical practice or participation in the management and administration of a
physician group in which the Physician or the Company devote a significant
amount of time to the practice of medicine.
c. Should any portion of this Section
17.1 be deemed unenforceable because of the scope, duration or territory
encompassed by the undertakings of the Physician or the Company hereunder, and
only in such event, then the Physician, the Company and Vision 21 consent and
agree to such limitation on scope, duration or territory as may be finally
adjudicated as enforceable by a court of competent jurisdiction after the
exhaustion of all appeals.
d. This covenant shall be construed as an
agreement ancillary to the other provisions of this Agreement, and the
existence of any claim or cause of action of the Physician or the Company
against Vision 21, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Vision 21 of this covenant;
provided, however, that the Physician and the Company shall not be bound by
this covenant and shall not be obligated to pay the liquidated damages
contemplated in this Section 17.1 if at the time of a breach of this covenant
the Business Management Agreement has already been terminated pursuant to
Section 6.2(a) thereof. Without limiting other possible remedies to Vision 21
for breach of this covenant, the Physician and the Company agree that
injunctive or other equitable relief will be available to enforce the covenants
of this provision, such relief to be without the necessity of posting a bond,
cash or otherwise. The Physician, the Company and Vision 21 further expressly
acknowledge that the damages that would result from a violation of this
non-competition covenant would be impossible to predict with any degree of
certainty, and agree that liquidated damages in the aggregate amount of the
aggregate consideration received by the Physician pursuant to this Agreement is
reasonable in light of the severe harm to the Management Business and Vision 21
which would result in the event that a violation of this non-competition
covenant were to occur. For purposes of calculation of the liquidated damages
60
<PAGE> 75
contemplated in this Section and for purposes of calculation of the liquidated
damages contemplated in the Business Management Agreement and the Physician
Employment Agreement between the Physician and the Company, the aggregate
consideration received by Physician and the Company pursuant to this Agreement
shall be in those amounts and in such form as set forth in Schedule 17.1. If
the Physician violates this non-competition covenant, Vision 21 shall, in
addition to all other rights and remedies available at law or equity, be
entitled to (a) cancel the number of shares of Common Stock held by the
Physician or the Company or, with respect to shares of Common Stock entitled to
be received by the Physician or the Company, terminate its obligation to
deliver such number of shares of Common Stock, valued as set forth in Section
6.6(a) of the Business Management Agreement, (b) set off all or any of such
liquidated damages sum against amounts payable under the Note held by the
Physician or the Company, and (c) repayment by Physician to Vision 21 of the
fair market value as described above, of Vision 21 Common Stock sold by
Physician; but in no event shall Vision 21 be entitled to offset amounts in
excess of the liquidated damages sum pursuant to this Section 17.1. The
Physician and the Company agree to deliver to Vision 21 the certificates
representing any such shares canceled by Vision 21 or the Note. Payment and
satisfaction by Physician shall be made within sixty (60) days of notification
to Physician by Vision 21 that Physician has violated this non-competition
covenant.
e. Notwithstanding anything contained
herein, this Section 17.1 shall not be construed to (i) limit the freedom of
any patient of the Physician or the Company to choose the facility or physician
from whom such patient shall receive health-care services or (ii) limit or
interfere with the Physician's ability to exercise his professional medical
judgment in treating his patients or his ability to provide medical services to
his patients.
17.2. Physician and Company Confidentiality Covenant.
From the date hereof, the Physician and the Company shall not, directly or
indirectly, use for any purpose, other than in connection with the performance
of the Physician's duties under the Physician Employment Agreement with the
Company, or disclose to any third party, any information of Vision 21 or the
Company, as appropriate (whether written or oral), including any business
management or economic studies, patient lists, proprietary forms, proprietary
business or management methods, marketing data, fee schedules, or trade secrets
of Vision 21 or of the Company, as applicable, and including the terms and
provisions of this Agreement and any transaction or document executed by the
parties pursuant to this Agreement. Notwithstanding the foregoing, the
Physician and the Company may disclose information that the Physician or the
Company can establish (a) is or becomes generally available to and known by the
public or medical community (other than as a result of an unpermitted
disclosure directly or indirectly by the Physician or the Company or their
respective Affiliates, advisors, or representatives); (b) is or becomes
available to the Physician or the Company on a nonconfidential basis from a
source other than Vision 21 or its Affiliates, advisors or representatives,
provided that such source is not and was not bound by a confidentiality
agreement with or other obligation of secrecy to Vision 21 or its Affiliates,
advisors or representatives of which the Physician or the Company has
knowledge; or (c) has already been or is hereafter independently acquired or
developed by the Physician or the Company without violating any confidentiality
agreement with or other
61
<PAGE> 76
obligation of secrecy to Vision 21, the Company or their respective Affiliates,
advisors or representatives. Without limiting the other possible remedies to
Vision 21 for the breach of this covenant, the Physician and the Company agree
that injunctive or other equitable relief shall be available to enforce this
covenant, such relief to be without the necessity of posting a bond, cash or
otherwise. The Physician and the Company further agree that if any restriction
contained in this Section 17.2 is held by any court to be unenforceable or
unreasonable, a lesser restriction shall be enforced in its place and the
remaining restrictions contained herein shall be enforced independently of each
other.
17.3. Survival. The parties acknowledge and agree that
this Article 17 shall survive the Closing of the transactions contemplated
herein.
18. DISPUTES.
18.1. Mediation and Arbitration. Any dispute,
controversy or claim (excluding claims arising out of an alleged breach of
Article 17 of this Agreement) arising out of this Agreement, or the breach
thereof, that cannot be settled through negotiation shall be settled (a) first,
by the parties trying in good faith to settle the dispute by mediation under
the Commercial Mediation Rules of the AAA (such mediation session to be held in
Tampa, Florida, if the amount in dispute is equal to or in excess of $200,000
or if the dispute is solely of a non-monetary nature, and in Minneapolis,
Minnesota if the amount in dispute is lower than $200,000, and in either case
to commence within 15 days of the appointment of the mediator by the AAA), and
(b) if the controversy, claim or dispute cannot be settled by mediation, then
by arbitration administered by the AAA under its Commercial Arbitration Rules
(such arbitration to be held in Tampa, Florida, if the amount in dispute is
equal to or in excess of $200,000 or if the dispute is solely of a non-monetary
nature, and in Minneapolis, Minnesota if the amount in dispute is lower than
$200,000, and in either case before a single arbitrator and to commence within
15 days of the appointment of the arbitrator by the AAA), and judgment on the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
19. MISCELLANEOUS
19.1. Taxes. Physician and the Company shall pay all
transfer taxes, sales and other taxes and charges, imposed by the State, if
any, which may become payable in connection with the transactions and documents
contemplated hereunder (excluding any of such taxes which may be attributable
to services to be provided by Vision 21 under the Business Management
Agreement). Vision 21 shall pay all transfer taxes, sales and other taxes and
charges imposed by the State of Florida, if any, which may become payable in
connection with the transactions and documents contemplated hereunder
(excluding any of such taxes which may be attributable to services to be
provided by Vision 21 under the Business Management Agreement).
19.2. Remedies Not Exclusive. No remedy conferred by
any of the specific provisions of this Agreement or any document contemplated
by this Agreement is intended to
62
<PAGE> 77
be exclusive of any other remedy, and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver of the right to pursue other available remedies.
19.3. Parties Bound. Except to the extent otherwise
expressly provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
19.4. Notices. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to Vision 21 addressed to:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34777
Attn: Richard T. Welch, Chief Financial Officer
With copies to:
Shumaker, Loop & Kendrick
Post Office Box 172609
101 E. Kennedy Boulevard, Suite 2800
Tampa, Florida 33672-0609
Facsimile No. (813) 229-1660
Attn: Darrell C. Smith, Esquire
If to the Company and the Physician addressed to:
Lindstrom, Samuelson & Hardten
Ophthalmology Associates, P.A.
710 East 24th Street
Minneapolis, Minnesota 55404
Attn: Richard L. Lindstrom, M.D.
63
<PAGE> 78
With copies to:
Fredrikson & Byron, P.A.
900 2nd Avenue South
1100 International Center
Minneapolis, Minnesota 55402
Attn: Steve Beck, Esquire
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 19.4. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery
or refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
19.5. Choice of Law. This Agreement shall be
construed, interpreted, and the rights of the parties determined in accordance
with, the laws of the State of Florida except with respect to matters of law
concerning the internal affairs of any corporate or partnership entity which is
a party to or the subject of this Agreement, and as to those matters the law of
the state of incorporation or organization of the respective entity shall
govern.
19.6. Entire Agreement; Amendments and Waivers. This
Agreement, together with the documents contemplated by this Agreement and all
Exhibits and Schedules hereto and thereto, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof. No supplement, modification or
waiver of any of the provisions of this Agreement shall be binding unless it
shall be specifically designated to be a supplement, modification or waiver of
this Agreement and shall be executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
19.7. Confidentiality Agreements. The provisions of
any prior confidentiality agreements and letters of intent between or among
Vision 21, the Company and the Physician, as amended, shall terminate and cease
to be of any force or effect at and upon the Closing.
19.8. Reformation Clause. It is the intention of the
parties hereto to conform strictly to applicable laws regarding the practice
and regulation of medicine, whether such laws are now or hereafter in effect,
including the laws of the United States of America, the State or any other
applicable jurisdiction, and including any subsequent revisions to, or judicial
interpretations of, those laws, in each case to the extent they are applicable
to this Agreement (the "Applicable Laws"). Accordingly, if the ownership of
any Nonmedical Asset by Vision 21 violates any Applicable Law, then the parties
hereto agree as follows: (a) the provisions of this
64
<PAGE> 79
Section 19.8 shall govern and control; (b) if none of the parties hereto are
materially economically disadvantaged, then any Nonmedical Asset, the ownership
of which violates any Applicable Law, shall be deemed to have never been owned
by Vision 21; (c) if one or more of the parties hereto is materially
economically disadvantaged, then the parties hereto agree to negotiate in good
faith such changes to the structure and terms of the transactions provided for
in this Agreement as may be necessary to make these transactions, as
restructured, lawful under applicable laws and regulations, without materially
disadvantaging either party; (d) this Agreement shall be deemed reformed; and
(e) the parties to this Agreement shall execute and deliver all documents or
instruments necessary to effect or evidence the provisions of this Section
19.8.
19.9. Assignment. The Agreement may not be assigned by
operation of law or otherwise except that Vision 21 shall have the right to
assign this Agreement, at any time, to any Affiliate or direct or indirect
wholly-owned subsidiary. In the event of such assignment, Vision 21 shall
remain liable hereunder.
19.10. Attorneys' Fees. Except as otherwise
specifically provided herein, if any action or proceeding is brought by any
party with respect to this Agreement or the other documents contemplated with
respect to the interpretation, enforcement or breach hereof, the prevailing
party in such action shall be entitled to an award of all reasonable costs of
litigation or arbitration, including, without limitation, attorneys' fees, to
be paid by the losing party, in such amounts as may be determined by the court
having jurisdiction of such action or proceeding or by the arbitrators deciding
such action or proceeding.
19.11. Further Assurances. From time to time hereafter
and without further consideration, each of the parties hereto shall execute and
deliver such additional or further instruments of conveyance, assignment and
transfer and take such other actions as any of the other parties hereto may
reasonably request in order to more effectively consummate the transactions
contemplated hereunder or as shall be reasonably necessary or appropriate in
connection with the carrying out of the parties' respective obligations
hereunder for the purposes of this Agreement.
19.12. Announcements and Press Releases. Any press
releases or any other public announcements concerning this Agreement or the
transactions contemplated hereunder shall be approved in advance by Vision 21
and the Company; provided, however, that such approval shall not be
unreasonably withheld and if any party reasonably believes that it has a legal
obligation to make a press release and the consent of the other party cannot be
obtained, then the release may be made without such approval.
19.13. No Tax Representations. Each party acknowledges
that it is relying solely on its advisors to determine the tax consequences of
the transactions contemplated hereunder and that no representation or warranty
has been made by any party as to the tax consequences of such transactions
except as otherwise specifically set forth in this Agreement.
65
<PAGE> 80
19.14. No Rights as Stockholder. The Physician shall
have no rights as a stockholder with respect to any shares of Common Stock
until the issuance of a stock certificate evidencing such shares. Except as
otherwise provided in the Agreement, no adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to such
date any stock certificate is issued.
19.15. Multiple 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.
19.16. Headings. The headings of the several articles
and sections herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
19.17. Severability. Each article, section and
subsection of this Agreement constitutes a separate and distinct undertaking,
covenant or provision of this Agreement. If any such provision shall finally
be determined to be unlawful, such provision shall be deemed severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
19.18. Form of Transaction. If after the execution
hereof, Vision 21 determines that the sale of the Nonmedical Assets of the
Company can be better achieved through a different form of transaction without
economic injury to the Company or the Physician, or delay of the consummation
of the transaction, the Company and the Physician shall cooperate in revising
the structure of the transaction and shall negotiate in good faith to so amend
this Agreement; provided, that Vision 21 shall reimburse the Company and the
Physician at Closing for all reasonable additional expenses incurred by the
Company and the Physician as a result of such change in form.
[SIGNATURES ON FOLLOWING PAGE]
66
<PAGE> 81
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
"COMPANY"
LINDSTROM, SAMUELSON & HARDTEN
OPHTHALMOLOGY ASSOCIATES, P.A.
/s/ By:/s/ Richard L. Lindstrom
- ------------------------------------ -------------------------------
Witness Richard L. Lindstrom, President
/s/
- ------------------------------------
Witness
"PHYSICIAN"
/s/ /s/ Richard L. Lindstrom
- ------------------------------------ ------------------------------------
Witness Richard L. Lindstrom, M.D.
/s/ /s/ Thomas W. Samuelson
- ------------------------------------ ------------------------------------
Witness Thomas W. Samuelson, M.D.
/s/ /s/ David R. Hardten
- ------------------------------------ ------------------------------------
Witness David R. Hardten, M.D.
"VISION 21"
VISION 21, INC.
/s/ By:/s/ Theodore N. Gillette
- ----------------------------------- ------------------------------------
Witness Theodore N. Gillette, President
/s/
- -----------------------------------
Witness
67
<PAGE> 82
Schedule 2.1(c)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Personal Property Leases
1. Banc One Leases #1000042973 for Walman's slitlamp video system
and #1000037423 for same.
2. O.S. Leasing Lease #3785 for Mita Copier.
3. DVI Financial Services, Inc. - Lease for Yag Photodisruptor.
4. First United Leasing Corp. Lease for Sonamed A-scan.
<PAGE> 83
Schedule 2.1(d)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Real Property Leases
1. Lease Agreement dated July 1, 1996 between Allina Health
System, as Lessor, and Richard Lindstrom, M.D. Term: 60
months.
2. Lease Agreement dated 11/1/96 between Allina Health System for
Suite 107 of the Park Avenue Medical Office Building.
<PAGE> 84
Schedule 2.1(e)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Assumed Contracts
None
<PAGE> 85
Schedule 2.1(f)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Tangible Personal Property
Miscellaneous personal effects, including display cabinet contents,
Dr. Lindstrom's desk and cabinets in storage and plaques/wall
hangings, are not included.
See attached list.
[LIST OF TANGIBLE PERSONAL PROPERTY IS OMITTED.]
<PAGE> 86
Schedule 2.1(h)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Nonmedical Assets
None.
<PAGE> 87
Schedule 2.2
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Medical Assets
Medical records;
Patient lists;
Third-party payer contracts (except for rights to purchased
accounts receivable);
Eyeglasses, lenses and other eyewear;
Licenses, certificates of need, Medicare/Medicaid
certifications and other governmental authorizations necessary
to provide Professional Eye Care Services and to be paid
therefor by applicable third-party payers; and
Any other asset that legally cannot be owned by a party that
is not physician-owned by Vision 21.
<PAGE> 88
Schedule 2.2(b)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Personal Effects
Desk -- belongs to Richard L. Lindstrom, M.D.
Bookshelves -- All Books
1 Chair
All plaques and wall hangings
All personal gifts received by the Physician
<PAGE> 89
Schedule 2.3
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Assumed Obligations
All material obligations of the Company and the Physician except for:
1. Obligations transferred to Laser Vision Centers, Inc.
2. Obligations to Firstar Bank under the Company's line of credit
and term note.
3. Contracts for the lease of real and personal property for
which a consent to transfer has not been received.
4. Insurance contracts which require a consent to transfer and
for which such consent has not been received.
5. Third-party payor agreements.
<PAGE> 90
Schedule 2.4A
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Purchase Price
$460,416 in cash and 455,196 shares of Vision 21 common stock payable
pursuant to a Subordinated Promissory Note
<PAGE> 91
Schedule 2.8
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Purchase Price Allocation
To be completed after Purchase Price Adjustment
<PAGE> 92
Schedule 3
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Individuals - Best knowledge
representations and warranties of the Company
1. Richard L. Lindstrom, M.D.
2. Thomas W. Samuelson, M.D.
3. David R. Hardten, M.D.
4. Brenda Boff, Office Manager
<PAGE> 93
Schedule 3.1
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Capital Stock or other interest owned by the
Company, the Physician or any Professional
Employee in any Competitor
1. Dr. Lindstrom owns stock and/or warrants of the following
companies:
Omega Health Systems, Inc.
Eye Care International, Inc.
Midwest Ophthalmology Consultants, Inc.
Eye Network, Inc.
Laser Vision Centers, Inc.
Midwest Eye Care Alliance
Surjijet (Midwest Surgical Services, Inc.)
Data Site (formerly Refractive Surgery Services, Inc.)
2. Dr. Hardten owns securities of the following companies:
Laser Vision Centers, Inc.
Midwest Eye Care Alliance, Inc.
Midwest Ophthalmology Consultants, Inc.
Eye Network, Inc.
Data Site
Surgijet Midwest Surgical Services, Inc.
Lasersight
3. Dr. Samuelson owns securities of the following companies:
Midwest Eye Care Alliance, Inc.
Midwest Ophthalmology Consultants, Inc.
Eye Network, Inc.
<PAGE> 94
Schedule 3.2
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Sale, distribution, or spin-off of
significant assets of the Company or its
Affiliates within the last two years
The Company will transfer certain of its assets to Laser Vision
Centers, Inc. pursuant to a letter of intent dated December 5, 1996.
<PAGE> 95
Schedule 3.4
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Violations or conflicts resulting from
execution, delivery and consummation of
transaction by the Company
1. Allina Health Systems lease agreements for suites 106, 107 and
102 of the Park Avenue Medical Group Office Building.
2. Banc One Leases 1000042973 and 10000037423
3. O.S. Leasing Lease 3785
4. D.V.I. Financial Services, Inc. Lease
5. First United Leasing Corp. Lease
<PAGE> 96
Schedule 3.5
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Consents required for Company from
Governmental Authority or any other persons
1. Allina Health Systems
2. Banc One
3. O.S. Leasing
4. DVI Financial Services, Inc.
5. First United Leasing Corp. (now Mellow First United Leasing)
6. Insurance companies which provide insurance policies to the
Company and the Physician.
<PAGE> 97
Schedule 3.7
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Liabilities of the Company
not reflected in Financial Statements
1. See Schedule 3.10
2. Items may be reflected in financials prepared as of November
30, 1996.
<PAGE> 98
Schedule 3.8(a)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Compensation of all Employees of the Company
Please see attached.
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THE
ATTACHMENT CALLED FOR BY THIS SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED
SEPARATELY WITH THE SECURITIES EXCHANGE COMMISSION.]
<PAGE> 99
Schedule 3.8(b)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Compensation plans, arrangements or practices
sponsored by the Company or to which the Company
contributes on behalf of its
employees (other than Employment Agreements and
Employee Benefit Plans)
1. Special Compensation Addendum dated May 1, 1995 with Richard
L. Lindstrom, M.D.
2. Agreement for Deferred Compensation dated January 1, 1993 with
Richard L. Lindstrom, M.D.
3. Special Compensation Addendum dated May 1, 1995 with Thomas W.
Samuelson, M.D.
4. Agreement for Deferred Compensation dated January 1, 1993 with
Thomas W. Samuelson, M.D.
5. Agreement for Deferred Compensation dated May 1, 1995 with
David R. Hardten, M.D.
<PAGE> 100
Schedule 3.8(c)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employment Agreements
1. Employment Agreement dated January 1, 1993 between the Company
and Thomas W. Samuelson, M.D.
2. Employment Agreement dated May 1, 1995 between the Company and
David R. Hardten, M.D.
3. Employment Agreement dated January 1, 1993 between the Company
and Richard Lindstrom, M.D.
4. Employment Agreement dated July 1, 1996 between the Company
and Y. Ralph Chu, M.D.
<PAGE> 101
Schedule 3.8(d)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employee Policies and Procedures
Lindstrom, Samuelson & Hardten Ophthalmology Associates, P.A. - Employee
Handbook.
<PAGE> 102
Schedule 3.8(f)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Exceptions to Labor Compliance
None.
<PAGE> 103
Schedule 3.8(g)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Union participation of Company Employees
None.
<PAGE> 104
Schedule 3.9(a)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employee Benefit Plans sponsored by the Company or
to which the Company contributes on behalf of its
Employees in the past three years
1. Lindstrom & Samuelson Ophthalmology Associates, P.A. 401(k)
Pension Plan and Trust. This plan can be terminated at will
subject to compliance with 401(k) regulations.
<PAGE> 105
Schedule 3.9(b)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Exceptions to Employee Benefit Plan Compliance
None.
<PAGE> 106
Schedule 3.9(c)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employee Benefit Plan audits, investigations or enforcement actions
None.
<PAGE> 107
Schedule 3.9(d)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employee Benefit Plan Prohibited Transactions
None.
<PAGE> 108
Schedule 3.9(f)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employee Benefit Plan determination letter or IRS ruling
Determination Letter dated February 24, 1993 regarding the Company's
401(k) Pension Plan and Trust.
<PAGE> 109
Schedule 3.9(g)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employee Benefit Plan Accumulated Funding Deficiency
The Company from time-to-time has small funding deficiencies on a
month-to-month basis (under $1,000). Any funding deficiency is made
up of the following month.
<PAGE> 110
Schedule 3.9(h)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Employee Benefit Plan Excise Taxes
None.
<PAGE> 111
Schedule 3.10
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Changes to Company since Balance Sheet Date
1. See the Company's financial statements as of November 30,
1996.
2. The Company purchased refractive lane for $17,000
approximately.
3. The Company has hired the following employees since September
30, 1996:
Jessica Bowers, William Helmke, Carrie Jacobs, Kathleen Koos,
Shannon Robins and Max Sornoza.
<PAGE> 112
Schedule 3.11(b)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Permitted Encumbrances on Personal Property
1. Banc One Leasing Corporation - UCC-1 Financing Statement filed
with Minnesota Secretary of State on August 5, 1996 covering
all equipment, furniture, fixtures and other personal
property.
2. Alcon Surgical, Inc. - UCC-1 Financing Statement filed with
Minnesota Secretary of State on December 26, 1995 covering
Alcon practice management system.
3. National Westminster Bank, USA - UCC-1 Financing Statement
filed with Minnesota Secretary of State on March 4, 1996
covering Laserex Systems, Inc. 3000LE Nd: Yag Photodisrupter
System.
4. Firststar Bank of Minnesota, N.A. - UCC-1 Financing Statement
filed with Minnesota Secretary of State on January 24, 1996
covering all inventory, equipment, accounts and general
intangibles.
5. Firstar MetroBank - UCC-1 Financing Statement filed with
Minnesota Secretary of State dated June 12, 1989, as amended
May 27, 1993, and as continued February 4, 1994, covering all
inventory, equipment, fixtures and general intangibles.
6. Security Bank - UCC-1 Financing Statement filed with Minnesota
Secretary of State on March 7, 1994 covering Mita 3785 Copier.
<PAGE> 113
Schedule 3.11(c)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Real Property Leases and Personal Property Leases
1. See Schedules 2.1(c) and 2.1(d)
2. Copelco Capital, Inc. Leases Nos. 05 71790, 0-55936-0 and
0608380 9998000013. Lease 0608380 9998000013 is in dispute.
See Schedule 3.18.
<PAGE> 114
Schedule 3.12
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Commitments of the Company
1. None that are not disclosed elsewhere.
2. Agreements with the following payors to provide medical or
health care services:
*Medica
*Minnesota Dept. of Human Services
*Health Integrated Provider Network
*Blue Cross Blue Shield of Minnesota
*Preferred One
*DHCS
*Eye Care International
*Health One
*State of Wisconsin Dept. of Health and Social Services
*Superior Vision Services, Inc.
*North Dakota Dept. of Human Services
*UCARE Minnesota
*Health Span Integrated Provider Network
3. Consulting Agreement dated September 13, 1994 with M.J. Brown,
O.D., P.A.
4. Adminsitrative Services Agreement dated September 13, 1994
with M.J. Brown, O.D., P.A.
<PAGE> 115
Schedule 3.13
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Insurance Policies; Cancellations;
Outstanding Claims, Settlements or Premiums Owed;
Professional Liability Insurance
Denials since January 1, 1994; and All Claims since January 1, 1994
Consent of State Fund Mutual Insurance company, St. Paul Companies and
Chubb Insurance/Federal Insurance Company maybe necessary to transfer
the policies.
1. Workers' Compensation Policy No. WCA010006-00 with State Fund
Mutual Insurance Company
2. Professional Liabilty Insurance Policy No. DM06609826 with the
St. Paul Companies.
3. General Liability/professional office building insurance
policy No. DK06614224 with St. Paul Companies.
4. Fiduciary Insurance Policy No. 81377377 with Chubbs
Insurance/Federal Insurance Company.
<PAGE> 116
Schedule 3.14
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Description of Proprietary Rights; Consents
None. Dr. Lindstrom personally owns 25 patents which are not included
in the transaction.
<PAGE> 117
Schedule 3.15
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Good faith disputes over payment of
Taxes; Tax deficiency or delinquency
None.
<PAGE> 118
Schedule 3.16
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
List of licenses, franchises, permits and
governmental authorizations for conduct of the Company's
business; Notices of Noncompliance
1. Richard L. Lindstrom, M.D. - Minnesota State Board License
(No. 21444), North Dakota State Board License (No. 6996),
Texas State Board License (No. F2326), and DEA Certificate
(No. AL9161023).
2. Thomas W. Samuelson, M.D. - Minnesota State Board License (No.
30302) and DEA Certificate (No. BS0570552).
3. David R. Hardten, M.D. - Minnesota State Board License (No.
31920), Wisconsin State Board License (No. 29723) and DEA
Certificate (No. BH1422788).
4. Dr. Ralph Chu, M.D. - Minnesota State Board
License (No. 38792)
5. Dr. Laney Brown, O.D. - Minnesota State Board
License (No. 1751)
<PAGE> 119
Schedule 3.17
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Finder's, broker's or agent's fee owed by the Company
None.
<PAGE> 120
Schedule 3.18
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Company Litigation
1. Copelco Capital, f/k/a Copelco Leasing Corporation vs.
Lindstrom & Samuelson Ophthalmology, Thomas W. Samuelson, Eye
Technology, Inc. and Richard L. Lindstrom, Superior Court of
New Jersey, Docket No. L5484-96, filed July 3, 1996. Suit
for breach of Equipment Lease ($44,367.49 plus interest and
costs). This lease will not be transferred to Vision 21.
<PAGE> 121
Schedule 3.21
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
List of Company borrowing and investing arrangements
1. Term Note dated December 15, 1993 in the original principal
amount of $150,000.00 given to Firstar Bank of Minnesota, N.A.
Term: 60 months. Interest rate: 1.00 percent above prime
rate. Monthly payments of $3,000.00, including interest.
Secured by security interest in all inventory and equipment.
This Note shall be paid off by the Physician.
2. Revolving Credit Note dated November 30, 1995 in the principal
amount of $100,000.00. Term: one year. Interest rate: .50
percent above prime rate. Interest only payable monthly.
Secured by security interest in all inventory and equipment.
This Note shall be paid off by the Physician.
<PAGE> 122
Schedule 3.22
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Ownership Interests of Interested Persons
and Material Affiliations in the last
three years
1. See Schedules 3.1 and 4.6.
2. Drs. Hardten and Samuelson have employment agreements with St.
Paul Ramsey Medical Center and the Minneapolis VA Hospital.
3. Dr. Samuelson is Chief of Staff at Phillips Eye Institute.
4. Drs. Lindstrom and Hardten are employed by Dicken & Associates
in Thief River Falls, Minnesota.
<PAGE> 123
Schedule 3.23
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Company Investments in Competitors
See Schedule 4.6.
<PAGE> 124
Schedule 3.29
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Description of and relationship with Payors
See attached Exhibit to Schedule 3.29
<PAGE> 125
Schedule 3.35
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Inventory Exceptions
None.
<PAGE> 126
Schedule 3.36
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Tangible Personal Property Exceptions
None.
<PAGE> 127
Schedule 3.37
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Real Property Lease and Personal Property Leases Exceptions
See Schedule 3.18.
<PAGE> 128
Schedule 3.38
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Assumed Contract Exceptions
None.
<PAGE> 129
Schedule 4.2
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Violations or conflicts resulting from
execution, delivery or consummation of
transaction by the Physician
The Physician may be in conflict with or violation of the following:
None.
<PAGE> 130
Schedule 4.5
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Finder's, broker's or agent's fees owed by the Physician
None.
<PAGE> 131
Schedule 4.6
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Physician Ownership of Interested Persons and Material Affiliations
1. Richard Lindstrom and Dr. Samuelson own shares in RSS, a
limited liability company specializing in outcome-based
information systems available to the eye care industry.
2. Richard Lindstrom owns shares in Autonomous Technologies
Corporation.
3. Stock Option Agreement dated May 17, 1996 between Richard
Lindstrom (as a Director) and Laser Vision Centers.
4. Stock Option Agreement dated May 17, 1996 between Richard
Lindstrom (as a Consultant) and Laser Vision Centers.
5. Richard Lindstrom and wife own shares of Eye Technology, Inc.
given to them on June 13, 1995 in consideration for a release
of all obligations and liabilities arising from a License
Agreement dated April 1, 1989 and a Consulting Agreement dated
April 1, 1991.
6. See Schedule 3.22.
7. See Schedule 3.1.
8. Dr. Lindstrom has consulting arrangements with the following
companies: (or has had within 3 years):
Chiron, Ciba, Storz, Visatec, Slack, Surgijet Medical
Development Concepts, Inc., Midwest Surgical Services, Laser
Vision Centers, Inc., Alcon, Allergan, Eye Network, 3M Vision
Care, Phillips Eye Institute, Insight Biomedical.
9. See attached list of consulting arrangements for Dr. Samuelson
10. See attached list of affiliations for Dr. Hardten
<PAGE> 132
Schedule 4.7
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Physician Investments in Competitors
See Schedule 4.6.
<PAGE> 133
Schedule 4.8
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Physician Litigation
See Schedule 3.18.
<PAGE> 134
Schedule 4.10
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
List of hospitals at which Physician has full staff privileges
1. Phillips Eye Institute
2. St. Paul Ramsey Medical Center
3. Minneapolis VA Hospital
4. All doctors have courtesy privileges at certain other
hospitals.
5. See attached lists of hospital privileges for Drs. Hardten,
M.D. and Lindstrom, M.D.
<PAGE> 135
Schedule 4.11
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Exceptions to continued Physician intent to practice medicine
1. Each physician practices currently, and has practiced over the
last 3 years, on the following basis:
Dr. Lindstrom - 100 days per year
Dr. Samuelson - approximately 2 1/2 days/week excluding
vacation
Dr. Hardten - approximately 2 1/2 days/week excluding
vacation
<PAGE> 136
Schedule 5
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Individuals - Best knowledge
representations and warranties of Vision 21
1. Theodore N. Gillette
2. Richard L. Sanchez
3. Richard T. Welch
4. Nicholas M. Arfaras
<PAGE> 137
Schedule 5.1
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Jurisdictions where Vision 21 is qualified to do business
1. Florida
2. Arizona
3. Minnesota
4. New York
<PAGE> 138
Schedule 5.6
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Finder's, brokers or agent's fees owed by Vision 21
None.
<PAGE> 139
Schedule 5.9
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Liabilities of Vision 21 not reflected in Financial Statements
None.
<PAGE> 140
Schedule 6.1(b)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Exception to Physician "accredited
investor" or "sophisticated investor" representation
None.
<PAGE> 141
Schedule 6.1(d)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Physician's principal residence
* * *
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 142
Schedule 7.14
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Physician Employment Agreements
None
<PAGE> 143
Schedule 7.18
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Assignment of Fees for Medical and Optometry Services
None
<PAGE> 144
Schedule 8.4
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Personal liabilities of Physician for which
Vision 21 will use best efforts to obtain release
Personal guaranties of Physicians under the leases listed on Schedule 2.1(c).
<PAGE> 145
Schedule 11.5
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Joint personal liabilities of Physician and
Company to which Vision 21 will use best
efforts to obtain release
See Schedule 8.4
<PAGE> 146
Schedule 16.1
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
Liquidated damages for Physician
breaching Physician Employment Agreement
Liquidated damages for Richard L. Lindstrom, M.D. shall equal: (i)
$230,208 in cash; plus (ii) $2.77 per share of Vision 21 common stock times
227,598 shares of Vision 21 common stock granted to Richard L. Lindstrom, M.D.
in connection with the Transaction, which stock total equals $630,446. The
total of the foregoing liquidated damages equals $860,654.
Liquidated damages for Thomas W. Samuelson, M.D. shall equal: (i)
$76,736 in cash; plus (ii) $2.77 per share of Vision 21 common stock times
75,866 shares of Vision 21 common stock granted to Thomas W. Samuelson, M.D. in
connection with the Transaction, which stock total equals $210,149. The total
of the foregoing liquidated damages equals $286,885.
Liquidated damages for David R. Hardten, M.D. shall equal: (i)
$153,472 in cash; plus (ii) $2.77 per share of Vision 21 common stock times
151,732 shares of Vision 21 common stock granted to David R. Hardten, M.D. in
connection with the Transaction, which stock total equals $420,298. The total
of the foregoing liquidated damages equals $573,770.
<PAGE> 147
Exhibit 12.1(o)
to Asset Purchase Agreement among Lindstrom, Samuelson &
Hardten Ophthalmology Associates, P.A. (the "Company") Richard
L. Lindstrom, M.D., Thomas W. Samuelson, M.D. and David R.
Hardten, M.D. (collectively, the "Physician") and Vision 21,
Inc. ("Vision 21")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement"), dated as of
____________, 19__, is by and between Vision 21, Inc., a Florida corporation
and any successor ("Vision 21"), and Lindstrom, Samuelson & Hardten
Ophthalmology Associates, P.A. ("Shareholder").
1. Registration Rights.
(a) In the event that Vision 21 proposes to file a
registration statement under the Securities Act for purposes of effecting an
underwritten public offering of shares of Vision 21 common stock for cash
(including, but not limited to, a registration statement relating to a
secondary offering of Vision 21 common stock, but excluding registration
statements relating to any employee benefit plan or a corporate
reorganization), Vision 21 shall give written notice of such proposed filing to
the Shareholder at least fifteen (15) days before the anticipated filing date,
and such notice shall offer Shareholder the opportunity to register such number
of the Shareholder's shares of common stock as Shareholder may request in
writing within ten (10) days after receipt of such notice; provided, however,
that the maximum number of shares of common stock that such Shareholder may
request to include in any registration statement shall be limited as provided
in Section 1(c).
(b) In the event that (i) one (1) year has elapsed from
the date of effectiveness of the registration statement filed in connection
with an underwritten initial public offering of shares of Vision 21 common
stock, and (ii) Vision 21 receives a written request from holders holding in
the aggregate a minimum of 300,000 shares of Vision 21 common stock issued to
the founding practices described in Vision 21's Confidential Information
Memorandum dated September 27, 1996, as amended, and issued to certain
professionals owning equity interests in such founding practices (the founding
practices and professionals of such practices holding share's of common stock
of Vision 21 are collectively referred to as the "Founding Shareholders"), that
Vision 21 file a registration statement under the Securities Act effecting an
offering of shares of Vision 21 common stock; then Vision 21 shall as soon as
practicable file a registration statement at its own expense effecting a public
offering of shares of Vision 21 common stock held by Founding Shareholders, as
well as any other Vision 21 shares owned by any other shareholders which Vision
21 wishes to include in the offering (which offering may be an underwritten
offering at Vision 21's sole discretion); provided however that Vision 21 shall
be obligated to effect only one registration statement containing each
Shareholder, and Vision 21 shall be obligated to file only two (2) registration
statements in the aggregate, pursuant to this Section 1(b).
<PAGE> 148
(c) The maximum aggregate number of shares of common
stock that Shareholder may request to be registered under this Agreement shall
be sixty percent (60%) of Shareholder's original shares of Vision 21 common
stock. In no event shall the total number of Shareholder's shares of common
stock that Vision 21 is obligated to register under this Agreement exceed sixty
percent (60%) of Shareholder's original shares of Vision 21 common stock, and
in no event shall Vision 21 be obligated to register more than (i) in an
initial offering, thirty percent (30%) of Shareholder's original shares of
Vision 21 common stock or (ii) in a second offering, sixty percent (60%) of the
Shareholder's original shares minus the percent of the Shareholder's original
shares that the Shareholder registered in the first offering. The "original
shares" of Vision 21 as described herein shall be deemed to be the __________
shares of common stock received by the Shareholder on the date of this
Agreement.
(d) Vision 21 shall have the sole and exclusive right to
select the underwriters of any public offering of shares of Vision 21 common
stock, including any public offering conducted pursuant to the demand
registration right set forth in Section 1(b) above. The use of underwriters in
any demand registration right set forth in Section 1(b) above is subject to
Vision 21's ability to engage underwriters under terms and conditions deemed
reasonable by Vision 21.
(e) If the managing underwriter of any offering advises
Vision 21 that the total number of shares of Vision 21's common stock which
Vision 21, the Shareholder and any other persons intend to include in such
offering would adversely affect the success of such offering, then the amount
of shares of common stock to be offered for the account of Shareholder shall be
reduced to the extent necessary to reduce the total number of shares of common
stock to be included in such offering to the amount recommended by such
managing underwriter.
(f) Vision 21 shall not be required to (i) reduce the
amount of shares of common stock to be offered by Vision 21 in such offering
for any reason or (ii) include any shares of common stock of Shareholder in any
public offering for which a registration statement is or is proposed to be
filed if such shares of common stock are, at the time of effectiveness of such
registration statement, eligible to be sold under Rule 144 under the Securities
Act or otherwise eligible for sale to the public without registration.
(g) Vision 21 shall have the right to extend or delay the
effectiveness of any registration statement for a period of up to ninety (90)
days if, upon the advice of counsel, such delay is advisable and in the best
interests of Vision 21 because of the existence of non-public material
information, or to allow Vision 21 to complete any pending audit of its
financial statements, any public financing plan, any pending acquisition, or to
release audited financial statements for any pending acquisition as required by
the Securities and Exchange Commission.
(h) Shareholder agrees to cooperate with Vision 21 in all
respects in connection with registration of the common stock, including timely
supplying all information and executing and returning all documents requested
by Vision 21 and its managing underwriter.
Exhibit 12.1(o) - Page 2
<PAGE> 149
(i) Vision 21 shall not be required to include any of
Shareholder's shares of common stock in any registration statement unless
Shareholder accepts the terms of the underwriting as agreed upon between Vision
21 and its underwriters.
(j) Vision 21 shall have the right to defer the filing of
any registration statement if the Board of Directors of Vision 21 determines in
good faith that it would be seriously detrimental to Vision 21 and its
shareholders for such registration statement to be filed.
(k) This Agreement shall expire two (2) years from the
date of an initial public offering of Vision 21 common stock.
2. Covenants of Vision 21. Vision 21 hereby covenants and
agrees:
(a) To take such steps as may be necessary to comply with the Blue
Sky laws of such states as the managing underwriter may reasonably request;
provided that in no event shall Vision 21 be obligated to qualify to do
business in any state where it is not so qualified or to take any action which
would subject it to unlimited service of process in any state where it is not
at such time so subject;
(b) To use reasonable efforts to cause the registration statement
to become effective and to keep the registration statement effective for such
period as may be required under the terms of the underwriting agreement
relating thereto but no longer than for a period of forty-five (45) days, to
file such post-effective amendments as may be necessary to keep any prospectus
contained in such registration statement true and complete during such period
as the registration statement shall be effective, and to furnish and file such
other amendments, supplements, and other documents the managing underwriter may
reasonably request;
(c) To supply such numbers of prospectuses as may be reasonably
required by the managing underwriter;
(d) To pay the reasonable costs and expenses of the registration
statement including without limitation all registration and Blue Sky filing
fees, all fees and expenses of Vision 21's counsel (but not the fees and
expenses of counsel for Shareholder), all accounting costs (including costs
associated with the preparation of interim period financial statements), NASD
fees, printing costs, experts' fees, expenses, costs of post-effective
amendments, and all other usual and customary expenses in connection with the
registration statement, except for Shareholder's pro rata share of underwriting
discounts, fees, and selling commissions (calculated in the manner set forth in
Section 3(a)(ii) of this Agreement); and
(e) With respect to any registration statement filed pursuant to
this Agreement, where underwriters are utilized, to cooperate with the
underwriters to the best of its abilities and to enter into an underwriting
agreement with such underwriters containing such representations,
Exhibit 12.1(o) - Page 3
<PAGE> 150
warranties, and covenants on the part of Vision 21 as are usual and customary
in an underwritten public sale of common stock.
3. Covenants of Shareholder.
(a) Shareholder hereby covenants and agrees:
(i) To cooperate with Vision 21 in its compliance with
all federal and state securities laws, including without limitation providing
such information and signing such documents as are necessary to effect a
registration or reasonably requested by underwriters pursuant to this
Agreement;
(ii) To pay his pro rata portion (calculated on the basis
of the ratio of the aggregate offering price attributable to the shares of
Shareholder being registered and sold in relation to the aggregate offering
price attributable to the total number of securities being registered and sold,
including securities being registered and sold by other selling stockholders)
of the underwriting discounts and selling commissions and to pay all the fees
and disbursements of his counsel; and
(iii) To the entry of stop transfer instructions with the
Company's transfer agent against the transfer of any shares of Shareholder's
Vision 21 common stock except in compliance with the restrictions as set forth
in this Section 3.
(b) Shareholder shall be considered an "affiliate" of Vision 21
for purposes of Rule 144 under the Securities Act, even in the event
Shareholder is not technically an affiliate of Vision 21 as defined in Rule
144, and the Vision 21 common stock owned by Shareholder shall be subject to
the restrictions and limitations on resale imposed by Rule 144 on affiliates of
Vision 21. Shareholder shall not sell any of his shares of Vision 21 common
stock under Rule 144 unless Shareholder would be eligible to do so under the
provisions applicable to affiliates.
(c) In addition to the transfer restrictions otherwise provided
for herein, Shareholder shall not, whether or not Shareholder elects to cause
the registration of his shares pursuant to this Agreement, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of any shares of Vision 21 common stock
(other than the shares covered by such registration, which may be sold in
accordance with the plan or plans of distribution described in the registration
statement) owned by Shareholder for a period of one hundred eighty (180) days
or such shorter period as negotiated by the Company following the effective
date of such registration statement without the prior written consent of Vision
21. In the event that Shareholder is a corporation, professional corporation
or professional limited liability company, Shareholder may after receiving the
written approval of Vision 21 (which approval shall not be unreasonably
withheld) transfer its shares of Vision 21 Common Stock to any of the
individuals and/or trusts described in Sections 7(a), (b) and (c) hereof. Such
transferee
Exhibit 12.1(o) - Page 4
<PAGE> 151
shall, for purposes of the transfer restrictions contained in this Agreement,
be deemed to have held such transferred shares for the same period as
Shareholder.
4. Indemnification of Shareholder. Whenever registration with
respect to any shares of Shareholder's common stock is effected under the
Securities Act pursuant hereto, Vision 21 will indemnify and hold harmless
Shareholder, each underwriter, the directors, officers, employees and agents of
each underwriter, and each person, if any, who controls each underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, liabilities, expenses and
damages (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
(including any securities law violations) insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading, provided that Vision 21 will not be liable to Shareholder to the
extent that such loss, claim, liability, expense or damage is based on an
untrue statement or omission made in reliance on and in conformity with
information furnished to Vision 21 by Shareholder, or by Shareholder through
any attorney-in-fact, expressly for inclusion in the registration statement or
any prospectus included in such registration statement.
5. Indemnification of Vision 21. Whenever registration with
respect to any shares of Shareholder's common stock is effected under the
Securities Act pursuant hereto, Shareholder will indemnify and hold harmless
Vision 21, each of Vision 21's directors and officers, each person who controls
Vision 21 within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, each underwriter, the directors, officers, employees and
agents of each underwriter, and each person, if any, who controls each
underwriter within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, from and against any and all losses, claims,
liabilities, expenses and damages (including any and all investigative, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claim asserted), to
which they, or any of them, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact required to be stated in it or necessary to make
the statements in it not misleading; provided that Shareholder will not be
liable except to the extent that such loss, claim, liability, expense or damage
arises from or is based upon an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
furnished to Vision 21 by the Shareholder, or by Shareholder through any
attorney-in-fact, expressly for inclusion in the registration statement or any
prospectus included in such registration statement.
Exhibit 12.1(o) - Page 5
<PAGE> 152
6. Defense of Claim. Promptly after receipt by an indemnified
party of notice of the commencement of any action, the indemnified party shall
notify the indemnifying party in writing of the commencement thereof if a claim
in respect thereof is to be made against an indemnifying party under this
Agreement, but the omission of such notice shall not relieve the indemnifying
party from liability which it may have to the indemnified party under this
Agreement, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to any indemnified
party otherwise than under this Agreement. In case any action is brought
against the indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and to the extent that it chooses, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party, and after notice from
the indemnifying party to the indemnified party that it so chooses, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided however that (i) if the indemnifying party fails to take
reasonable steps necessary to defend diligently the claim within twenty (20)
days after receiving notice from the indemnified party that the indemnified
party believes the indemnifying party has failed to diligently defend such
claim, or (ii) if the indemnified party who is a defendant in any action or
proceeding which is also brought against the indemnifying party reasonably
shall have concluded that there are legal defenses available to the indemnified
party which conflict with the defense strategy of the indemnifying party, or
(iii) if representation under applicable standards of professional conduct
require separate representation of the indemnified party and the indemnifying
party, then the indemnified party shall have the right to assume or continue
its own defense as set forth above and the indemnifying party shall reimburse
the indemnified party for the costs of such defense as provided in Section 4
and 5. In no event shall the indemnifying party be responsible for the fees of
more than one firm for all indemnified parties.
7. Non-Transferability. The registration rights and benefits set
forth herein, including indemnification by Vision 21 are granted for the sole
and personal benefit of Shareholder and may not be transferred or assigned
except for (a) gifts to his/her family members (b) assignment to a trust
controlled by the Shareholder, (c) transfers to Shareholder's heirs which occur
by operation of law as a result of the death of the Shareholder, or (d) if the
Shareholder is a corporation, professional corporation or professional limited
liability company, transfers or assignments to the individuals who are current
equity holders of Shareholder and by such equity holders to the individuals
and/or trusts described in subsection (i) and (ii) of this Section.
8. Survival of Indemnity. The indemnifications provided by this
Agreement shall be a continuing right to indemnification and shall survive the
registration and sale of any securities by any person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
9. Delay of Registration. Shareholder agrees that he shall have
no right to obtain or seek an injunction restraining or otherwise delaying any
registration statement filed by Vision 21.
Exhibit 12.1(o) - Page 6
<PAGE> 153
10. Notices.
(a) All communications under this Agreement shall be in
writing and shall be sufficient in all respects if when personally delivered
or mailed by prepaid certified or registered mail, return receipt requested,
addressed as follows:
(i) If to Vision 21, at:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34647
Attn: Theodore N. Gillette, Chief
Executive Officer
With a copy to:
Darrell C. Smith, Esquire
c/o Shumaker, Loop & Kendrick, LLP
101 E. Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
or at such other address as Vision 21 may have furnished in writing to
Shareholder at the time outstanding, or
(ii) If to Shareholder at:
Lindstrom, Samuelson & Hardten
Ophthalmology Associates, P.A.
710 East 24th Street
Minneapolis, Minnesota 55404
Attn: Richard L. Lindstrom, M.D.
(b) Any notice so addressed, when mailed by registered or
certified mail shall be deemed to be given three days after so mailed, and when
delivered by hand shall be deemed to be given immediately.
11. Counterparts. One or more counterparts of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
Exhibit 12.1(o) - Page 7
<PAGE> 154
12. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Florida,
which shall prevail in all matters arising under or in connection with this
Agreement.
13. Headings. The headings in this Agreement are for convenience
of reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
14. Stock Lettering. The Company shall have the right to provide
a legend on the shares of stock covered hereunder reflecting the restriction
described hereunder.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date and year first above written.
"VISION 21"
VISION 21, INC.
By:_____________________________________
Theodore N. Gillette, Chief Executive
Officer
"SHAREHOLDER"
LINDSTROM, SAMUELSON & HARDTEN
OPHTHALMOLOGY ASSOCIATES, P.A.
By:_____________________________________
Richard L. Lindstrom, President
Exhibit 12.1(o) - Page 8
<PAGE> 1
EXHIBIT 10.36
"CONFIDENTIAL TREATMENT REQUESTED
BY VISION TWENTY-ONE, INC."
MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
DATED: DECEMBER 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS............................................................................................ 1
1.1. AAA........................................................................................ 1
1.2. Accountants................................................................................ 1
1.3. Accounts Receivable........................................................................ 1
1.4. Acquisition Proposal....................................................................... 1
1.5. Affiliate.................................................................................. 2
1.6. Applicable Laws............................................................................ 2
1.7. Assets..................................................................................... 2
1.8. Assumed Contracts.......................................................................... 2
1.9. Assumed Obligations........................................................................ 2
1.10. Audit...................................................................................... 2
1.11. Business Management Agreement.............................................................. 2
1.12. Business Records........................................................................... 2
1.13. Cash Compensation.......................................................................... 2
1.14. Claim Notice............................................................................... 2
1.15. Closing.................................................................................... 2
1.16. Closing Date............................................................................... 2
1.17. Code....................................................................................... 2
1.18. Commitments................................................................................ 2
1.19. Common Stock............................................................................... 3
1.20. Company Balance Sheet...................................................................... 3
1.21. Company Balance Sheet Date................................................................. 3
1.22. Compensation Plans......................................................................... 3
1.23. Competing Management Business.............................................................. 3
1.24. Competitor................................................................................. 3
1.25. Confidential Information Memorandum........................................................ 3
1.26. Controlled Group........................................................................... 3
1.27. Corporation Law............................................................................ 3
1.28. Damages.................................................................................... 3
1.29. Election Period............................................................................ 3
1.30. Employee Benefit Plans..................................................................... 3
1.31. Employee Policies and Procedures........................................................... 4
1.32. Employment Agreements...................................................................... 4
1.33. Environmental Laws......................................................................... 4
1.34. ERISA...................................................................................... 4
1.35. Exchange Act............................................................................... 4
1.36. Excluded Assets............................................................................ 4
1.37. FBCA....................................................................................... 4
1.38. Financial Statements....................................................................... 4
1.39. GAAP....................................................................................... 4
1.40. Governmental Authority..................................................................... 4
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
1.41. Indemnified Party.......................................................................... 4
1.42. Indemnifying Party......................................................................... 4
1.43. Indemnity Notice........................................................................... 4
1.44. Initial Public Offering.................................................................... 5
1.45. Insurance Policies......................................................................... 5
1.46. Lease Assignments.......................................................................... 5
1.47. Leased Property............................................................................ 5
1.48. IRS........................................................................................ 5
1.49. Managed Care Business...................................................................... 5
1.50. Management Business........................................................................ 5
1.51. Material Adverse Effect.................................................................... 5
1.52. Note....................................................................................... 5
1.53. Permitted Encumbrances..................................................................... 5
1.54. Personal Property Leases................................................................... 5
1.55. Prepaid Items.............................................................................. 5
1.56. Proposed Purchase Price Adjustments........................................................ 5
1.57. Proprietary Rights......................................................................... 6
1.58. Purchase Price............................................................................. 6
1.59. Real Property Leases....................................................................... 6
1.60. Registration Rights Agreement.............................................................. 6
1.61. Registration Statement..................................................................... 6
1.62. Related Acquisitions....................................................................... 6
1.63. SEC........................................................................................ 6
1.64. Securities................................................................................. 6
1.65. Securities Act............................................................................. 6
1.66. State...................................................................................... 6
1.67. Tangible Personal Property................................................................. 6
1.68. Tax Returns................................................................................ 6
1.69. Third Party Claim.......................................................................... 6
1.70. Third-Party Payor Program.................................................................. 6
1.71. Transaction................................................................................ 7
1.72. Vision 21 Financial Statements............................................................. 7
2. PURCHASE AND SALE OF ASSETS............................................................................ 7
2.1. Purchase and Sale of Assets................................................................ 7
2.2. Excluded Assets............................................................................ 9
2.3. Assumption of Obligations and Liabilities.................................................. 9
2.4. Purchase Price............................................................................. 9
2.5. The Closing................................................................................ 9
2.6. Purchase Price Adjustments................................................................. 10
2.7. Subsequent Actions......................................................................... 10
2.8. Allocation of Purchase Price............................................................... 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER............................................................................................ 11
3.1. Organization and Good Standing; Qualification.............................................. 11
3.2. Continuity of Business Enterprise.......................................................... 11
3.3. Authorization and Validity................................................................. 11
3.4. Compliance................................................................................. 12
3.5. Consents................................................................................... 12
3.6. Financial Statements....................................................................... 12
3.7. Liabilities and Obligations................................................................ 12
3.8. Employee Matters........................................................................... 13
a. Cash Compensation............................................................... 13
b. Compensation Plans.............................................................. 13
c. Employment Agreements........................................................... 13
d. Employee Policies and Procedures................................................ 13
e. Unwritten Amendments............................................................ 13
f. Labor Compliance................................................................ 14
g. Unions.......................................................................... 14
h. Aliens.......................................................................... 14
3.9. Employee Benefit Plans..................................................................... 14
a. Identification.................................................................. 14
b. Administration.................................................................. 15
c. Examinations.................................................................... 15
d. Prohibited Transactions......................................................... 15
e. Claims and Litigation........................................................... 15
f. Qualification................................................................... 15
g. Funding Status.................................................................. 15
h. Excise Taxes.................................................................... 16
i. Multiemployer Plans............................................................. 16
j. Pension Benefit Guaranty Corporation............................................ 16
k. Retirees........................................................................ 16
l. Other Compensation.............................................................. 16
3.10. Absence of Certain Changes................................................................. 16
3.11. Title; Leased Assets....................................................................... 18
a. Real Property................................................................... 18
b. Personal Property............................................................... 18
c. Leases.......................................................................... 18
3.12. Commitments................................................................................ 18
a. Commitments; Defaults........................................................... 18
b. No Cancellation or Termination of Commitment.................................... 20
3.13. Insurance.................................................................................. 20
3.14. Proprietary Rights and Information......................................................... 21
3.15. Taxes...................................................................................... 21
a. Filing of Tax Returns........................................................... 21
b. Payment of Taxes................................................................ 21
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
c. No Pending Deficiencies, Delinquencies, Assessments or
Audits.......................................................................... 22
d. No Extension of Limitation Period............................................... 22
e. All Withholding Requirements Satisfied.......................................... 22
f. Foreign Person.................................................................. 22
3.16. Compliance with Laws....................................................................... 22
3.17. Finder's Fee............................................................................... 23
3.18. Litigation................................................................................. 23
3.19. Condition of Fixed Assets.................................................................. 23
3.20. Distributions and Repurchases.............................................................. 23
3.21. Banking Relations.......................................................................... 23
3.22. Ownership Interests of Interested Persons; Affiliations.................................... 23
3.23. Investments in Competitors................................................................. 24
3.24. Environmental Matters...................................................................... 24
a. Environmental Laws.............................................................. 24
b. Permits......................................................................... 24
c. Superfund List.................................................................. 24
3.25. Certain Payments........................................................................... 24
3.26. Arrangements with Third-Party Payor Programs............................................... 25
3.27. Fraud and Abuse............................................................................ 25
3.28. Third-Party Payor Programs................................................................. 26
3.29. Acquisition Proposals...................................................................... 26
3.30. Accounts Receivable/Payable................................................................ 26
3.31. Projections................................................................................ 27
3.32. Tangible Personal Property................................................................. 27
3.33. Leases..................................................................................... 27
3.34. Contract Rights............................................................................ 27
3.35. Prepaid Items.............................................................................. 28
3.36. Completeness of Assets..................................................................... 28
3.37. Disclosure................................................................................. 28
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER...................................................... 28
4.1. Validity; Shareholder Capacity............................................................. 28
4.2. No Violation............................................................................... 28
4.3. Consents................................................................................... 29
4.4. Certain Payments........................................................................... 29
4.5. Finder's Fee............................................................................... 29
4.6. Ownership of Interested Persons; Affiliations.............................................. 29
4.7. Investments in Competitors................................................................. 29
5. REPRESENTATIONS AND WARRANTIES OF VISION 21............................................................ 29
5.1. Organization and Good Standing............................................................. 30
5.2. Capitalization............................................................................. 30
5.3. Corporate Records.......................................................................... 30
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
5.4. Authorization and Validity................................................................. 30
5.5. Compliance................................................................................. 30
5.6. Consents................................................................................... 31
5.7. Finder's Fee............................................................................... 31
5.8. Capital Stock.............................................................................. 31
5.9. Vision 21 Financial Statements; Confidential Information
Memorandum................................................................................. 31
5.10. Liabilities and Obligations................................................................ 31
5.11. Compliance with Laws....................................................................... 32
5.12. Insolvency Proceedings..................................................................... 32
5.13. Employment of Company's Employees.......................................................... 32
6. SECURITIES LAW MATTERS................................................................................. 32
6.1. Investment Representations and Covenants of Shareholder.................................... 32
6.2. Current Public Information................................................................. 35
7. COVENANTS OF THE COMPANY AND THE SHAREHOLDER........................................................... 35
7.1. Consummation of Agreement.................................................................. 35
7.2. Business Operations........................................................................ 35
7.3. Access..................................................................................... 35
7.4. Notification of Certain Matters............................................................ 35
7.5. Approvals of Third Parties................................................................. 36
7.6. Employee Matters........................................................................... 36
7.7. Contracts.................................................................................. 37
7.8. Capital Assets; Payments of Liabilities.................................................... 37
7.9. Mortgages, Liens and Guaranties............................................................ 37
7.10. Acquisition Proposals...................................................................... 37
7.11. Distributions and Repurchases.............................................................. 38
7.12. Requirements to Effect the Transaction..................................................... 38
7.13. Shareholder Retained Equity................................................................ 38
7.14. Termination of Retirement Plans............................................................ 38
7.15. Delivery of Schedules...................................................................... 38
8. COVENANTS OF VISION 21................................................................................. 38
8.1. Consummation of Agreement.................................................................. 38
8.2. Notification of Certain Matters............................................................ 39
8.3. Licenses and Permits....................................................................... 39
8.4. Release of Shareholder From Company Liabilities............................................ 39
9. COVENANTS OF VISION 21, THE COMPANY AND THE
SHAREHOLDER............................................................................................ 39
9.1. Filings; Other Action...................................................................... 39
9.2. Amendment of Schedules..................................................................... 40
9.3. Fees and Expenses.......................................................................... 40
</TABLE>
v
<PAGE> 7
<TABLE>
<C> <C> <C>
10. CONDITIONS PRECEDENT OF VISION 21...................................................................... 41
10.1. Representations and Warranties............................................................. 41
10.2. Covenants.................................................................................. 41
10.3. Legal Opinion.............................................................................. 41
10.4. Proceedings................................................................................ 42
10.5. No Material Adverse Change................................................................. 42
10.6. Government Approvals and Required Consents................................................. 42
10.7. Closing Deliveries......................................................................... 42
10.8. Due Diligence.............................................................................. 42
10.9. Financial Audit............................................................................ 42
10.10. Compliance Audit........................................................................... 42
10.11. Exemption Under State Securities Laws...................................................... 42
11. CONDITIONS PRECEDENT OF THE COMPANY AND THE
SHAREHOLDER............................................................................................ 42
11.1. Representations and Warranties............................................................. 43
11.2. Covenants.................................................................................. 43
11.3. Legal Opinions............................................................................. 43
11.4. Proceedings................................................................................ 43
11.5. Government Approvals and Required Consents................................................. 43
11.6. Closing Deliveries......................................................................... 43
11.7. No Change in Voting or Ownership Control................................................... 43
11.8. No Material Adverse Change; Delivery of Amended Confidential
Information Memorandum..................................................................... 43
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS................................................................ 44
12.1. Deliveries of the Company and the Shareholder.............................................. 44
12.2. Deliveries of Vision 21.................................................................... 45
12.3. Release of Escrow Materials................................................................ 46
13. POST CLOSING MATTERS................................................................................... 47
13.1. Further Instruments of Transfer............................................................ 47
14. REMEDIES............................................................................................... 47
14.1. Indemnification by the Company and Shareholder............................................. 47
14.2. Indemnification by Vision 21............................................................... 48
14.3. Conditions of Indemnification.............................................................. 48
14.4. Remedies Not Exclusive..................................................................... 51
14.5. Costs, Expenses and Legal Fees............................................................. 51
14.6. Indemnification Limitations................................................................ 51
14.7. Tax Benefits; Insurance Proceeds........................................................... 51
14.8. Payment of Indemnification Obligation...................................................... 52
15. TERMINATION............................................................................................ 52
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
15.1. Termination................................................................................ 52
15.2. Effect of Termination...................................................................... 53
16. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.......................................................... 53
16.1. Shareholder and Company Non-Competition Covenant........................................... 53
16.2. Shareholder and Company Confidentiality Covenant........................................... 55
16.3. Survival................................................................................... 56
17. DISPUTES............................................................................................... 56
17.1. Mediation and Arbitration.................................................................. 56
18. MISCELLANEOUS.......................................................................................... 57
18.1. Taxes...................................................................................... 57
18.2. Remedies Not Exclusive..................................................................... 57
18.3. Parties Bound.............................................................................. 57
18.4. Notices.................................................................................... 57
18.5. Choice of Law.............................................................................. 58
18.6. Entire Agreement; Amendments and Waivers................................................... 58
18.7. Confidentiality Agreements................................................................. 59
18.8. Reformation Clause......................................................................... 59
18.9. Assignment................................................................................. 59
18.10. Attorneys' Fees............................................................................ 59
18.11. Further Assurances......................................................................... 59
18.12. Announcements and Press Releases........................................................... 60
18.13. No Tax Representations..................................................................... 60
18.14. No Rights as Stockholder................................................................... 60
18.15. Multiple Counterparts...................................................................... 60
18.16. Headings................................................................................... 60
18.17. Severability............................................................................... 60
18.18. Form of Transaction........................................................................ 60
</TABLE>
vii
<PAGE> 9
MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
This Managed Care Organization Asset Purchase Agreement (this
"Agreement"), dated as of December 1, 1996, is by and among Eye Specialists of
Arizona Network, P.C., an Arizona professional corporation (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder"), and Vision 21, Inc., a Florida
corporation ("Vision 21").
RECITALS
A. Shareholder is a physician licensed to practice medicine in
the State (as defined herein) and currently conducts a Managed Care Business
through the Company.
B. Shareholder owns all of the issued and outstanding shares of
capital stock of the Company.
C. Vision 21 provides business management services and facilities
for eye care professionals and related businesses.
D. The Company desires to sell, assign and transfer all of its
assets and Vision 21 desires to purchase, assume and acquire such assets and
assume certain liabilities of the Company in exchange for capital stock of
Vision 21 and other consideration, all as more specifically provided herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
1.1. AAA. The term "AAA" shall mean the American
Arbitration Association.
1.2. Accountants. The term "Accountants" shall mean the
accounting firm for Vision 21.
1.3. Accounts Receivable. The term "Accounts Receivable"
shall have the meaning set forth in Section 2.1(a).
1.4. Acquisition Proposal. The term "Acquisition Proposal"
shall have the meaning set forth in Section 3.28.
1
<PAGE> 10
1.5. Affiliate. The term "Affiliate" with respect to any
person or entity shall mean a person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by or is under
common control with, such person or entity.
1.6. Applicable Laws. The term "Applicable Laws" shall
have the meaning set forth in Section 18.8.
1.7. Assets. The term "Assets" shall have the meaning set
forth in Section 2.1.
1.8. Assumed Contracts. The term "Assumed Contracts" shall
have the meaning set forth in Section 2.1(d).
1.9. Assumed Obligations. The term "Assumed Obligations"
shall have the meaning set forth in Section 2.3.
1.10. Audit. The term "Audit" shall have the meaning set
forth in Section 3.6.
1.11. Business Management Agreement. The term "Business
Management Agreement" shall mean the Business Management Agreement entered into
between Daniel B. Feller, M.D., P.A. and Vision 21 at the Closing.
1.12. Business Records. The term "Business Records" shall
have the meaning set forth in Section 2.1(f).
1.13. Cash Compensation. The term "Cash Compensation" shall
have the meaning set forth in Section 3.8(a).
1.14. Claim Notice. The term "Claim Notice" shall have the
meaning set forth in Section 14.3(a).
1.15. Closing. The term "Closing" shall mean the
consummation of the transactions contemplated by this Agreement.
1.16. Closing Date. The term "Closing Date" shall mean
December 1, 1996, or such other date as mutually agreed upon by the parties.
1.17. Code. The term "Code" shall mean the Internal Revenue
Code of 1986, as amended.
1.18. Commitments. The term "Commitments" shall have the
meaning set forth in Section 3.12(a).
2
<PAGE> 11
1.19. Common Stock. The term "Common Stock" or "Vision 21
Common Stock" shall mean the common stock, par value $.01 per share, of Vision
21.
1.20. Company Balance Sheet. The term "Company Balance
Sheet" shall have the meaning set forth in Section 3.6.
1.21. Company Balance Sheet Date. The term "Company Balance
Sheet Date" shall have the meaning set forth in Section 3.6.
1.22. Compensation Plans. The term "Compensation Plans"
shall have the meaning set forth in Section 3.8(b).
1.23. Competing Management Business. The term "Competing
Management Business" shall have the meaning set forth in Section 16.1(b).
1.24. Competitor. The term "Competitor" shall mean any
person or entity which, individually or jointly with others, whether for its own
account or for that of any other person or entity, owns, or holds any ownership
or voting interest in any person or entity engaged in Managed Care Business;
provided, however, that such term shall not include any Affiliate of Vision 21
or any entity with which Vision 21 has an agreement similar to the Business
Management Agreement in effect.
1.25. Confidential Information Memorandum. The term
"Confidential Information Memorandum" shall mean that certain disclosure
memorandum distributed by Vision 21 to the Company and Shareholder dated as of
September 27, 1996, and any amendments or revisions thereto.
1.26. Controlled Group. The term "Controlled Group" shall
have the meaning set forth in Section 3.9(g).
1.27. Corporation Law. The term "Corporation Law" shall
mean the statutes, regulations and laws governing business corporations and
professional corporations in the State.
1.28. Damages. The term "Damages" shall have the meaning
set forth in Section 14.1.
1.29. Election Period. The term "Election Period" shall
have the meaning set forth in Section 14.3(a).
1.30. Employee Benefit Plans. The term "Employee Benefit
Plans" shall have the meaning set forth in Section 3.9(a).
3
<PAGE> 12
1.31. Employee Policies and Procedures. The term "Employee
Policies and Procedures" shall have the meaning set forth in Section 3.8(d).
1.32. Employment Agreements. The term "Employment
Agreements" shall have the meaning set forth in Section 3.8(c).
1.33. Environmental Laws. The term "Environmental Laws"
shall have the meaning set forth in Section 3.24(a).
1.34. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.35. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
1.36. Excluded Assets. The term "Excluded Assets" shall
have the meaning set forth in Section 2.2.
1.37. FBCA. The term "FBCA" shall mean the Florida Business
Corporation Act.
1.38. Financial Statements. The term "Financial Statements"
shall have the meaning set forth in Section 3.6.
1.39. GAAP. The term "GAAP" shall mean generally accepted
accounting principles, applied on a consistent basis with prior periods, set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of the determination.
1.40. Governmental Authority. The term "Governmental
Authority" shall mean any national, state, provincial, local or tribunal
governmental, judicial or administrative authority or agency.
1.41. Indemnified Party. The term "Indemnified Party" shall
have the meaning set forth in Section 14.3(a).
1.42. Indemnifying Party. The term "Indemnifying Party"
shall have the meaning set forth in Section 14.3(a).
1.43. Indemnity Notice. The term "Indemnity Notice" shall
have the meaning set forth in Section 14.3(d).
4
<PAGE> 13
1.44. Initial Public Offering. The term "Initial Public
Offering" shall mean the potential initial underwritten public offering of
Vision 21 Common Stock contemplated by Vision 21.
1.45. Insurance Policies. The term "Insurance Policies"
shall have the meaning set forth in Section 3.13.
1.46. Lease Assignments. The term "Lease Assignments" shall
have the meaning set forth in Section 12.1(m).
1.47. Leased Property. The term "Leased Property" shall
have the meaning set forth in Section 2.1(c).
1.48. IRS. The term "IRS" shall mean the Internal Revenue
Service.
1.49. Managed Care Business. The term "Managed Care
Business" shall mean either offering a Third-Party Payor Program or contracting
with a Third-Party Payor Program, directly or indirectly, to arrange for the
provision of health care items or services by a panel of contracted providers,
in any manner whatsoever. Managed Care Business shall also mean the provision of
management or administrative services to any party that engages in either of the
foregoing.
1.50. Management Business. The term "Management Business"
shall have the meaning set forth in Section 16.1(b)(i).
1.51. Material Adverse Effect. The term "Material Adverse
Effect" shall mean a material adverse effect on the Company's business,
operations, condition (financial or otherwise) or results of operations, taken
as a whole, considering all relevant facts and circumstances.
1.52. Note. The term "Note" shall mean the subordinated
promissory note, to be delivered to the Shareholder at the Closing.
1.53. Permitted Encumbrances. The term "Permitted
Encumbrances" shall have the meaning set forth in Section 3.11(b).
1.54. Personal Property Leases. The term "Personal Property
Leases" shall have the meaning set forth in Section 2.1(b).
1.55. Prepaid Items. The term "Prepaid Items" shall have
the meaning set forth in Section 2.1(l).
1.56. Proposed Purchase Price Adjustments. The term
"Proposed Purchase Price Adjustments" shall have the meaning set forth in
Section 2.6(b).
5
<PAGE> 14
1.57. Proprietary Rights. The term "Proprietary Rights"
shall have the meaning set forth in Section 3.14.
1.58. Purchase Price. The term "Purchase Price" shall mean
the consideration set forth in Section 2.4 of this Agreement.
1.59. Real Property Leases. The term "Real Property Leases"
shall have the meaning set forth in Section 2.1(c).
1.60. Registration Rights Agreement. The term "Registration
Rights Agreement" shall mean the Registration Rights Agreement entered into
between the Shareholder and Vision 21 at the closing.
1.61. Registration Statement. The term "Registration
Statement" shall have the meaning set forth in Section 9.1.
1.62. Related Acquisitions. The term "Related Acquisitions"
shall mean the pending acquisitions by Vision 21 with third parties which are
expected to be completed simultaneously with this Transaction.
1.63. SEC. The term "SEC" shall mean the Securities and
Exchange Commission.
1.64. Securities. The term "Securities" shall mean the Note
and the shares of Vision 21 Common Stock which shall be delivered to the Company
under the terms of the Note.
1.65. Securities Act. The term "Securities Act" shall mean
the Securities Act of 1933, as amended.
1.66. State. The term "State" shall mean the State in which
the Company is incorporated.
1.67. Tangible Personal Property. The term "Tangible
Personal Property" shall have the meaning set forth in Section 2.1(e).
1.68. Tax Returns. The term "Tax Returns" shall have the
meaning set forth in Section 3.15(a).
1.69. Third Party Claim. The term "Third Party Claim" shall
have the meaning set forth in Section 14.3(a).
1.70. Third-Party Payor Program. The term "Third Party
Payor Program" shall mean any program or arrangement under which health services
are provided, directly or
6
<PAGE> 15
indirectly, to parties that provide health benefits, including but not limited
to the federal Medicare program, the Arizona Medicaid and general assistance
programs, the CHAMPUS program, and any program of any health maintenance
organization, preferred provider organization, physician-hospital organization,
private health insurance company, self-insured employee benefit plan or
Taft-Hartley employee benefit plan.
1.71. Transaction. The term "Transaction" shall mean the
purchase and sale of the Assets and the assumption of the Assumed Obligations
pursuant to this Agreement.
1.72. Vision 21 Financial Statements. The term "Vision 21
Financial Statements" shall have the meaning set forth in Section 5.9.
2. PURCHASE AND SALE OF ASSETS.
2.1. Purchase and Sale of Assets. Subject to the terms and
conditions herein set forth, and in reliance upon the representations and
warranties set forth herein, the Company agrees to sell, convey, assign,
transfer and deliver to Vision 21, and Vision 21 agrees to purchase, assume,
accept and acquire, the assets consisting of all the assets as a going concern
(other than the Assets specified in Section 2.2 hereof) owned by the Company as
of the Closing Date, of every kind, character and description, whether tangible,
real, personal, or mixed, and wheresoever located, whether carried on the books
of the Company or not carried on the books of the Company due to having been
expended, fully depreciated, or otherwise (the "Assets"), including without
limitation the following (except to the extent that any of the following are
specifically enumerated as Excluded Assets in Section 2.2 hereof) to the extent
permitted by applicable law:
(a) All of the accounts receivable or other rights to receive
payment owing to the Company ("Accounts Receivable");
(b) All of the Company's rights in, to and under all leases of
supplies, instruments, equipment, furniture, machinery and other items of
tangible personal property ("Personal Property Leases"), including, without
limitation, the Personal Property Leases described on Schedule 2.1(b);
(c) All of the Company's rights as a lessee in, to and under all
real property lease agreements (such real property lease agreements are
hereinafter referred to as "Real Property Leases" and the parcels of real
property in which the Company has a leasehold interest and that are subject to
the Real Property Leases are hereinafter referred to as "Leased Property"),
including, without limitation, estates created by, and rights conferred under,
the Real Property Leases described on Schedule 2.1(c), and any and all estates,
rights, titles and interests in, to and under all warehouses, storage
facilities, buildings, works, structures, fixtures, landings, constructions in
progress, improvements, betterments, installations, and additions constructed or
located on or affixed to the Leased Property;
7
<PAGE> 16
(d) All of the Company's rights in, to and under all contracts,
agreements, leases, insurance policies, purchase orders and commitments (the
"Assumed Contracts"), including, without limitation, the Assumed Contracts
described on Schedule 2.1(d);
(e) All tangible personal property (including supplies,
instruments, equipment, furniture and machinery) owned by the Company ("Tangible
Personal Property"), including, without limitation, the Tangible Personal
Property described on Schedule 2.1(e);
(f) All books and records of the Company, including, without
limitation, all credit records, payroll records, computer records, computer
programs, contracts, agreements, operating manuals, schedules of assets,
correspondence, books of account, files, papers, books and all other public and
confidential business records (together the "Business Records"), whether such
Business Records are in hard copy form or are electronically or magnetically
stored;
(g) All franchises, licenses, permits, certificates, approvals and
other governmental authorizations necessary to own and operate any of the other
Assets, a complete and correct list of which is set forth on Schedule 2.1(g);
(h) All (i) United States and foreign patents, patent
applications, trademarks, trademark applications and registrations, service
marks, service mark applications and registrations, copyrights, copyright
applications and registrations and trade names of the Company; (ii) proprietary
data and technical, manufacturing know-how and information (and all materials
embodying such information) of the Company; (iii) developments, discoveries,
inventions, ideas and trade secrets of the Company; and (iv) rights to sue for
past infringement;
(i) All of the Company's right, title and interest in, to and
under all telephone numbers used by the Company, including all extensions
thereto;
(j) All rights in, to and under all representations, warranties,
covenants and guaranties made or provided by third parties to or for the benefit
of the Company with respect to any of the other Assets;
(k) All cash in registers or petty cash drawers (which shall on
the Closing Date be at least ninety percent (90%) of the average daily cash
balance held in such locations in the twelve (12) month period preceding the
Closing Date);
(l) All of the Company's prepaid expenses, prepaid insurance,
deposits and other similar items ("Prepaid Items"); and
(m) All goodwill of the Company.
If and to the extent the assignment of any personal property lease,
real property lease, contract, agreement, purchase order, work order,
commitment, license, permit, certificate or approval listed on the foregoing
Schedules shall require the consent of another party thereto,
8
<PAGE> 17
then (i) such personal property lease, real property lease, contract, agreement,
purchase order, work order, commitment, license, permit, certificate or approval
shall constitute a Personal Property Lease, Real Property Lease, Assumed
Contract or License, as the case may be, only upon and subject to receipt of
such consent; (ii) such personal property lease, contract, agreement, purchase
order, work order, commitment, license, permit, certificate or approval shall
not be a Personal Property Lease, Real Property Lease, Assumed Contract or
License, as the case may be, if and for so long as the attempted assignment
would constitute a breach thereof; and (iii) the Company shall cooperate fully
with Vision 21 (or Vision 21's successor-in-interest) in seeking such consent or
reasonable arrangement designed to provide to Vision 21 (or such
successor-in-interest) the benefits, claim or rights arising thereunder.
2.2. Excluded Assets. The Company shall not sell, convey, assign,
transfer or deliver to Vision 21, and Vision 21 shall not be obligated to
purchase, accept or acquire (or make any payments or otherwise discharge any
liability or obligation of the Company with respect to), (a) life insurance
policies covering the life of any employee of the Company, (b) personal effects
listed on Schedule 2.2; and (c) cash and cash equivalents in banks, certificates
of deposit, commercial paper and securities owned by the Company (but excluding
cash held in registers or petty cash drawers on the Closing Date) (collectively,
the "Excluded Assets").
2.3. Assumption of Obligations and Liabilities. At the Closing,
Vision 21 shall assume and agree to pay or perform, promptly as they become due,
only those obligations and liabilities of the Company expressly set forth on
Schedule 2.3 (the "Assumed Obligations"). Except for the Assumed Obligations,
Vision 21 shall not assume or be deemed to have assumed and shall not be
responsible for any other obligation or liability of the Company, direct or
indirect, known or unknown, absolute or contingent, including without limitation
(i) any and all obligations regarding any foreign, Federal, state or local
income, sales, use, franchise or other tax liabilities, and (ii) any and all
obligations or liabilities relating to any fees or expenses of the Company's or
Shareholders' counsel, accountants or other experts incident to the negotiation
and preparation of any of the documents contemplated herein and consummation of
the transactions contemplated thereby.
2.4. Purchase Price. Vision 21 agrees that, subject to the terms
and conditions of this Agreement, and in full consideration for the aforesaid
sale, transfer, conveyance, assignment and delivery of the Assets of the Company
to Vision 21, and the acceptance by Vision 21 of such Assets and the assumption
of the Assumed Obligations of the Company by Vision 21, Vision 21 shall deliver
to the Company at the Closing the consideration (the "Purchase Price") set forth
in Schedule 2.4A which shall be paid pursuant to a Note in substantially the
form attached hereto and made a part hereof as Exhibit 2.4B.
2.5. The Closing. The Closing shall take place on the Closing Date
at the offices of Shumaker, Loop & Kendrick, 101 E. Kennedy Boulevard, Suite
2800, Tampa, Florida 33602 or at such other location in the State as the parties
shall mutually agree.
9
<PAGE> 18
2.6. Purchase Price Adjustments.
(a) The Purchase Price shall be subject to adjustment to
the extent that Current Assets (as defined herein) or Current Liabilities
Assumed (as defined herein) materially differ from the amounts customarily
arising in the ordinary course of business of the Company as of November 30,
1996. The term "Current Assets" shall mean petty cash, Accounts Receivable,
prepaid expenses, Inventory, supplies and other current assets (excluding cash
in banks, certificates of deposit, other cash equivalents, current portion of
capital leases and prepaid Income Taxes). The term "Current Liabilities Assumed"
shall mean the audited balances as of November 30, 1996 of trade accounts
payable, accrued payroll, accrued payroll taxes, accrued benefits, and other
current liabilities (excluding notes payable, current portion of capital leases
and long-term debt, income and franchise taxes, and accrued shareholder
expenses). The adjustment shall be settled in cash (which shall be set-off from
moneys due the Company pursuant to the Business Management Agreement) or Vision
21 Common Stock at Vision 21's option. The parties also agree that to the extent
the adjustments materially impact the goodwill created by the transaction, there
shall be an adjustment for the related impact of net income created by the
change in amortization of such goodwill and the Purchase Price shall be
increased or reduced to reflect the impact on net income settled in cash or
Vision 21 Common Stock at Vision 21's option.
(b) Within sixty (60) days following the Closing Date,
Vision 21 shall present to the Shareholder its Purchase Price adjustment (the
"Proposed Purchase Price Adjustment") calculated in accordance with Section
2.6(a) hereof. The Shareholder shall, within thirty (30) days after the delivery
by Vision 21 of the Proposed Purchase Price Adjustment, complete his review
thereof. In the event that the Shareholder believes that the Proposed Purchase
Price Adjustment has not been prepared on the basis set forth in Section 2.6(a)
or otherwise contests any item set forth therein, the Shareholder shall, on or
before the last day of such 30 day period, so object to Vision 21 in writing,
setting forth a specific description of the nature of the objection and the
corresponding adjustments the Shareholder believes should be made. If no
objection is received by Vision 21 on or before the last day of such 30 day
period, then the Proposed Purchase Price Adjustment delivered by Vision 21 shall
be final. If an objection has been made and Vision 21 and the Shareholder are
unable to resolve all of their disagreements with respect to the proposed
adjustments within 15 days following the delivery of the Shareholder's
objection, the dispute shall be submitted to arbitration as provided in Section
18.1 except that the arbitrator shall be instructed to deliver his determination
of the dispute to the parties no later than 30 days after the arbitration
hearing. Vision 21 shall provide to the Shareholder and his accountants full
access to all relevant books, records and work papers utilized in preparing the
Proposed Purchase Price Adjustment.
2.7. Subsequent Actions. If, at any time after the Closing Date,
Vision 21 shall determine or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Vision 21 its
right, title or interest in, to or under any of the rights, properties or assets
of the Company acquired or to be acquired by Vision 21 as a result of, or in
connection with, the
10
<PAGE> 19
Transaction, or otherwise to carry out this Agreement, the officers and
directors of Vision 21 shall, at the sole cost and expense of Vision 21, be
authorized to execute and deliver, in the name and on behalf of the Company,
such deeds, bills of sale, assignments and assurances, and to take and do, in
the name and on behalf of the Company, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in Vision 21 or
otherwise to carry out this Agreement.
2.8. Allocation of Purchase Price. The Purchase Price
shall be allocated among the Assets as set forth on Schedule 2.8. Each of Vision
21, the Company and the Shareholder covenants and agrees that he or it shall not
take a position that is in any way inconsistent with the terms of this Section
2.8 on any income tax return, before any governmental agency charged with the
collection of any income tax or in any judicial proceeding.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER. The Company and the Shareholder, jointly and severally, represent
and warrant to Vision 21 that the following are true and correct as of the date
hereof, and shall be true and correct through the Closing Date as if made on
that date; when used in this Section 3, the term "best knowledge" shall mean in
the case of the Company the best knowledge of those individuals listed on
Schedule 3:
3.1. Organization and Good Standing; Qualification. The
Company is a professional corporation duly organized, validly existing and in
good standing under the laws of the State, with all requisite corporate power
and authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company is not duly qualified and licensed
to do business in any other jurisdiction. The Company does not have any assets,
employees or offices in any state other than the State. Except as set forth on
Schedule 3.1, neither the Company nor the Shareholder owns, directly or
indirectly, any of the capital stock of any other corporation or any equity,
profit sharing, participation or other interest in any corporation, partnership,
joint venture or other entity that is engaged in a business that is a
Competitor.
3.2. Continuity of Business Enterprise. Except as set
forth on Schedule 3.2, and except as contemplated by this Agreement, there has
not been any sale, distribution or spin-off of significant assets of the Company
or any of its Affiliates other than in the ordinary course of business within
the two (2) year period preceding the date of this Agreement.
3.3. Authorization and Validity. The execution, delivery
and performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby to be performed by the Company, have been duly authorized by
the Company. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the
11
<PAGE> 20
Company enforceable against the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
Company has obtained, in accordance with applicable law and its Articles or
Certificate of Incorporation and Bylaws, the approval of its stockholders
necessary for the consummation of the transactions contemplated hereby.
3.4. Compliance. Except as disclosed on Schedule 3.4, the
execution and delivery of the documents contemplated hereunder and the
consummation of the transactions contemplated thereby by the Company will not
(i) violate any provision of the Company's organizational documents, (ii)
violate any material provision of or result in the breach of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under, any mortgage, lien, lease, contract,
license, instrument or any other agreement to which the Company is a party,
(iii) result in the creation or imposition of any material lien, charge, pledge,
security interest or other material encumbrance upon any property of the Company
or (iv) violate or conflict with any order, award, judgment or decree or other
material restriction or to the best of the Company's knowledge violate or
conflict with any law, ordinance or regulation to which the Company or its
property is subject.
3.5. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by the Company or the consummation
by such party of the transactions contemplated thereby, except for those
consents or approvals set forth on Schedule 3.5.
3.6. Financial Statements. The Company has furnished to
Vision 21 its unaudited balance sheet and related unaudited statements of
income, retained earnings and cash flows for its prior three (3) full fiscal
years, and its unaudited interim balance sheet for the fiscal period ended
September 30, 1996 (the "Company Balance Sheet", and the date thereof shall be
referred to as the "Company Balance Sheet Date") and related unaudited
statements of income, retained earnings and cash flows for the twelve months
then ended (all collectively, with the related notes thereto, the "Financial
Statements"). The Financial Statements fairly present the financial condition
and results of operations of the Company as of the dates and for the periods
indicated except as otherwise indicated in the Financial Statements. The Company
and the Shareholder expressly warrant that they will have prior to the Closing
fairly, accurately and completely provided all necessary information requested
in or relevant to the preparation of the audit to be conducted by the
Accountants or their designees prior to Closing (the "Audit"). The cost of the
Audit shall be paid by Vision 21 and all materials prepared by Vision 21's
Accountants in connection with the Audit shall be solely the property of Vision
21.
3.7. Liabilities and Obligations. Except as set forth on
Schedule 3.7, the Financial Statements reflect all liabilities of the Company,
accrued, contingent or otherwise that would be required to be reflected thereon,
or in the notes thereto, prepared in accordance with GAAP, except for
liabilities and obligations incurred in the ordinary course of business since
the Company Balance Sheet Date. Except as set forth in the Financial Statements
or on
12
<PAGE> 21
Schedule 3.7, the Company is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
the Company does not know of any valid basis for the assertion of any other
claims or liabilities of any nature or in any amount.
3.8. Employee Matters.
a. Cash Compensation. Schedule 3.8(a) contains
a complete and accurate list of the names, titles and annual cash compensation
as of the Closing Date, including without limitation wages, salaries, bonuses
(discretionary and formula) and other cash compensation (the "Cash
Compensation") of all employees of the Company. In addition, Schedule 3.8(a)
contains a complete and accurate description of (i) all increases in Cash
Compensation of employees of the Company during the current fiscal year and the
immediately preceding fiscal year and (ii) any promised increases in Cash
Compensation of employees of the Company that have not yet been effected.
b. Compensation Plans. Schedule 3.8(b) contains
a complete and accurate list of all compensation plans, arrangements or
practices (the "Compensation Plans") sponsored by the Company or to which the
Company contributes on behalf of its employees, other than Employment Agreements
listed on Schedule 3.8(c) and Employee Benefit Plans listed on Schedule 3.9(a).
The Compensation Plans include without limitation plans, arrangements or
practices that provide for performance awards, and stock ownership or stock
options. The Company has provided or made available to Vision 21 a copy of each
written Compensation Plan and a written description of each unwritten
Compensation Plan. Except as set forth on Schedule 3.8(b), each of the
Compensation Plans can be terminated or amended at will by the Company.
c. Employment Agreements. Except as set forth
on Schedule 3.8(c), the Company is not a party to any employment agreement
("Employment Agreements") with respect to any of its employees. Employment
Agreements include without limitation employee leasing agreements, employee
services agreements and non-competition agreements.
d. Employee Policies and Procedures. Schedule
3.8(d) contains a complete and accurate list of all employee manuals and all
material policies, procedures and work-related rules (the "Employee Policies and
Procedures") that apply to employees of the Company. The Company has provided or
made available to Vision 21 a copy of all written Employee Policies and
Procedures and a written description of all material unwritten Employee Policies
and Procedures.
e. Unwritten Amendments. Except as described on
Schedule 3.8(b), 3.8(c), or 3.8(d), no material unwritten amendments have been
made, whether by oral communication, pattern of conduct or otherwise, with
respect to any Compensation Plans or Employee Policies and Procedures.
13
<PAGE> 22
f. Labor Compliance. To the best knowledge of
the Company and the Shareholder, the Company has been and is in compliance with
all applicable laws, rules, regulations and ordinances respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except for any such failures to be in compliance that, individually or in the
aggregate, would not result in a Material Adverse Effect, and the Company is not
liable for any arrearages of wages or penalties for failure to comply with any
of the foregoing. The Company has not, to the best of Shareholder's and the
Company's knowledge, engaged in any unfair labor practices or discriminated on
the basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices that would, individually or
in the aggregate, result in a Material Adverse Effect. Except as set forth on
Schedule 3.8(f), there are no (i) unfair labor practice charges or complaints or
racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the actual knowledge of the
Company and the Shareholder, threatened against the Company before any federal,
state or local court, board, department, commission or agency (nor, to the best
knowledge of the Company and the Shareholder, does any valid basis therefor
exist) or (ii) existing or, to the actual knowledge of the Company, threatened
labor strikes, disputes, grievances, controversies or other labor troubles
affecting the Company (nor, to the best knowledge of the Company and the
Shareholder, does any valid basis therefor exist).
g. Unions. The Company has never been a party
to any agreement with any union, labor organization or collective bargaining
unit. No employees of the Company are represented by any union, labor
organization or collective bargaining unit. Except as set forth on Schedule
3.8(g), to the actual knowledge of the Company, none of the employees of the
Company has threatened to organize or join a union, labor organization or
collective bargaining unit.
h. Aliens. All employees of the Company are, to
the best knowledge of the Company, citizens of, or are authorized in accordance
with federal immigration laws to be employed in, the United States.
3.9. Employee Benefit Plans.
a. Identification. Schedule 3.9(a) contains a
complete and accurate list of all employee benefit plans (within the meaning of
Section 3(3) of ERISA sponsored by the Company or to which the Company
contributes on behalf of its employees and all employee benefit plans previously
sponsored or contributed to on behalf of its employees within the three (3)
years preceding the date hereof (the "Employee Benefit Plans"). The Company has
provided or made available to Vision 21 copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. In
addition, the Company has provided or made available to Vision 21 a written
description of all
14
<PAGE> 23
existing practices engaged in by the Company that constitute Employee Benefit
Plans. Except as set forth on Schedule 3.9(a) and subject to the requirements of
the Code and ERISA, each of the Employee Benefit Plans can be terminated or
amended at will by the Company. Except as set forth on Schedule 3.9(a), no
unwritten amendment exists with respect to any Employee Benefit Plan. Except as
set forth on Schedule 3.9(b)-(l), each of the following paragraphs is true and
correct.
b. Administration. To the best knowledge of the
Company and the Shareholder, each Employee Benefit Plan has been administered
and maintained in compliance with all applicable laws, rules and regulations,
except where the failure to be in compliance would not, individually or in the
aggregate, result in a Material Adverse Effect. The Company and the Shareholder
have (i) made all necessary filings with respect to such Employee Benefit Plans,
including the timely filing of Form 5500 if applicable, and (ii) made all
necessary filings, reports and disclosures pursuant to and have complied with
all requirements of the IRS Voluntary Compliance Resolution Program, if
applicable, with respect to all profit sharing retirement plans and pension
plans in which employees of the Company participate.
c. Examinations. Except as set forth on
Schedule 3.9(c), the Company has not received any notice that any Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency.
d. Prohibited Transactions. To the best
knowledge of the Company and the Shareholder, no prohibited transactions (within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA) have
occurred with respect to any Employee Benefit Plans.
e. Claims and Litigation. No pending or, to the
actual knowledge of the Company and the Shareholder, threatened, claims, suits,
or other proceedings exist with respect to any Employee Benefit Plan other than
normal benefit claims filed by participants or beneficiaries.
f. Qualification. As set forth in more detail
on Schedule 3.9(f), the Company has received a favorable determination letter or
ruling from the IRS for each of the Employee Benefit Plans intended to be
qualified within the meaning of Section 401(a) of the Code and/or tax-exempt
within the meaning of Section 501(a) of the Code. Except as set forth on
Schedule 3.9(e), no proceedings exist or, to the actual knowledge of the Company
have been threatened that could result in the revocation of any such favorable
determination letter or ruling.
g. Funding Status. To the best knowledge of the
Company and the Shareholder, no accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether or not waived, exists with respect
to any Employee Benefit Plan or any plan sponsored by any member of a controlled
group (within the meaning of Section 412(n)(6)(B) of the Code) in which the
Company is a member ("Controlled Group"). With respect to each
15
<PAGE> 24
Employee Benefit Plan subject to Title IV of ERISA, the assets of each such plan
are at least equal in value to the present value of accrued benefits determined
on an ongoing basis as of the date hereof. The Company does not sponsor any
Employee Benefit Plan described in Section 501(c)(9) of the Code. None of the
Employee Benefit Plans are subject to actuarial assumptions.
h. Excise Taxes. Neither the Company nor any
member of a Controlled Group has any liability to pay excise taxes with respect
to any Employee Benefit Plan under applicable provisions of the Code or ERISA.
i. Multiemployer Plans. Neither the Company nor
any member of a Controlled Group is or ever has been obligated to contribute to
a multiemployer plan within the meaning of Section 3(37) of ERISA.
j. Pension Benefit Guaranty Corporation. None
of the Employee Benefit Plans are subject to the requirements of Title IV of
ERISA.
k. Retirees. The Company has no obligation or
commitment to provide medical, dental or life insurance benefits to or on behalf
of any of its employees who may retire or any of its former employees who have
retired except as may be required pursuant to the continuation of coverage
provisions of Section 4980B of the Code and Sections 501 through 508 of ERISA.
l. Other Compensation. Except as set forth on
Schedule 3.8(a), 3.8(b), 3.8(c), 3.8(d) and 3.9(a), neither the Company nor the
Shareholder is a party to any compensation or debt arrangement with any person
relating to the provision of healthcare related services other than arrangements
with the Company or the Shareholder.
3.10. Absence of Certain Changes. Except as set forth on
Schedule 3.10 or as contemplated by this Agreement, since the Company Balance
Sheet Date, the Company has not:
a. suffered a Material Adverse Effect, whether
or not caused by any deliberate act or omission of the Company or the
Shareholder;
b. contracted for the purpose of acquiring any
capital asset having a cost in excess of $5,000 or made any single expenditure
in excess of $5,000;
c. incurred any indebtedness for borrowed money
(other than short-term borrowings in the ordinary course of business), or issued
or sold any debt securities;
d. incurred or discharged any material
liabilities or obligations except in the ordinary course of business;
16
<PAGE> 25
e. paid any amount on any indebtedness prior to
the due date, forgiven or cancelled any claims or any debt in excess of $5,000,
or released or waived any rights or claims except in the ordinary course of
business;
f. mortgaged, pledged or subjected to any
security interest, lien, lease or other charge or encumbrance any of its
properties or assets (other than statutory liens arising in the ordinary course
of business or other liens that do not materially detract from the value or
interfere with the use of such properties or assets);
g. suffered any damage or destruction to or
loss of any assets (whether or not covered by insurance) that has, individually
or in the aggregate, resulted in a Material Adverse Effect;
h. acquired or disposed of any assets having an
aggregate value in excess of $5,000, except in the ordinary course of business;
i. written up or written down the carrying
value of any of its assets, other than accounts receivable in the ordinary
course of business;
j. changed the costing system or depreciation
methods of accounting for its assets in any material respect;
k. lost or terminated any employee, patient,
customer or supplier that has, individually or in the aggregate, resulted in a
Material Adverse Effect;
l. increased the compensation of any director,
officer, key employee or consultant, except as disclosed on Schedule 3.8(a);
m. increased the compensation of any employee
(except for increases in the ordinary course of business consistent with past
practice) or hired any new employee who is expected to receive annualized
compensation of at least $15,000;
n. made any payments to or loaned any money to
any person or entity referred to in Section 3.22;
o. formed or acquired or disposed of any
interest in any corporation, partnership, joint venture or other entity;
p. redeemed, purchased or otherwise acquired,
or sold, granted or otherwise disposed of, directly or indirectly, any of its
capital stock or securities, or agreed to change the terms and conditions of any
such capital stock, securities or rights;
q. entered into any agreement providing for
total payments in excess of $5,000 in any twelve (12) month period with any
person or group, or modified or
17
<PAGE> 26
amended in any material respect the terms of any such existing agreement, except
in the ordinary course of business;
r. entered into, adopted or amended any
Employee Benefit Plan, except as contemplated hereby or the other agreements
contemplated hereby; or
s. entered into any other commitment or
transaction or experienced any other event that would materially interfere with
its performance under this Agreement or any other agreement or document executed
or to be executed pursuant to this Agreement, or otherwise has, individually or
in the aggregate, resulted in a Material Adverse Effect.
3.11. Title; Leased Assets.
a. Real Property. The Company does not own any
interest (other than leasehold interests referred to on Schedule 3.11(c)) in
real property. The leased real property referred to on Schedule 3.11(c)
constitutes the only real property necessary for the conduct of the Company's
business.
b. Personal Property. Except as set forth on
Schedule 3.11(b), the Company and/or the Shareholder has good, valid and
marketable title to all the personal property constituting the Assets. The
personal property constituting the Assets constitute the only personal property
necessary for the conduct of the Company's business. Upon consummation of the
transactions contemplated hereby, such interest in the Assets shall be free and
clear of all security interests, liens, claims and encumbrances, other than
those set forth on Schedule 3.11(b) (the "Permitted Encumbrances") and statutory
liens arising in the ordinary course of business or other liens that do not
materially detract from the value or interfere with the use of such properties
or assets.
c. Leases. A list and brief description of (i)
all leases of real property and (ii) leases of personal property involving
rental payments within any twelve (12) month period in excess of $12,000, in
either case to which the Company is a party, either as lessor or lessee, are set
forth on Schedule 3.11(c). All such leases are valid and, to the knowledge of
the Company, enforceable in accordance with their respective terms except as may
be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
3.12. Commitments.
a. Commitments; Defaults. Except as set forth
on Schedule 3.12 or as otherwise disclosed pursuant to this Agreement, the
Company is not a party to nor bound by, nor are the Assets or the business of
the Company bound by, whether or not in writing, any of the following
(collectively, "Commitments"):
18
<PAGE> 27
i) partnership or joint venture
agreement;
ii) guaranty or suretyship,
indemnification or contribution agreement or performance bond;
iii) debt instrument, loan agreement or
other obligation relating to indebtedness for borrowed money or money lent or to
be lent to another;
iv) contract to purchase real property;
v) agreement with dealers or sales or
commission agents, public relations or advertising agencies, accountants or
attorneys (other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any twelve (12) month
period in excess of $2,000 and which is not terminable on thirty (30) days'
notice or without penalty;
vi) agreement relating to any material
matter or transaction in which an interest is held by a person or entity that is
an Affiliate of the Company or the Shareholder;
vii) agreement for the acquisition of
services, supplies, equipment, inventory, fixtures or other property involving
more than $2,000 in the aggregate;
viii) powers of attorney;
ix) contracts containing
non-competition covenants;
x) agreement providing for the
purchase from a supplier of all substantially all of the requirements of the
Company of a particular product or services;
xi) agreements regarding clinical
research;
xii) agreements with Third-Party Payor
Programs and contracts to provide medical or health care services; or
xiii) any other agreement or commitment
not made in the ordinary course of business or that is material to the business,
operations, condition (financial or otherwise) or results of operations of the
Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Vision 21. Except as set forth on Schedule 3.12
and to the Company's best knowledge, there are no existing or asserted defaults,
events of default or events, occurrences, acts or omissions
19
<PAGE> 28
that, with the giving of notice or lapse of time or both, would constitute
defaults by the Company or, to the best knowledge of the Company, any other
party to a material Commitment, and no penalties have been incurred nor are
amendments pending, with respect to the material Commitments, except as
described on Schedule 3.12. The Commitments are in full force and effect and are
valid and enforceable obligations of the Company, and to the best knowledge of
the Company, are valid and enforceable obligations of the other parties thereto,
in accordance with their respective terms, and no defenses, off-sets or
counterclaims have been asserted or, to the best knowledge of the Company, may
be made by any party thereto (other than the Company), nor has the Company
waived any rights thereunder, except as described on Schedule 3.12. Except as
set forth on Schedule 3.12, no consents or approvals are required under the
terms of any agreement listed on Schedule 3.12 in connection with the
transactions contemplated herein, including, without limitation, the transfer of
any such agreement pursuant to this Agreement.
b. No Cancellation or Termination of
Commitment. Except as disclosed pursuant to this Agreement or contemplated
hereby and except where such default would not have a Material Adverse Effect on
the Company, (i) neither the Company nor the Shareholder has received notice of
any plan or intention of any other party to any Commitment to exercise any right
to cancel or terminate any Commitment, and the Company does not know of any fact
that would justify the exercise of such a right; and (ii) neither the Company
nor the Shareholder currently contemplates, or has reason to believe any other
person currently contemplates, any amendment or change to any Commitment.
3.13. Insurance. The Company carries property, liability,
malpractice, workers' compensation and such other types of insurance pursuant to
the insurance policies listed and briefly described on Section 3.13 (the
"Insurance Policies"). The Insurance Policies are all of the insurance policies
of the Company relating to the business of the Company and the Assets. All of
the Insurance Policies are issued by insurers of recognized responsibility, and,
to the best knowledge of the Company, are valid and enforceable policies, except
as may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. Except as
set forth in Schedule 3.13, no consent or approval is required for, and no other
impediment or restriction exists that will prohibit or limit, the transfer of
any such Insurance Policies included within the Assets in accordance with the
terms of this Agreement. All Insurance Policies shall be maintained in force
without interruption up to and including the Closing Date. True, complete and
correct copies of all Insurance Policies have been provided or made available to
Vision 21. Except as set forth on Schedule 3.13, neither the Company nor the
Shareholder has received any notice or other communication from any issuer of
any Insurance Policy cancelling such policy, materially increasing any
deductibles or retained amounts thereunder, and to the actual knowledge of the
Company, no such cancellation or increase of deductibles, retainages or premiums
is threatened. Except as set forth on Schedule 3.13, the Company does not have
any outstanding claims, settlements or premiums owed against any Insurance
Policy, and the Company has given all notices or has presented all potential or
actual claims under any Insurance Policy in due and timely fashion. Schedule
3.13
20
<PAGE> 29
also sets forth a list of all claims under any Insurance Policy in excess of
$10,000 per occurrence filed by the Company since January 1, 1994.
3.14. Proprietary Rights and Information. Set forth on
Schedule 3.14 is a true and correct description of the following ("Proprietary
Rights"):
a. all trademarks, trade-names, service marks
and other trade designations, including common law rights, registrations and
applications therefor, and all patents and applications therefor currently
owned, in whole or in part, by the Company, and all licenses, royalties,
assignments and other similar agreements relating to the foregoing to which the
Company is a party (including the expiration date thereof if applicable); and
b. all agreements relating to technology,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other organizations engaged in Managed Care Business), or which it licenses or
authorizes others to use.
The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, such ownership or use does not conflict, infringe
or violate the rights of any other person. Except as disclosed on Schedule 3.14,
no consent of any person will be required for the use thereof by Vision 21 upon
consummation of the transactions contemplated hereby and the Proprietary Rights
are freely transferable. No claim has been asserted by any person to the
ownership of or for infringement by the Company of the proprietary right of any
other person, and the Company does not know of any valid basis for any such
claim. To the best knowledge of the Company and the Shareholder, the Company has
the right to use, free and clear of any adverse claims or rights of others, all
trade secrets, customer lists and proprietary information required for the
marketing of all merchandise and services formerly or presently sold or marketed
by it.
3.15. Taxes.
a. Filing of Tax Returns. The Company has duly
and timely filed (in accordance with any extensions duly granted by the
appropriate governmental agency, if applicable) with the appropriate
governmental agencies all federal, state, local or foreign income, excise,
corporate, franchise, property, sales, use, payroll, withholding, provider,
value added and other tax returns and reports (collectively the "Tax Returns")
required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns or reports
are complete and accurate in all material respects and properly reflect the
taxes of the Company for the periods covered thereby.
b. Payment of Taxes. Except for such items as
the Company may be disputing in good faith by proceedings in compliance with
applicable law, which are described on Schedule 3.15, (i) the Company has paid
all taxes, penalties, assessments and interest that have become due with respect
to any Tax Returns that it has filed and has properly
21
<PAGE> 30
accrued on its books and records for all of the same that have not yet become
due, and (ii) the Company is not delinquent in the payment of any tax,
assessment or governmental charge.
c. No Pending Deficiencies, Delinquencies,
Assessments or Audits. Except as set forth on Schedule 3.15, the Company has not
received any notice that any tax deficiency or delinquency has been asserted
against the Company. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of the
Company that could be asserted by any taxing authority. There is no taxing
authority audit of the Company pending, or to the actual knowledge of the
Company, threatened, and the results of any completed audits are properly
reflected in the Financial Statements. The Company has not, to its best
knowledge, violated any federal, state, local or foreign tax law.
d. No Extension of Limitation Period. The
Company has not granted an extension to any taxing authority of the limitation
period during which any tax liability may be assessed or collected.
e. All Withholding Requirements Satisfied. All
monies required to be withheld by the Company and paid to governmental agencies
for all income, social security, unemployment insurance, sales, excise, use, and
other taxes have been collected or withheld and paid to the respective
governmental agencies.
f. Foreign Person. Neither the Company nor the
Shareholder is a foreign person, as such term is referred to in Section
1445(f)(3) of the Code.
3.16. Compliance with Laws. The Company has complied with
all applicable laws, regulations and licensing requirements relating to the
operation of the Company and has filed with the proper authorities all necessary
statements and reports, except where the failure to so comply or file would not,
individually or in the aggregate, result in a Material Adverse Effect. There are
no existing violations by the Company of any federal, state or local law or
regulation that could, individually or in the aggregate, result in a Material
Adverse Effect. The Company possesses all necessary licenses, franchises,
permits and governmental authorizations for the conduct of the Company's
business as now conducted, all of which are listed (with expiration dates, if
applicable) on Schedule 3.16. Except as set forth on Schedule 3.16, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government authorizations,
except for any such default, breach or violation that would not, individually or
in the aggregate, have a Material Adverse Effect. Except as set forth on
Schedule 3.16, since January 1, 1993, the Company has not received any notice
from any federal, state or other governmental authority or agency having
jurisdiction over its properties or activities, or any insurance or inspection
body, that its operations or any of its properties, facilities, equipment, or
business practices fail to comply with any applicable law, ordinance,
regulation, building or zoning law, or requirement of any public or quasi-public
authority or body, except where failure to so comply would not, individually or
in the aggregate, have a Material Adverse Effect.
22
<PAGE> 31
3.17. Finder's Fee. Except as set forth on Schedule 3.17,
the Company has not incurred any obligation for any finder's, brokers or agent's
fee in connection with the transactions contemplated hereby.
3.18. Litigation. Except as described on Schedule 3.18 or
otherwise disclosed pursuant to this Agreement, there are no legal actions or
administrative proceedings or investigations instituted, to the actual knowledge
of the Company or the Shareholder, which affect or could affect the operation,
business, condition (financial or otherwise), or results of operations of the
Company which (i) if successful could, individually or in the aggregate, have a
Material Adverse Effect or (ii) could adversely affect the ability of the
Company or the Shareholder to effect the transactions contemplated hereby.
Neither the Company nor the Shareholder is (a) subject to any continuing court
or administrative order, judgment, writ, injunction or decree applicable
specifically to the Assets, the Company or to its business, assets, operations
or employees or (b) in default with respect to any such order, judgment, writ,
injunction or decree. The Company has no knowledge of any valid basis for any
such action, proceeding or investigation. Except as set forth on Schedule 3.18,
all medical malpractice claims asserted, general liability incidents and
incident reports have been submitted to the Company's insurer therefor. All
claims made or threatened against the Company in excess of its deductible are
covered under its Insurance Policies.
3.19. Condition of Fixed Assets. All of the fixtures,
structures and equipment reflected in the Financial Statements and used by the
Company in its business, are in good condition and repair, subject to normal
wear and tear, and conform in all material respects with all applicable
ordinances, regulations and other laws, and the Company has no actual knowledge
of any latent defects therein.
3.20. Distributions and Repurchases. No distribution,
payment or dividend of any kind has been declared or paid by the Company on any
of its capital stock since the Company Balance Sheet Date. No repurchase of any
of the Company's capital stock has been approved, effected or is pending, or is
contemplated by the Board of Directors of the Company.
3.21. Banking Relations. Set forth on Schedule 3.21 is a
complete and accurate list of all borrowing and investing arrangements that the
Company has with any bank or other financial institution, indicating with
respect to each relationship the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the person
or persons authorized in respect thereof.
3.22. Ownership Interests of Interested Persons;
Affiliations. Except as set forth on Schedule 3.22, no officer, supervisory
employee or director of the Company, or their respective spouses, children or
Affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier of the Company or any
organization that has a material contract or arrangement with the Company.
Except as may be disclosed pursuant to this Agreement, neither the Company, nor
any of its directors, officers, employees or
23
<PAGE> 32
consultants, nor any Affiliate of such person is, or within the last three (3)
years was, a party to any contract, lease, agreement or arrangement, including,
but not limited to, any joint venture or consulting agreement with any
physician, hospital, pharmacy, home health agency, organization engaged in
Managed Care Business, or other person which is in a position to make or
influence referrals to, or otherwise generate business for, the Company.
3.23. Investments in Competitors. Except as disclosed on
Schedule 3.23, neither the Company nor the Shareholder owns directly or
indirectly any interests or has any investment in any person that is a
Competitor of the Company.
3.24. Environmental Matters.
a. Environmental Laws. To the best knowledge of
the Company and the Shareholder, neither the Company nor any of the Assets
(including the leased real property described on Schedule 3.11(c)) are currently
in violation of, or subject to any existing, pending or, to the actual knowledge
of the Company threatened, investigation or inquiry by any governmental
authority or to any remedial obligations under, any federal, state or local laws
or regulations pertaining to health or the environment ("Environmental Laws"),
except for any such violations, investigations or inquiries that would not,
individually or in the aggregate, result in a Material Adverse Effect.
b. Permits. The Company is not required to
obtain, and has no knowledge of any reason Vision 21 will be required to obtain,
any permits, licenses or similar authorizations to occupy, operate or use any
buildings, improvements, fixtures and equipment owned or leased by the Company
by reason of any Environmental Laws.
c. Superfund List. To the best knowledge of the
Company, none of the Assets (including the Company's leased real property
described on Schedule 3.11(c)) are on any federal or state "Superfund" list or
subject to any environmentally related liens, except such liens as would not,
individually or in the aggregate, result in a Material Adverse Effect.
3.25. Certain Payments. Neither the Company nor any
director, officer or employee of the Company acting for or on behalf of the
Company, has paid or caused to be paid, directly or indirectly, in connection
with the business of the Company:
a. to any government or agency thereof or any
agent of any supplier or customer any bribe, kick-back or other similar payment;
or
b. any contribution to any political party or
candidate (other than from personal funds of directors, officers or employees
not reimbursed by their respective employers or as otherwise permitted by
applicable law).
24
<PAGE> 33
3.26. Arrangements with Third-Party Payor Programs. The
Company has complied with all legal and contractual requirements applicable to
any Third-Party Payor Program and has timely filed all claims or other reports
required to be filed prior to the Closing Date with respect to the purchase of
services by such Third-Party Payors Programs, except where the failure to file
would not, individually or in the aggregate, result in a Material Adverse
Effect. All such claims or reports are complete and accurate in all material
respects. The Company and the Shareholder have paid or have properly recorded on
the Financial Statements all actually known and undisputed refunds, discounts or
adjustments which have become due pursuant to such claims, and neither the
Company nor the Shareholder has any material liability to any Third-Party Payor
Program with respect thereto, except as has been reserved for in the Company
Balance Sheet. There are no pending appeals, overpayment determinations,
adjustments, challenges, audits, litigation, or notices of intent to reopen
claims determinations or other reports relating to any Third-Party Payor
Programs. Neither the Company, nor any of its directors, officers, employees,
consultants or the Shareholder has been convicted of, or pled guilty or nolo
contendere to, patient abuse or neglect, or any other Medicare or Medicaid
program-related offense. Neither the Company, nor its directors, officers, the
Shareholder, or to the best of the Company's knowledge, its employees or
consultants, has committed any offense which may serve as the basis for
suspension or exclusion from the Medicare and Medicaid programs, including but
not limited to, defrauding a government program, loss of a license to provide
health services, and failure to provide quality care.
3.27. Fraud and Abuse. To the best knowledge of the Company
and the Shareholder, the Company, and its officers and directors have not
engaged in any activities which are prohibited under 42 U.S.C. ss.ss. 1320-7, 7a
or 7b or 42 U.S.C. ss.1395nn (subject to the exceptions set forth in such
legislation), or the regulations promulgated thereunder or pursuant to similar
state or local statutes or regulations, or which are prohibited by rules of
professional conduct, including but not limited to the following:
a. knowingly and willfully making or causing to
be made a false statement or representation of a material fact in any
application for any benefit or payment;
b. knowingly and willfully making or causing to
be made a false statement or representation of a material fact for use in
determining rights to any benefit or payment;
c. failure to disclose knowledge by a Medicare
or Medicaid claimant of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on behalf of
another, with intent to fraudulently secure such benefit or payment;
d. knowingly and willfully offering, paying,
soliciting or receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or in kind (i) in
return for referring an individual to a person for the furnishing or arranging
for the furnishing of any item or service for which payment may be
25
<PAGE> 34
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering, or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service, or item for which payment may
be made in whole or in part by Medicare or Medicaid; and
e. referring a patient for designated health
services (as defined in 42 U.S.C. ss.1395nn) to or providing designated health
services to a patient upon a referral from an entity or person with which the
Shareholder or an immediate family member has a financial relationship, and to
which no exception under 42 U.S.C. ss.1395nn applies.
3.28. Third-Party Payor Programs. Schedule 3.28 sets forth
a true, correct and complete list of the names and addresses of each Third-Party
Payor Program, including any private pay patient as a single payor, of the
Company's services which accounted for more than 10% of the revenues of the
Company in the three (3) previous fiscal years. Except as set forth on Schedule
3.28, the Company has good relations with such Third-Party Payor Program and
none of such Third-Party Payor Programs has notified the Company that it intends
to discontinue its relationship with the Company or to deny any claims submitted
to such Third-Party Payor Program for payment.
3.29. Acquisition Proposals. Except for the negotiations,
offers and agreements with Vision 21 and its representatives, the Company has
not received during the twelve (12) month period preceding the date of this
Agreement any proposal or offer (including, without limitation, any proposal or
offer of its stockholders) with respect to a merger, acquisition, consolidation
or similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
nor has the Company or any of its employees, agents, representatives or
stockholders engaged in any negotiations concerning, or provided any
confidential information or data to, or had any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitated any effort or
attempted to make or implement an Acquisition Proposal.
3.30. Accounts Receivable/Payable. The Accounts Receivable
of the Company relating to the ownership and operation of the Company reflected
on the Company Balance Sheet, to the extent uncollected on the date hereof, are,
and the accounts receivable of the Company relating to the ownership and
operation of the Company to be reflected on the books of the Company on the
Closing Date will be, valid, existing and collectible within six months from the
Closing Date (taking into consideration the allowance for doubtful accounts set
forth in the Financial Statements) using reasonably diligent collection methods
taking into account the size and nature of the receivable, and represent amounts
due for goods sold and delivered or services performed. There are not, and on
the date of Closing there will not be, any refunds, discounts, set-offs,
defenses, counterclaims or other adjustments payable or assessable with respect
to the Accounts Receivable. The Company has collected Accounts Receivable only
in the ordinary course and has not changed collection procedures or methods nor
accelerated the pace of such collection efforts in anticipation of the
transactions contemplated
26
<PAGE> 35
in this Agreement. The Company has paid accounts payable in the ordinary course
and has not changed payment procedures or methods nor delayed the timing of such
payments in anticipation of the transactions contemplated in this Agreement.
3.31. Projections. There is no fact, development or
threatened development with respect to the markets, products, services, clients,
patients, facilities, personnel, vendors, suppliers, operations, assets or
prospects of the Company which are known to the Company or the Shareholder which
would materially adversely affect the projected fiscal year 1997 earnings of the
Company disclosed to Vision 21 by Shareholder, other than such conditions as may
affect as a whole the economy or the managed care industry generally.
3.32. Tangible Personal Property. Except as set forth on
Schedule 3.32, the Company's Tangible Personal Property is in good operating
condition, working order and repair (normal wear and tear excepted) and is fully
suitable for the uses for which it is employed in the conduct of the Company.
3.33. Leases. With respect to each of the Real Property
Leases and Personal Property Leases, except as set forth on Schedule 3.33:
(a) such lease is legal, valid, binding, enforceable and
in full force and effect;
(b) such lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing;
(c) no party to such lease is in material breach or
default, and no event has occurred that, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification or
acceleration thereunder;
(d) no party to such lease has repudiated in writing any
provision thereof;
(e) there are no disputes, oral agreements or forbearance
programs in effect as to such lease; and
(f) The Company has performed and satisfied in full each
material obligation to be performed by the Company under such lease.
3.34. Contract Rights. Except as set forth on Schedule
3.34, each of the Assumed Contracts is valid and enforceable and is in full
force and effect, and there is no material default or existing condition that,
with the giving of notice or the passage of time, would constitute such a
default by any parties thereto. The Company has performed and satisfied in full
each material obligation required to be performed by the Company under each
Assumed Contracts. If services are to be provided to the Company under any of
such Assumed
27
<PAGE> 36
Contracts, such services have been and are being performed satisfactorily and in
a timely manner, substantially in accordance with the terms of such Assumed
Contract.
3.35. Prepaid Items. Each of the Prepaid Items may be
transferred to Vision 21 without the necessity of obtaining any consent or
approval.
3.36. Completeness of Assets. The Assets include all the
properties used to conduct the business of the Company as presently conducted.
3.37. Disclosure. To the best of the Company's and the
Shareholder's knowledge, no representation, warranty or statement made by the
Company or the Shareholder in this Agreement or any of the exhibits or schedules
hereto, or any agreements, certificates, documents or instruments delivered or
to be delivered to Vision 21 in accordance with this Agreement or the other
documents contemplated herein, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company and the Shareholder do not
know of any fact or condition (other than general economic conditions or
legislative or administrative changes in health-care delivery) which materially
adversely affects, or in the future may materially affect, the condition,
properties, assets, liabilities, business, operations or prospects of the
Company which has not been set forth herein or in the Schedules provided
herewith.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder represents and warrants to Vision 21 that the following are true and
correct as of the date hereof, and shall be true and correct through the Closing
Date as if made on that date:
4.1. Validity; Shareholder Capacity. This Agreement and
each other agreement contemplated hereby or thereby have been, or will be as of
the Closing Date, duly executed and delivered by the Shareholder and constitute
or will constitute legal, valid and binding obligations of the Shareholder,
enforceable against the Shareholder in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable remedies.
The Shareholder has legal capacity to enter into and perform this Agreement.
4.2. No Violation. Except as set forth on Schedule 4.2,
neither the execution, delivery or performance of this Agreement, other
agreements of the Shareholder contemplated hereby or thereby, nor the
consummation of the transactions contemplated hereby or thereby, will (a)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, indenture or other
instrument under which the Shareholder is bound or to which any of his property
or the shares of common stock of the Company are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon any of his property or the shares of common stock of the Company or (b) to
the best knowledge of the Shareholder, violate or conflict with any judgment,
decree,
28
<PAGE> 37
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
4.3. Consents. Except as may be required under the
Exchange Act, the Securities Act, the Corporation Law and state securities laws,
or otherwise disclosed pursuant to this Agreement, no consent, authorization,
approval, permit or license of, or filing with, any governmental or public body
or authority, or any other person is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of the Shareholder.
4.4. Certain Payments. The Shareholder has not paid or
caused to be paid, directly or indirectly, in connection with the business of
the Company:
a. to any government or agency thereof or any
agent of any supplier or customer any bribe, kick-back or other similar payment;
or
b. any contribution to any political party or
candidate (other than from personal funds not reimbursed by the Company or as
otherwise permitted by applicable law).
4.5. Finder's Fee. Except as set forth on Schedule 4.5,
the Shareholder has not incurred any obligation for any finder's, broker's or
agent's fee in connection with the transactions contemplated hereby.
4.6. Ownership of Interested Persons; Affiliations. Except
as set forth on Schedule 4.6, neither the Shareholder nor his spouse, children
or Affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier of the Company or any
organization that has a material contact or arrangement with the Company.
Neither the Shareholder nor any of his Affiliates is, or with the last three (3)
years was, a party to any contract, lease, agreement or arrangement, including,
but not limited to, any joint venture or consulting agreement with any
physician, hospital, pharmacy, home health agency, organization engaged in
Managed Care Business or other person which is in a position to make or
influence referrals to, or otherwise generate business for, the Company.
4.7. Investments in Competitors. Except as disclosed on
Schedule 4.7, the Shareholder does not own directly or indirectly any interests
or have any investment in any person that is a Competitor of the Company.
5. REPRESENTATIONS AND WARRANTIES OF VISION 21. Vision 21
represents and warrants to the Company and the Shareholder that the following
are true and correct as of the date hereof and shall be true and correct as of
the Closing Date; when used in this Section 5, the term "best knowledge" shall
mean the best knowledge of those individuals listed on Schedule 5:
29
<PAGE> 38
5.1. Organization and Good Standing. Vision 21 is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, with all requisite corporation power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. At or prior to Closing, Vision 21 will be qualified to do
business as a foreign corporation in the jurisdictions listed on Schedule 5.1.
5.2. Capitalization. The authorized capital stock of
Vision 21 consists of 50,000,000 shares of Vision 21 Common Stock, of which
5,465,673 shares are issued and outstanding. Immediately prior to the Closing,
the authorized capital stock of Vision 21 will consist of 50,000,000 shares of
Vision 21 Common Stock, of which 5,465,673 shares will be issued and
outstanding.
5.3. Corporate Records. The copies of the Articles of
Incorporation and Bylaws, and all amendments thereto, of Vision 21 that have
been delivered or made available to the Company and the Shareholder are true,
correct and complete copies thereof, as in effect on the date hereof. The minute
books of Vision 21, copies of which have been delivered or made available to the
Company and the Shareholder, contain accurate minutes of all meetings of, and
accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the stockholders of Vision 21, since
its formation.
5.4. Authorization and Validity. The execution, delivery
and performance by Vision 21 of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Vision 21. This Agreement and
each other agreement contemplated hereby to be executed by Vision 21 have been
or will be as of the Closing Date duly executed and delivered by Vision 21 and
constitute or will constitute legal, valid and binding obligations of Vision 21,
enforceable against Vision 21 in accordance with their respective terms, except
as may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.5. Compliance. The execution and delivery of the
documents contemplated hereunder and the consummation of the transactions
contemplated thereby by Vision 21 shall not (i) violate any provision of Vision
21's organizational documents, (ii) violate any material provision of or result
in the breach of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any material obligation under, any mortgage,
lien, lease, contract, license, instrument or any other agreement to which
Vision 21 is a party, (iii) result in the creation or imposition of any material
lien, charge, pledge, security interest or other material encumbrance upon any
property of Vision 21 or (iv) violate or conflict with any order, award,
judgment or decree or other material restriction or to the best of Vision 21's
knowledge violate or conflict with any law, ordinance or regulation to which
Vision 21 or its property is subject.
30
<PAGE> 39
5.6. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by Vision 21 or the consummation
by such party of the transactions contemplated thereby, except for those
consents or approvals set forth on Schedule 5.6.
5.7. Finder's Fee. Except as disclosed on Schedule 5.7,
Vision 21 has not incurred any obligation for any finder's, broker's or agent's
fee in connection with the transactions contemplated hereby.
5.8. Capital Stock. The issuance and delivery by Vision 21
of shares of Vision 21 Common Stock in connection with the Note have been duly
and validly authorized by all necessary corporate action on the part of Vision
21. The shares of Vision 21 Common Stock to be issued in connection with the
Note, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable and will not have been issued in
violation of any preemptive rights, rights of first refusal or similar rights of
any of Vision 21's stockholders, or any federal or state law, including, without
limitation, the registration requirements of applicable federal and state
securities laws.
5.9. Vision 21 Financial Statements; Confidential
Information Memorandum. The balance sheet of Vision 21 as of September 30, 1996
and the related statements of income of Vision 21 for the first nine (9) months
of Vision 21's 1996 fiscal year, without giving effect to the Related
Acquisitions, including the costs incurred during such fiscal year associated
with any Registration Statement, shall be contained in the Confidential
Information Memorandum to be provided to the Shareholder and the Company by
Vision 21 prior to the Closing (collectively, with the related notes thereto,
the "Vision 21 Financial Statements"). The Vision 21 Financial Statements (a)
fairly present the financial condition and results of operations of Vision 21,
without giving effect to the Related Acquisitions, as of the dates and for the
periods indicated; and (b) have been prepared in conformity with GAAP (subject
to normal year-end adjustments and the absence of notes for any unaudited
interim financial statement), except as otherwise indicated in the Vision 21
Financial Statements. Subject to the foregoing and the other qualifications
contained elsewhere in this Agreement, to the best knowledge of Vision 21, the
Confidential Information Memorandum, as amended on December 17, 1996, is true
and correct in all material respects.
5.10. Liabilities and Obligations. Except as disclosed on
Schedule 5.10, the Vision 21 Financial Statements shall reflect all material
liabilities of Vision 21, accrued, contingent or otherwise, that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with GAAP. Except as set forth on Schedule 5.10 or in the Vision
21 Financial Statements, Vision 21 is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
Vision 21 does not know of any valid basis for the assertion of any other claims
or liabilities of any nature or in any amount.
31
<PAGE> 40
5.11. Compliance with Laws. Vision 21 has not failed to
comply with any applicable laws, regulations and licensing requirements or
failed to file with the proper authorities any necessary statements and reports
except where the failure to so comply or file would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no existing violations
by Vision 21 of any federal, state or local law or regulation that could,
individually or in the aggregate, result in a Material Adverse Effect. Vision 21
possesses all necessary licenses, franchises, permits and governmental
authorizations for the conduct of Vision 21's business as now conducted and
after the Closing, as contemplated in this Agreement. The transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded by any such
licenses, franchises, permits or government authorizations, except for any such
default, breach or violation that would not, individually or in the aggregate,
have a Material Adverse Effect. Since January 1, 1993, Vision 21 has not
received any notice from any federal, state or other governmental authority or
agency having jurisdiction over its properties or activities, or any insurance
or inspection body, that its operations or any of its properties, facilities,
equipment, or business practices fail to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public or
quasi-public authority or body, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
5.12. Insolvency Proceedings. Vision 21 is not currently
under the jurisdiction of a Federal or state court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
5.13. Employment of Company's Employees. Vision 21 does not
currently intend to change the existing composition or employment terms of any
of the non-professional personnel which have employment arrangements with the
Company on the effective date of this Agreement (except as is necessary for
Vision 21 to employ such individuals pursuant to the Business Management
Agreement). Vision 21 reserves the right, however, to change the number,
composition or employment terms of such non-professional personnel in the
future.
6. SECURITIES LAW MATTERS.
6.1. Investment Representations and Covenants of
Shareholder.
a. Shareholder understands that the Securities
will not be registered under the Securities Act or any state securities laws on
the grounds that the issuance of the Securities is exempt from registration
pursuant to Section 4(2) of the Securities Act under the Securities Act and
applicable state securities laws, and that the reliance of Vision 21 on such
exemptions is predicated in part on the Shareholder's representations,
warranties, covenants and acknowledgements set forth in this Section.
b. Except as disclosed on Schedule 6.1(b)
attached hereto, Shareholder represents and warrants that Shareholder is an
"accredited investor" or "sophisticated investor" as defined under the
Securities Act and state "Blue Sky" laws, or that
32
<PAGE> 41
Shareholder has utilized, to the extent necessary to be deemed a sophisticated
investor under the Securities Act and State "Blue Sky" laws, the assistance of a
professional advisor.
c. Shareholder represents and warrants that the
Securities to be acquired by Shareholder upon consummation of the transactions
described in this Agreement will be acquired by Shareholder for Shareholder's
own account, not as a nominee or agent, and without a view to resale or other
distribution within the meaning of the Securities Act and the rules and
regulations thereunder, except as contemplated in this Agreement, and that
Shareholder will not distribute any of the Securities in violation of the
Securities Act. All Securities shall bear a restrictive legend in substantially
the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE
SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES
WITH THE ACT AND APPLICABLE SECURITIES LAWS."
In addition, the Securities shall bear any legend required by the
securities or "Blue Sky" laws of any state where Shareholder resides as well as
any other legend deemed appropriate by Vision 21 or its counsel.
d. Shareholder represents and warrants that the
address set forth below Shareholder's name on Schedule 6.1(d) is Shareholder's
principal residence.
e. Shareholder (i) acknowledges that the
Securities issued to Shareholder at the Closing must be held indefinitely by
Shareholder unless subsequently registered under the Securities Act or an
exemption from registration is available, (ii) is aware that any routine sales
of Securities made pursuant to Rule 144 under the Securities Act may be made
only in limited amounts and in accordance with the terms and conditions of that
Rule and that in such cases where the Rule is not applicable, compliance with
some other registration exemption will be required, (iii) is aware that Rule 144
is not currently available for use by Shareholder for resale of any of the
Securities to be acquired by Shareholder upon consummation of the transactions
described in this Agreement, and (iv) acknowledges and agrees that the transfer
of the Securities shall be further restricted by the "lock-up" provisions
contained in the Registration Rights Agreement in the form of Exhibit 12.1(k),
whereby Shareholder shall be treated as an "affiliate" of Vision 21 under Rule
144.
f. Shareholder represents and warrants to
Vision 21 that Shareholder, either alone or together with the assistance of
Shareholder's own professional advisor, has such knowledge and experience in
financial and business matters such that Shareholder is capable of evaluating
the merits and risks of Shareholder's investment in any of the Securities to be
acquired by Shareholder upon consummation of the transactions described in this
Agreement.
33
<PAGE> 42
g. Shareholder confirms that Shareholder has
received and read the Confidential Information Memorandum of Vision 21 dated
September 27, 1996 and the December 17, 1996 Supplement thereto. Shareholder
also confirms that Shareholder has had the opportunity to ask questions of and
receive answers from Vision 21 concerning the terms and conditions of
Shareholder's investment in the Securities, and the Shareholder has received to
Shareholder's satisfaction, such additional information, in addition to that set
forth herein, about Vision 21's operations and the terms and conditions of the
offering as Shareholder has requested.
h. In order to ensure compliance with the
provisions of paragraph (c) hereof, Shareholder agrees that after the Closing
Shareholder will not sell or otherwise transfer or dispose of Securities or any
interest therein (unless such shares have been registered under the Securities
Act) without first complying with either of the following conditions, the
expenses and costs of satisfaction of which shall be fully borne and paid for by
Shareholder:
i) Vision 21 shall have received a
written legal opinion from legal counsel, which opinion and counsel shall be
satisfactory to Vision 21 in the exercise of its reasonable judgment, or a copy
of a "no-action" or interpretive letter of the Securities and Exchange
Commission specifying the nature and circumstances of the proposed transfer and
indicating that the proposed transfer will not be in violation of any of the
registration provisions of the Securities Act and the rules and regulations
promulgated thereunder; or
ii) Vision 21 shall have received an
opinion from its own counsel to the effect that the proposed transfer will not
be in violation of any of the registration provisions of the Securities Act and
the rules and regulations promulgated thereunder.
Shareholder also agrees that the certificates or instruments representing the
Securities to be issued to Shareholder pursuant to this Agreement may contain a
restrictive legend noting the restrictions on transfer described in this Section
and required by federal and applicable state securities laws, and that
appropriate "stop-transfer" instructions will be given to Vision 21's transfer
agent, if any, provided that this Section 6.1(h) shall no longer be applicable
to any Securities following their transfer pursuant to a registration statement
effective under the Securities Act or in compliance with Rule 144 or if the
opinion of counsel referred to above is to the further effect that transfer
restrictions and the legend referred to herein are no longer required in order
to establish compliance with any provisions of the Securities Act.
i. Shareholder understands that although an
Initial Public Offering is contemplated by Vision 21, there are no assurances
that an Initial Public Offering will occur or if it does occur that it will be
successful.
j. Shareholder agrees that he shall be
considered an "affiliate" of Vision 21 for purposes of Rule 144 and agrees to
the restrictions and limitations imposed by Rule 144 on affiliates.
Shareholder further agrees that he shall be considered an affiliate of
34
<PAGE> 43
Vision 21 for Rule 144 purposes even if he does not meet the technical
definition of "affiliate" under Rule 144.
6.2. Current Public Information. At all times following
the registration of any of Vision 21's securities under the Securities Act or
Exchange Act pursuant to which Vision 21 becomes subject to the reporting
requirements of the Exchange Act, Vision 21 shall use commercially reasonable
efforts to comply with the requirements of Rule 144 under the Securities Act, as
such Rule may be amended from time to time (or any similar rule or regulation
hereafter adopted by the SEC) regarding the availability of current public
information to the extent required to enable any holder of shares of Common
Stock to sell such shares without registration under the Securities Act pursuant
to Rule 144 (or any similar rule or regulation).
7. COVENANTS OF THE COMPANY AND THE SHAREHOLDER. The Company and
the Shareholder, jointly and severally, agree that between the date hereof and
the Closing (with respect to the Company's covenants, the Shareholder agrees to
use his best efforts to cause the Company to perform):
7.1. Consummation of Agreement. The Company and the
Shareholder shall use their best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and conditions;
provided, however, that this covenant shall not require the Company or the
Shareholder to make any expenditures that are not expressly set forth in this
Agreement or otherwise contemplated herein.
7.2. Business Operations. The Company shall operate its
business in the ordinary course. The Company and the Shareholder shall use their
best efforts to preserve the business of the Company intact. Neither the Company
nor the Shareholder shall take any action that would, individually or in the
aggregate, result in a Material Adverse Effect.
7.3. Access. The Company and the Shareholder shall, at
reasonable times during normal business hours and on reasonable notice, permit
Vision 21 and its authorized representatives, including without limitation, the
Accountants, reasonable access to, and make available for inspection, all of the
assets and business of the Company, including its employees, customers and
suppliers, and permit Vision 21 and its authorized representatives to inspect
and, at Vision 21's sole cost and expense, make copies of all documents, records
(other than patient medical records) and information with respect to the affairs
of the Company, including, without limitation, the Financial Statements, as
Vision 21 and its representatives may request, all for the sole purpose of
permitting Vision 21 to become familiar with the business and assets and
liabilities of the Company.
7.4. Notification of Certain Matters. The Company and the
Shareholder shall promptly inform Vision 21 in writing of (a) any notice of, or
other communication relating to, a default or event that, with notice or lapse
of time or both, would become a default, received by the Company or the
Shareholder subsequent to the date of this Agreement and prior
35
<PAGE> 44
to the Closing Date under any Commitment material to the Company's condition
(financial or otherwise), operations, assets, liabilities or business and to
which it is subject; or (b) any material adverse change in the Company's
condition (financial or otherwise), operations, assets, liabilities or business.
7.5. Approvals of Third Parties. As soon as practicable
after the date hereof, the Company and the Shareholder shall secure all
necessary approvals and consents of landlords with respect to the real property
described on Schedule 2.1(c) to the consummation of the transactions
contemplated hereby and shall use their best efforts to secure all necessary
approvals and consents of other third parties to the consummation of the
transactions contemplated hereby; provided, however, that this covenant shall
not require the Company or the Shareholder to make any material expenditures
that are not expressly set forth in this Agreement or otherwise contemplated
herein.
7.6. Employee Matters. Except as set forth in Schedule
3.8(a) or as otherwise contemplated by this Agreement, the Company shall not,
without the prior written approval of Vision 21, except as required by law:
a. increase the cash compensation of the
Shareholder or any other employees of the Company (other than in the ordinary
course of business and consistent with past practice);
b. adopt, amend or terminate any Compensation
Plan;
c. adopt, amend or terminate any Employment
Agreement;
d. adopt, amend or terminate any Employee
Policies and Procedures;
e. adopt, amend or terminate any Employee
Benefit Plan;
f. take any action that could deplete the
assets of any Employee Benefit Plan, other than payment of benefits in the
ordinary course to participants and beneficiaries;
g. fail to pay any premium or contribution due
or with respect to any Employee Benefit Plan;
h. fail to file any return or report with
respect to any Employee Benefit Plan;
i. institute, settle or dismiss any employment
litigation except as could not, individually or in the aggregate, result in a
Material Adverse Effect;
36
<PAGE> 45
j. enter into, modify, amend or terminate any
agreement with any union, labor organization or collective bargaining unit; or
k. take or fail to take any action with respect
to any past or present employee of the Company that would, individually or in
the aggregate, result in a Material Adverse Effect.
7.7. Contracts. Except with Vision 21's prior written
consent, the Company shall not assume or enter into any contract, lease,
license, obligation, indebtedness, commitment, purchase or sale except in the
ordinary course of business that is material to the Company's business, nor will
it waive any material right or cancel any material contract, debt or claim.
7.8. Capital Assets; Payments of Liabilities. The Company
shall not, without the prior written approval of Vision 21 (a) acquire or
dispose of any capital asset having a fair market value of $5,000 or more, or
acquire or dispose of any capital asset outside of the ordinary course of
business or (b) discharge or satisfy any lien or encumbrance or pay or perform
any obligation or liability other than (i) liabilities and obligations reflected
in the Financial Statements or (ii) current liabilities and obligations incurred
in the usual and ordinary course of business since the Company Balance Sheet
Date and, in either case (i) or (ii) above, only as required by the express
terms of the agreement or other instrument pursuant to which the liability or
obligation was incurred.
7.9. Mortgages, Liens and Guaranties. The Company shall
not, without the prior written approval of Vision 21, enter into or assume any
mortgage, pledge, conditional sale or other title retention agreement, permit
any security interest, lien, encumbrance or claim of any kind to attach to any
of its assets (other than statutory liens arising in the ordinary course of
business and other liens that do not materially detract from the value or
interfere with the use of such assets), whether now owned or hereafter acquired,
or guarantee or otherwise become contingently liable for any obligation of
another, except obligations arising by reason of endorsement for collection and
other similar transactions in the ordinary course of business, or make any
capital contribution or investment in any person.
7.10. Acquisition Proposals. The Company and the
Shareholder agree that from the date of this Agreement through the earlier of
the Closing Date or January 1, 1997, (a) neither the Shareholder nor the Company
nor any of its officers and directors shall, and the Shareholder and the Company
shall direct and use their best efforts to cause the Company's employees,
agents, and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any Acquisition
Proposal or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; (b) the Shareholder and the Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and
37
<PAGE> 46
each will take the necessary steps to inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 7.10; and (c) the Shareholder and the Company will notify Vision 21
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company or the Shareholder.
7.11. Distributions and Repurchases. No distribution,
payment or dividend of any kind will be declared or paid by the Company with
respect of its capital stock, nor will any repurchase of any of the Company's
capital stock be approved or effected.
7.12. Requirements to Effect the Transaction. The Company
and the Shareholder shall use their best efforts to take, or cause to be taken,
all actions necessary to effect the Transaction under applicable law.
7.13. Shareholder Retained Equity. Except as contemplated
herein, the Company shall not, and the Shareholder shall not permit the Company
to, make payment of all or any portion of any retained equity of the Company at
any time prior to Closing.
7.14. Termination of Retirement Plans. Prior to Closing,
the Shareholder shall cause the Company to take all steps necessary to
discontinue benefits accruals under any Employee Benefit Plan that is intended
to be a qualified employee retirement plan under Section 401(a) of the Code (a
"Retirement Plan") effective as of Closing or as soon thereafter as may be
practical.
Subsequent to Closing, the Company and Vision 21 shall
review the extent to which the Company can resume contributions to the
Retirement Plan without violating the qualification requirements of Sections
410(b) and 401(a)(4) of the Code, taking into account any employees of Vision
21 who would be "leased employees" of the Company under Section 414(n) of the
Code. If Vision 21 and the Company mutually agree that such qualification
requirements can be satisfied, the Company may elect to continue the Retirement
Plan and make contributions in accordance with its terms, provided that the
Company shall agree to cover at its own expense any Vision 21 employees who are
leased employees if such coverage is required to maintain the tax-qualified
status of the Retirement Plan.
7.15. Delivery of Schedules. The Company and the
Shareholder shall deliver to Vision 21 all Schedules required to be delivered by
them prior to the Closing.
8. COVENANTS OF VISION 21. Vision 21 agrees that between the date
hereof and the Closing:
8.1. Consummation of Agreement. Vision 21 shall use its
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and conditions and take all corporate and other
actions necessary to approve the Transaction;
38
<PAGE> 47
provided, however, that this covenant shall not require Vision 21 to make any
expenditures that are not expressly set forth in this Agreement or otherwise
contemplated herein.
8.2. Notification of Certain Matters. Vision 21 shall
promptly inform the Company and the Shareholder in writing of (a) any notice of,
or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by Vision 21 subsequent
to the date of this Agreement and prior to the Closing Date under any Vision 21
Commitment material to Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business and to which it is subject; or (b)
any material adverse change in Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business.
8.3. Licenses and Permits. Vision 21 shall use its best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, statute, rule, regulation or ordinance, or otherwise
necessary or desirable to consummate the Transaction and to conduct the intended
business of Vision 21.
8.4. Release of Shareholder From Company Liabilities.
Vision 21 shall use its best efforts to obtain from third party creditors the
release of Shareholder from any personal liabilities relating to the Company
which are identified on Schedule 8.4 and assumed by Vision 21 pursuant to the
terms of this Agreement.
9. COVENANTS OF VISION 21, THE COMPANY AND THE SHAREHOLDER.
Vision 21, the Company and the Shareholder agree as follows:
9.1. Filings; Other Action.
a. Vision 21, the Company and the Shareholder
shall cooperate to promptly prepare and file at Vision 21's expense with the
SEC, a Registration Statement on Form S-1 (or other appropriate form) to be
filed by Vision 21 in connection with any Initial Public Offering of Vision 21
(including the prospectus constituting a part thereof, the "Registration
Statement"). Vision 21 shall obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement, and the Company and the Shareholder shall furnish all
information concerning the Company and the Shareholder as may be reasonably
requested in connection with any such action.
b. Each of the Company, the Shareholder and
Vision 21 represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in a Registration
Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment and supplement thereof, if any, becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company, the Shareholder, and Vision 21 shall agree as
to the information and documents supplied by the
39
<PAGE> 48
Company and the Shareholder for inclusion in the Registration Statement and
shall indicate such information and documents in a letter to be delivered at
least ten (10) days prior to the initial filing of the Registration Statement
with the SEC. The Company and the Shareholder shall be entitled to review the
Registration Statement and each amendment thereto, if any, prior to the time
each becomes effective under the Securities Act.
c. The Shareholder and the Company shall, upon
request, furnish Vision 21 with all information concerning himself, itself,
their respective partners, the Company's subsidiaries, directors, officers, and
stockholders, and including financial statements with respect to the same, any
consents (and information necessary to obtain such consents) and such other
matters as may be reasonably requested by Vision 21 in connection with the
preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of the Company's subsidiaries to any
governmental entity in connection with the Transaction, any Initial Public
Offering and the other transactions contemplated by this Agreement.
9.2. Amendment of Schedules. Each party hereto agrees
that, with respect to the representations and warranties of such party contained
in this Agreement, such party shall have the continuing obligation until the
Closing to attach, supplement or amend promptly the Schedules with respect to
any matter that would have been or would be required to be set forth or
described in the Schedules in order to not materially breach any representation,
warranty or covenant of such party contained herein; provided that no amendment
or supplement to a Schedule that constitutes or reflects a material adverse
change to the Company or the Assets may be made unless Vision 21 consents to
such amendment or supplement, and no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to Vision 21 may be made
unless the Company and the Shareholder consent to such amendment or supplement.
For all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 10.1 and 11.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 9.2. In the event that the Company is
required to amend or supplement a Schedule in accordance with this Section 9.2
and Vision 21 does not consent to such amendment or supplement, or Vision 21 is
required to amend or supplement a Schedule in accordance with this Section 9.2
and the Company and the Shareholder do not consent, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 15.1(d) or Section
15.1(e) as appropriate.
9.3. Fees and Expenses.
a. Vision 21 shall pay all costs of the Audit
of the Company's Financial Statements and financial records by Vision 21's
auditors (or auditors designated by Vision 21's auditors). All items prepared by
Vision 21's auditors in connection with the Audit ("Prepared Audit Materials")
shall be for use solely by Vision 21; provided, however, that the Company may
utilize the Prepared Audit Materials solely in connection with its review of
Vision 21's calculation of the Purchase Price. The Prepared Audit Materials
shall not be deemed to
40
<PAGE> 49
include those items which customarily remain the property of auditors such as
their working papers and memos.
b. In the event the Transaction is not
consummated, the Company and Shareholder shall not be entitled to copies or
originals of the Prepared Audit Materials unless the Company or Shareholder pays
for or reimburses Vision 21 for all expenses of the auditor in connection with
the Audit in advance of receiving the Prepared Audit Materials (either from
Vision 21 or its auditor). For purposes of this Agreement, Audit expenses shall
include all expenses related to the Audit as well as expenses incurred to
present the financial statements in accordance with GAAP and all schedules
related thereto.
c. Each of the Company and Vision 21 shall pay
the costs and expenses of their own legal counsel with respect to legal services
rendered in connection with the preparation and negotiation of this Agreement
and the transactions contemplated hereby.
d. In the event that an Initial Public Offering
does not take place for any reason whatsoever, Vision 21 (but not the Company or
the Shareholder) shall have sole responsibility for the payment of all legal
fees (except as set forth in Section 9.3(c)), accounting fees (except as set
forth in Section 9.3(c)), underwriters' expenses and other fees, costs and
expenses associated solely in connection with the preparation of any
Registration Statement relating to such Initial Public Offering.
e. If any Initial Public Offering is
consummated as contemplated by this Agreement, all legal fees, audit fees,
printing costs, filing fees, blue sky fees and underwriters' discounts and fees
associated solely with the Initial Public Offering shall be paid by Vision 21
from the proceeds of the Initial Public Offering, except for those expenses,
fees and underwriters' discounts related to any shares sold by the Shareholder.
10. CONDITIONS PRECEDENT OF VISION 21. Except as may be waived in
writing by Vision 21, the obligations of Vision 21 hereunder are subject to the
fulfillment at or prior to the Closing Date of each of the following conditions
precedent:
10.1. Representations and Warranties. The representations
and warranties of the Company and the Shareholder contained herein shall have
been true and correct in all material respects when initially made and shall be
true and correct in all material respects as of the Closing Date.
10.2. Covenants. The Company and the Shareholder shall have
performed and complied in all material respects with all covenants required by
this Agreement to be performed and complied with by the Company or the
Shareholder prior to the Closing Date.
10.3. Legal Opinion. Counsel to the Company and the
Shareholder shall have delivered to Vision 21 their opinions, dated as of the
Closing Date, in form and substance
41
<PAGE> 50
substantially similar to Exhibit 10.3 which Vision 21, Vision 21's counsel, the
underwriters of the Initial Public Offering and their counsel shall be permitted
to rely upon.
10.4. Proceedings. No action, proceeding or order by any
court or governmental body or agency shall have been threatened orally or in
writing, asserted, instituted or entered to restrain or prohibit the carrying
out of the transactions contemplated hereby.
10.5. No Material Adverse Change. No material adverse
change in the condition (financial or otherwise), operations, assets,
liabilities or business of the Company shall have occurred since the Company
Balance Sheet Date, whether or not such change shall have been caused by the
deliberate act or omission of the Company or the Shareholder.
10.6. Government Approvals and Required Consents. The
Company, the Shareholder and Vision 21 shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Company is a party).
10.7. Closing Deliveries. Vision 21 shall have received all
documents and agreements, duly executed and delivered in form reasonably
satisfactory to Vision 21, referred to in Section 12.1.
10.8. Due Diligence. Vision 21 shall have completed to its
satisfaction a due diligence review of the Company and the Shareholder.
10.9. Financial Audit. Vision 21 shall have approved in
Vision 21's sole discretion an audit of the Company and the Company which audit
shall have been performed by an accounting firm designated by Vision 21 at the
sole expense of Vision 21.
10.10. Compliance Audit. At the option of Vision 21, Vision
21 shall have approved in Vision 21's sole discretion an audit of the Company
for regulatory compliance which audit shall be at the sole expense of Vision 21.
10.11. Exemption Under State Securities Laws. The transfer
of Vision 21's Securities to the Shareholder as contemplated in this Agreement
shall qualify for one or more exemptions from registration under the State's
securities laws. Vision 21 shall pay all filing fees in connection with any
filing required to qualify the transfer of the Securities for such exemption(s).
11. CONDITIONS PRECEDENT OF THE COMPANY AND THE SHAREHOLDER.
Except as may be waived in writing by the Company and the Shareholder, the
obligations of the Company and the Shareholder hereunder are subject to
fulfillment at or prior to the Closing Date of each of the following conditions
precedent:
42
<PAGE> 51
11.1. Representations and Warranties. The representations
and warranties of Vision 21 contained herein shall be true and correct in all
respects when initially made and shall be true and correct in all material
respects as of the Closing Date.
11.2. Covenants. Vision 21 shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by it prior to the Closing
Date.
11.3. Legal Opinions. Counsel to Vision 21 shall have
delivered to the Company and the Shareholder their opinion, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 11.3.
11.4. Proceedings. No action, proceeding or order by any
court or governmental body or agency shall have been threatened in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
11.5. Government Approvals and Required Consents. The
Company, the Shareholder and Vision 21 shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Company is a party).
11.6. Closing Deliveries. The Company and the Shareholder
shall have received all documents, instruments and agreements, duly executed and
delivered in form reasonably satisfactory to the Company, referred to in Section
12.2.
11.7. No Change in Voting or Ownership Control. There shall
have been no changes in the voting or ownership control of Vision 21 from the
date first above written to the Closing Date.
11.8. No Material Adverse Change; Delivery of Amended
Confidential Information Memorandum. No material adverse change in the condition
(financial or otherwise), operations, assets, liabilities or business of Vision
21 shall have occurred since the end of the last fiscal period reported in the
Vision 21 Financial Statements, whether or not such change shall have been
caused by the deliberate act or omission of Vision 21. Vision 21 shall deliver
an amended Confidential Information Memorandum updating the information
contained in the initial Confidential Information Memorandum on or before
December 17, 1996, and the Company and the Shareholder shall have the right not
to close the transactions contemplated in this Agreement if they determine,
based upon their review of the amended Confidential Information Memorandum, that
a material adverse change has occurred with respect to the condition (financial
or otherwise), operations, assets, liabilities or business of Vision 21.
43
<PAGE> 52
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS.
12.1. Deliveries of the Company and the Shareholder. At or
prior to December 24, 1996, the Company and the Shareholder shall deliver to
Vision 21, c/o Shumaker, Loop & Kendrick, LLP, counsel to Vision 21, the
following, all of which shall be in a form reasonably satisfactory to Vision 21
and shall be held by Shumaker, Loop & Kendrick, LLP in escrow pending Closing,
pursuant to an escrow agreement or letter in form and substance mutually
acceptable to the parties hereto:
a. a copy of resolutions of the Board of
Directors of the Company authorizing (i) the execution, delivery and performance
of this Agreement and all related documents and agreements, and (ii) the
consummation of the Transaction, certified by the Secretary of the Company as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
b. a certificate of the President of the
Company, and of the Shareholder, dated the Closing Date, as to the truth and
correctness of the representations and warranties of the Company and the
Shareholder contained herein, on and as of the Closing Date;
c. a certificate of the President of the
Company, and of the Shareholder, dated the Closing Date, (i) as to the
performance of and compliance in all material respects by the Company and the
Shareholder with all covenants contained herein on and as of the Closing Date
and (ii) certifying that all conditions precedent of the Company and the
Shareholder to the Closing have been satisfied;
d. a certificate of the Secretary of the
Company certifying as to the incumbency of the directors and officers of the
Company and as to the signatures of such directors and officers who have
executed documents delivered pursuant to the Agreement on behalf of the Company;
e. a certificate, dated within ten (10) days
prior to the Closing Date, of the Secretary of State of the state of
incorporation for the Company establishing that the Company is in existence, has
paid all franchise or similar taxes, if any, and, if applicable, otherwise is in
good standing to transact business in its state of organization;
f. certificates, dated within ten (10) days
prior to the Closing Date, of the Secretary of State of the states in which the
Company is qualified to do business, to the effect that the Company is qualified
to do business and, if applicable, is in good standing as a foreign corporation
in each of such states;
g. an opinion of counsel to the Company and
Shareholder dated as of the Closing Date, in form and substance satisfactory to
Vision 21, which Vision 21, Vision 21's counsel and the underwriters of any
Initial Public Offering and their counsel are permitted to rely upon and which
shall include an opinion, subject to normal and customary exceptions that
44
<PAGE> 53
to the best of their knowledge the transactions and arrangements contemplated by
this Agreement are in conformity with State laws, rules and regulations
governing the practice of medicine.
h. such appropriate documents of transfer,
including bills of sale, endorsements, assignments, drafts, checks or other
instruments, as to all of the Assets, and any other appropriate instruments in
such reasonable or customary form as shall be requested by Vision 21 and its
counsel;
i. such instruments satisfactory to Vision 21
that all liens, claims, pledges, security interests and other encumbrances on
all of the Assets have been released;
j. all authorizations, consents, permits and
licenses referenced in Section 3.5;
k. an executed Registration Rights Agreement
between Vision 21 and the Shareholder in substantially the form attached hereto
as Exhibit 12.1 (k) (the "Registration Rights Agreement");
l. a non-foreign affidavit, as such affidavit
is referred to in Section 1445 (b) (2) of the Code, of the Shareholder, signed
under a penalty of perjury and dated as of the Closing Date, to the effect that
the Shareholder is a United States citizen or a resident alien (and thus not a
foreign person) and providing the Shareholder's United States taxpayer
identification number;
m. an assignment to Vision 21 of each lease for
real property described on Schedule 2.1(c) (the "Lease Assignments"), or if
desired by Vision 21, a new lease or leases between the landlords under such
leases and Vision 21 in form and substance reasonably satisfactory to Vision 21;
and
n. such other instrument or instruments of
transfer prepared by Vision 21 as shall be necessary or appropriate, as Vision
21 or its counsel shall reasonably request, to carry out and effect the purpose
and intent of this Agreement.
12.2. Deliveries of Vision 21. At or prior to December 15,
1996, Vision 21 shall deliver to the Company and the Shareholder, c/o Shumaker,
Loop & Kendrick, LLP, counsel to Vision 21, the following, all of which shall be
in a form reasonably satisfactory to the Company and the Shareholder and shall
be held by Shumaker, Loop & Kendrick, LLP in escrow pending Closing, pursuant to
an escrow agreement or letter in form and substance mutually acceptable to the
parties hereto:
a. a copy of the resolutions of the Board of
Directors of Vision 21 authorizing (i) the execution, delivery and performance
of this Agreement, and all related documents and agreements, and (ii) the
consummation of the Transaction, certified by Vision
45
<PAGE> 54
21's Secretary as being true and correct copies of the originals thereof subject
to no modifications or amendments;
b. a certificate of an officer of Vision 21
dated the Closing Date as to the truth and correctness of the representations
and warranties of Vision 21 contained herein, on and as of the Closing Date;
c. a certificate of an officer of Vision 21
dated the Closing Date, (i) as to the performance and compliance of Vision 21
with all covenants contained herein on and as of the Closing Date and (ii)
certifying that all conditions precedent of Vision 21 to the Closing have been
satisfied;
d. a certificate, dated within ten (10) days
prior to the Closing Date, of the Secretary of State of the State of Florida
establishing that Vision 21 is in existence, has paid all franchise or similar
taxes, if any, and, if applicable, otherwise is in good standing to transact
business in such state;
e. certificates (or photocopies thereof), dated
within ten (10) days prior to the Closing Date, of the Secretary of State of
each state in which Vision 21 is qualified to do business, to the effect that
Vision 21 is qualified to do business and, if applicable, is in good standing as
a foreign corporation in each of such states;
f. an opinion of Shumaker, Loop & Kendrick,
LLP, counsel to Vision 21, dated as of the Closing Date, pursuant to Section
11.3;
g. the executed Registration Rights Agreement;
h. the executed Lease Assignments;
i. the Note in the original principal amount
set forth in this Agreement; and
j. such other instrument or instruments of
transfer, prepared by the Company or the Shareholder as shall be necessary or
appropriate, as the Company, the Shareholder or their counsel shall reasonable
request, to carry out and effect the purpose and intent of this Agreement.
12.3. Release of Escrow Materials. Shumaker, Loop &
Kendrick, LLP shall release the agreements, certificates, instruments, documents
and other materials described in Sections 12.1 and 12.2 to the appropriate
parties to effectuate the transactions contemplated in this Agreement only after
all such materials have been delivered by all applicable parties (or the parties
receiving such documents have waived in writing such delivery requirement) and
after counsel for the Shareholder and the Company have sent written notice to
Shumaker, Loop & Kendrick, LLP stating that the Shareholder and the Company have
reviewed the amended
46
<PAGE> 55
Confidential Information Memorandum and have decided, based upon such review, to
consummate the transactions contemplated in this Agreement. In the event that
the Shareholder and the Company elect not to consummate the transactions
contemplated in this Agreement based upon their review of the amended
Confidential Information Memorandum, and counsel for the Shareholder and the
Company informs Shumaker, Loop & Kendrick, LLP in writing as to such decision,
Shumaker, Loop & Kendrick, LLP shall promptly return the foregoing materials to
the parties sending such materials.
13. POST CLOSING MATTERS.
13.1. Further Instruments of Transfer. From and after the
Closing Date, at the request of Vision 21 and at Vision 21's sole cost and
expense, the Shareholder and the Company shall deliver any further instruments
of transfer and take all reasonable action as may be necessary or appropriate to
carry out the purpose and intent of this Agreement.
14. REMEDIES.
14.1. Indemnification by the Company and Shareholder.
Subject to the terms and conditions of this Agreement, the Company and the
Shareholder, jointly and severally, agree to indemnify, defend and hold Vision
21 and its directors, officers, members, managers, employees, agents, attorneys
and affiliates harmless from and against all losses, claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, reasonable
attorneys' fees and expenses (collectively, "Damages") asserted against or
incurred by such entities and individuals (including, but not limited to, any
reduction in payments to or revenues of the Company) arising out of or resulting
from:
a. a breach of any representation, warranty or
covenant of the Company or the Shareholder contained herein or in any schedule
or certificate delivered hereunder;
b. any liability under the Securities Act, the
Exchange Act or any other federal or state "Blue Sky" or securities law or
regulation, at common law or otherwise, (i) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to the
Shareholder or the Company (including its subsidiaries, if any), and provided to
Vision 21 or its counsel by the Company or the Shareholder, specifically for
inclusion in a Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, (ii) arising out of or based
upon any omission or alleged omission to state therein a material fact relating
to the Shareholder or the Company (including its subsidiaries, if any) required
to be stated therein or necessary to make the statements therein not misleading,
and not provided to Vision 21 or its counsel by the Company or the Shareholder,
provided, however, that such indemnity shall not inure to the benefit of Vision
21 to the extent that such untrue statement (or alleged untrue statement) was
made, in, or omission (or alleged omission) occurred in, any preliminary
prospectus, and such information
47
<PAGE> 56
was not so included by Vision 21 and properly delivered to shareholders of
Vision 21 who acquire Vision 21 Common Stock in any Initial Public Offering;
c. any filings, reports or disclosures made
pursuant to the IRS Voluntary Compliance Resolution Program, if applicable; and
d. any liability arising from any alleged
unlawful sale or offer to sell or transfer any of the Common Stock by
Shareholder.
14.2. Indemnification by Vision 21. Subject to the terms
and conditions of this Agreement, Vision 21 hereby agrees to indemnify, defend
and hold the Company and the Shareholder harmless from and against all damages
asserted against or incurred by it or him arising out of or resulting from:
a. a breach by Vision 21 of any representation,
warranty or covenant of Vision 21 contained therein or in any schedule or
certificate delivered hereunder;
b. any liability under the Securities Act, the
Exchange Act or any other federal or state "Blue Sky" or securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to Vision 21,
contained in any preliminary prospectus, Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to Vision 21 (including its subsidiaries),
required to be stated therein or necessary to make the statements therein not
misleading; and
c. any filings, reports or disclosures made
pursuant to the IRS Voluntary Compliance Resolution Program, if applicable.
Notwithstanding anything in this Section 14.2, Vision 21 shall not be
liable for any Damages resulting from any matter not disclosed to Vision 21 by
any of the third parties to be acquired by Vision 21 in connection with the
Related Acquisitions.
14.3. Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
a. A party claiming indemnification under this
Agreement (an "Indemnified Party") shall promptly (and, in any event, at least
ten (10) days prior to the due date for any responsive pleadings, filings or
other documents) (i) notify the party from whom indemnification is sought (the
"Indemnifying Party") of any third-party claim or claims asserted against the
Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying Party
a written notice ("Claim Notice") describing in reasonable detail the nature of
the Third Party Claim, a copy of all papers served with respect to such claim
(if any), an estimate of the amount of damages
48
<PAGE> 57
attributable to the Third Party Claim and the basis of the Indemnified Party's
request for indemnification under this Agreement. Except as set forth in Section
14.6, the failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the related Third Party Claim except to the extent that the resulting delay is
materially prejudicial to the defense of such claim. Within thirty (30) days
after receipt of any Claim Notice (the "Election Period"), the Indemnifying
Party shall notify the Indemnified Party (i) whether the Indemnifying Party
disputes its potential liability to the Indemnified Party under this Article 14
with respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
b. If the Indemnifying Party notifies the
Indemnified Party within the Election Period that the Indemnifying Party elects
to assume the defense of the Third Party Claim, then the Indemnifying Party
shall have the right to defend, at its sole cost and expense, such Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or settled at the
discretion of the Indemnifying Party in accordance with this Section 14.3(b).
The Indemnifying Party shall have full control of such defense and proceedings,
including any compromise or settlement thereof. The Indemnified Party is hereby
authorized, at the sole cost and expense of the Indemnifying Party (but only if
the Indemnified Party is entitled to indemnification hereunder), to file, during
the Election Period, any motion, answer or other pleadings that the Indemnified
Party shall deem necessary or appropriate to protect its interests or those of
the Indemnifying Party and not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is adverse to the Indemnifying
Party, the Indemnifying Party shall be relieved of its obligations hereunder
with respect to such Third Party Claim). If requested by the Indemnifying Party,
the Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to
Section 14.3(b) and shall bear its own costs and expenses with respect to such
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and
upon written notification thereof, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of the Indemnified Party;
provided further that the Indemnifying Party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party.
49
<PAGE> 58
c. If the Indemnifying Party fails to notify
the Indemnified Party within the Election Period that the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 14.3(b), or if the
Indemnifying Party elects to defend the Indemnified Party pursuant to Section
14.3(b) but fails diligently and promptly to prosecute or settle the Third Party
Claim, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party (if the Indemnified Party is entitled
to indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article 14 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnifying Party's defense pursuant to this Section
or of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control any defense or settlement controlled by the
Indemnified Party pursuant to this Section 14.3(c), and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to the Indemnified Party, then the
Indemnifying Party may employ separate counsel and upon written notification
thereof, the Indemnified Party shall not have the right to assume the defense of
such action on behalf of the Indemnifying Party.
d. In the event any Indemnified Party should
have a claim against any Indemnifying Party hereunder that does not involve a
Third Party Claim, the Indemnified Party shall transmit to the Indemnifying
Party a written notice (the "Indemnity Notice") describing in reasonable detail
the nature of the claim, an estimate of the amount of damages attributable to
such claim and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within sixty (60) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by mediation or arbitration as
provided in Section 17.1 if the parties do not reach a settlement of such
dispute within thirty (30) days after notice of a dispute is given.
e. Payments of all amounts owing by an
Indemnifying Party pursuant to this Article 14 relating to a Third Party Claim
shall be made within thirty (30) days after the latest of (i) the settlement of
such Third Party Claim, (ii) the expiration of the period
50
<PAGE> 59
for appeal of a final adjudication of such Third Party Claim or (iii) the
expiration of the period for appeal of a final adjudication of the Indemnifying
Party's liability to the Indemnified Party under this Agreement. Payments of all
amounts owing by an Indemnifying Party pursuant to Section 14.3(d) shall be made
within thirty (30) days after the later of (i) the expiration of the sixty (60)
day Indemnity Notice period or (ii) the expiration of the period for appeal, if
any, of a final adjudication or arbitration of the Indemnifying Party's
liability to the Indemnified Party under this Agreement.
14.4. Remedies Not Exclusive. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity. This Article 14
regarding indemnification shall survive Closing.
14.5. Costs, Expenses and Legal Fees. Each party hereto
agrees to pay the costs and expenses (including attorneys' fees and expenses)
incurred by the other parties in successfully (a) enforcing any of the terms of
this Agreement, or (b) proving that another party breached any of the terms of
this Agreement.
14.6. Indemnification Limitations. Notwithstanding the
provisions of Sections 14.1 and 14.2, (a) no party shall be required to
indemnify another party with respect to a breach of a representation, warranty
or covenant unless the claim for indemnification is brought within two (2) years
after the Closing Date, except that a claim for indemnification for a breach of
the representations and warranties contained in Sections 3.1, 3.2., 3.3, 3.11,
3.14, 3.20, 4.3, 4.5, 4.8, 5.1, 5.2, 5.3, 5.4 and 6.1 may be made at any time,
and a claim for indemnification for a breach of the representations and
warranties contained in Sections 3.9, 3.15, 3.17, 3.18, 3.24, 3.25, 3.26, 3.27,
4.1, 4.4, 4.6, 5.6 and 5.7 may be made at any time within the applicable statute
of limitations; (b) indemnification based upon Sections 14.1(b) through (d) and
14.2(b) may be made at any time within the applicable statute of limitations;
and (c) the Shareholder shall not be required to indemnify Vision 21 pursuant to
Section 16.1 unless, and to the extent that, the aggregate amount of Damages
incurred by Vision 21 shall exceed an amount equal to two percent (2%) of the
total Purchase Price; and (c) the Shareholder shall not be required to indemnify
Vision 21 with respect to a breach of a representation, warranty or covenant for
Damages in excess of the aggregate Purchase Price received by the Shareholder
(other than pursuant to a requirement to indemnify Vision 21 under Sections 3.26
or 3.27, or unless the breach involves an intentional breach or fraud by the
Shareholder or the Company which shall be unlimited).
14.7. Tax Benefits; Insurance Proceeds. The total amount of
any indemnity payments owed by one party to another party to this Agreement
shall be reduced by any correlative tax benefit received by the party to be
indemnified or the net proceeds received by the party to be indemnified with
respect to recovery from third parties or insurance proceeds and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
51
<PAGE> 60
14.8. Payment of Indemnification Obligation. In the event
that the Shareholder has an indemnification obligation to Vision 21 hereunder,
subject to Vision 21's approval as set forth below, the Shareholder may satisfy
such obligation by transferring to Vision 21 such number of shares of Vision 21
Common Stock owned by the Shareholder having an aggregate fair market value
(which is prior to any Initial Public Offering based upon the valuation given at
Closing hereof or after an Initial Public Offering the fair market value at such
time based on the last reported sale price of Vision 21 Common Stock on a
principal national securities exchange or other exchange on which the Vision 21
Common Stock is then listed or the last quoted ask price on any over-the-counter
market through which the Vision 21 Common Stock is then quoted on the last
trading day immediately preceding the day on which the Shareholder transfers
shares of Vision 21 Common Stock to Vision 21 hereunder) equal to the
indemnification obligation, provided that each of the following conditions are
satisfied:
a. The Shareholder shall transfer to Vision 21
good, valid and marketable title to the shares of Vision 21 Common Stock, free
and clear of all adverse claims, security interests, liens, claims, proxies,
options, stockholders' agreements and encumbrances;
b. The Shareholder shall make such
representation and warranties as to title to the stock, absences of security
interests, liens, claims, proxies, stockholders' agreements and other
encumbrances and other matters as reasonably requested by Vision 21; and
c. The other terms and conditions of any
transaction contemplated pursuant to this Section and the effects thereof,
including any legal or tax consequences, shall be reasonably satisfactory to
Vision 21.
15. TERMINATION.
15.1. Termination. This Agreement may be terminated and the
Transaction may be abandoned:
a. at any time prior to the Closing Date by
mutual agreement of all parties;
b. at any time prior to the Closing Date by
Vision 21 if any representation or warranty of the Company or the Shareholder
contained in this Agreement or in any certificate or other document executed and
delivered by the Company or the Shareholder pursuant to this Agreement is or
becomes untrue or breached in any material respect or if the Company or the
Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
c. at any time prior to the Closing Date by the
Company if any representation or warranty of Vision 21 contained in this
Agreement is or becomes untrue in any
52
<PAGE> 61
material respect or if Vision 21 fails to comply in any material respect with
any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt or written notice thereof;
d. at any time prior to the Closing Date by the
Company in the event of the failure of any of the conditions precedent set forth
in Article 13 of this Agreement;
e. at any time prior to the Closing Date by
Vision 21 in the event of the failure of any of the conditions precedent set
forth in Article 12 of this Agreement;
f. by Vision 21 if at any time prior to the
Closing Date, Vision 21 deems termination to be advisable, provided, however,
that if Vision 21 exercises its right to terminate this Agreement under this
subsection, Vision 21 shall reimburse the Company and the Shareholder for all
reasonable attorneys' and accountants' fees incurred by the Company and the
Shareholder in connection with this Agreement; provided that Vision 21 shall
only reimburse the Company and the Shareholder up to an aggregate maximum amount
of One Hundred Thousand and No/100 Dollars ($100,000.00) for such fees; or
g. by Vision 21 or the Company if the
Transaction shall not have been consummated by December 24, 1996.
15.2. Effect of Termination. In the event this Agreement is
terminated pursuant to Section 15.1, Vision 21, the Company and the Shareholder,
shall each be entitled to pursue, exercise and enforce any and all remedies,
rights, powers and privileges available at law or in equity, subject to the
limitations set forth in Section 15.1. In the event of a termination of this
Agreement under the provisions of this Article 15, a party not then in material
breach of this Agreement shall stand fully released and discharged of any and
all obligations under this Agreement.
16. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.
16.1. Shareholder and Company Non-Competition
Covenant.
a. The Shareholder and the Company recognize
that the covenants of the Shareholder and the Company contained in this Section
16.1 are an essential part of this Agreement and that, but for the agreement of
the Shareholder and the Company to comply with such covenants, Vision 21 would
not have entered into this Agreement. The Shareholder and the Company
acknowledge and agree that the Shareholder's and the Company's covenants not to
compete are necessary to ensure the continuation of the Management Business
(as defined below) and are necessary to protect the reputation of Vision 21,
and that irreparable and irrevocable harm and damage will be done to Vision 21
if the Shareholder or the Company compete with the Management Business or
Vision 21. The Shareholder and the Company accordingly agree that for the
periods set forth in the Business Management Agreement the Shareholder and the
Company shall not:
53
<PAGE> 62
i) directly or indirectly, either as
principal, agent, independent contractor, consultant, director, officer,
employee, employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for the Shareholder's or the
Company's own benefit or for the benefit of any other person or entity knowingly
(A) hire, attempt to hire, contact or solicit with respect to hiring any
employee of Vision 21 (or of any of its direct or indirect subsidiaries) or (B)
induce or otherwise counsel, advise or encourage any employee of Vision 21 (or
of any of its direct or indirect subsidiaries) to leave the employment of Vision
21;
ii) act or serve, directly or
indirectly, as a principal, agent, independent contractor, consultant, director,
officer, employee, employer or advisor or in any other position or capacity with
or for, or acquire a direct or indirect ownership interest in or otherwise
conduct (whether as stockholder, partner, investor, joint venturer, or as owner
of any other type of interest), any Competing Management Business as such term
is defined herein; provided, however, that this clause (ii) shall not prohibit
the Shareholder or the Company from being the owner of up to 1% of any class of
outstanding securities of any company or entity if such class of securities is
publicly traded; or
iii) directly or indirectly, either as
principal, agent, independent, contractor, consultant, director, officer,
employee, employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for the Shareholder's or the
Company's own benefit or for the benefit of any other person or entity, call
upon or solicit any customers or clients of the Management Business; provided
however, that the Shareholder may send out a general notice to the customers or
clients of the Management Business announcing the termination of his arrangement
with Vision 21 and may advertise in a general manner without violating this
covenant. The parties hereto acknowledge and agree that for purposes of this
Section, patients which have in the past received medical or optometric care
from the Company and/or shall in the future receive medical or optometric care
from the Company are not deemed to be customers or clients of the Management
Business.
b. For the purposes of this Section 16.1, the
following terms shall have the meaning set forth below:
i) "Management Business" shall mean
management and administration of the non-medical aspects of medical,
ophthalmology and optometry practices and entering into managed care agreements.
ii) "Competing Management Business"
shall mean an individual, business, corporation, association, firm, undertaking,
company, partnership, joint venture, organization or other entity that either
(A) conducts a business substantially similar to the Management Business within
the State, or (B) provides or sells a service which is the same or substantially
similar to, or otherwise competitive with the services provided by the
Management Business within the State; provided, however, that "Competing
Management Business" shall not include Vision 21, or the Shareholder's internal
management and
54
<PAGE> 63
administration of the Shareholder's or participation in the management and
administration of a physician group in which the Shareholder devotes a
significant amount of time to the practice of medicine.
c. Should any portion of this Section 16.1 be
deemed unenforceable because of the scope, duration or territory encompassed by
the undertakings of the Shareholder or the Company hereunder, and only in such
event, then the Shareholder, the Company and Vision 21 consent and agree to such
limitation on scope, duration or territory as may be finally adjudicated as
enforceable by a court of competent jurisdiction after the exhaustion of all
appeals.
d. This covenant shall be construed as an
agreement ancillary to the other provisions of this Agreement, and the existence
of any claim or cause of action of the Shareholder or the Company against Vision
21, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Vision 21 of this covenant; provided, however,
that the Shareholder and the Company shall not be bound by this covenant and
shall not be obligated to pay the liquidated damages contemplated in this
Section 16.1 if at the time of a breach of this covenant the Business Management
Agreement has already been terminated pursuant to Section 6.2(a) thereof.
Without limiting other possible remedies to Vision 21 for breach of this
covenant, the Shareholder and the Company agree that injunctive or other
equitable relief will be available to enforce the covenants of this provision,
such relief to be without the necessity of posting a bond, cash or otherwise.
The Shareholder, the Company and Vision 21 further expressly acknowledge that
the damages that would result from a violation of this non-competition covenant
would be impossible to predict with any degree of certainty, and agree that
liquidated damages in the aggregate amount of the aggregate consideration
received by the Company pursuant to this Agreement is reasonable in light of the
severe harm to the Management Business and Vision 21 which would result in the
event that a violation of this non-competition covenant were to occur. If the
Shareholder or the Company violates this non-competition covenant, Vision 21
shall, in addition to all other rights and remedies available at law or equity,
be entitled to (a) cancel the number of shares of Common Stock held by the
Shareholder or the Company or, with respect to shares of Common Stock entitled
to be received by the Shareholder or the Company, terminate its obligation to
deliver such number of shares of Common Stock, valued as set forth in Section
6.6(a) of the Business Management Agreement, (b) set off all or any of such
liquidated damages sum against amounts payable under the Note held by the
Shareholder or the Company, and (c) repayment by Shareholder to Vision 21 of the
fair market value as described above, of Vision 21 Common Stock sold by
Shareholder; but in no event shall Vision 21 be entitled to offset amounts in
excess of the liquidated damages sum pursuant to this Section 16.1. The
Shareholder and the Company agree to deliver to Vision 21 the certificates
representing any such shares canceled by Vision 21 or the Note. Payment and
satisfaction by Shareholder shall be made within sixty (60) days of notification
to Shareholder by Vision 21 that Shareholder has violated this non-competition
covenant.
16.2. Shareholder and Company Confidentiality Covenant.
From the date hereof, the Shareholder and the Company shall not, directly or
indirectly, use for any purpose,
55
<PAGE> 64
other than in connection with the performance of the Shareholder's duties under
the Shareholder's employment agreement with the Company, or disclose to any
third party, any information of Vision 21 or the Company, as appropriate
(whether written or oral), including any business management or economic
studies, patient lists, proprietary forms, proprietary business or management
methods, marketing data, fee schedules, or trade secrets of Vision 21 or of the
Company, as applicable, and including the terms and provisions of this Agreement
and any transaction or document executed by the parties pursuant to this
Agreement. Notwithstanding the foregoing, the Shareholder and the Company may
disclose information that the Shareholder or the Company can establish (a) is or
becomes generally available to and known by the public or medical community
(other than as a result of an unpermitted disclosure directly or indirectly by
the Shareholder or the Company or their respective Affiliates, advisors, or
representatives); (b) is or becomes available to the Shareholder or the Company
on a nonconfidential basis from a source other than Vision 21 or its Affiliates,
advisors or representatives, provided that such source is not and was not bound
by a confidentiality agreement with or other obligation of secrecy to Vision 21
or its Affiliates, advisors or representatives of which the Shareholder or the
Company has knowledge; or (c) has already been or is hereafter independently
acquired or developed by the Shareholder or the Company without violating any
confidentiality agreement with or other obligation of secrecy to Vision 21, the
Company or their respective Affiliates, advisors or representatives. Without
limiting the other possible remedies to Vision 21 for the breach of this
covenant, the Shareholder and the Company agree that injunctive or other
equitable relief shall be available to enforce this covenant, such relief to be
without the necessity of posting a bond, cash or otherwise. The Shareholder and
the Company further agree that if any restriction contained in this Section 16.2
is held by any court to be unenforceable or unreasonable, a lesser restriction
shall be enforced in its place and the remaining restrictions contained herein
shall be enforced independently of each other.
16.3. Survival. The parties acknowledge and agree that this
Article 16 shall survive the Closing of the transactions contemplated herein.
17. DISPUTES.
17.1. Mediation and Arbitration. Any dispute, controversy
or claim (excluding claims arising out of an alleged breach of Article 16 of
this Agreement) arising out of this Agreement, or the breach thereof, that
cannot be settled through negotiation shall be settled (a) first, by the parties
trying in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the AAA (such mediation session to be held in Tampa, Florida,
if the amount in dispute is equal to or in excess of $200,000 or if the dispute
is solely of a non-monetary nature, and in Scottsdale, Arizona if the amount in
dispute is lower than $200,000, and in either case to commence within 15 days of
the appointment of the mediator by the AAA), and (b) if the controversy, claim
or dispute cannot be settled by mediation, then by arbitration administered by
the AAA under its Commercial Arbitration Rules (such arbitration to be held in
Tampa, Florida, if the amount in dispute is equal to or in excess of $200,000 or
if the dispute is solely of a non-monetary nature, and in Scottsdale, Arizona if
the amount in dispute is lower than $200,000, and in either case before a single
arbitrator and to commence within 15 days of
56
<PAGE> 65
the appointment of the arbitrator by the AAA), and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
18. MISCELLANEOUS.
18.1. Taxes. Shareholder and the Company shall pay all
transfer taxes, sales and other taxes and charges, imposed by the State, if any,
which may become payable in connection with the transactions and documents
contemplated hereunder. Vision 21 shall pay all transfer taxes, sales and other
taxes and charges imposed by the State of Florida, if any, which may become
payable in connection with the transactions and documents contemplated
hereunder.
18.2. Remedies Not Exclusive. No remedy conferred by any of
the specific provisions of this Agreement or any document contemplated by this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
18.3. Parties Bound. Except to the extent otherwise
expressly provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
18.4. Notices. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to Vision 21 addressed to:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34777
Attn: Richard T. Welch, Chief Financial Officer
57
<PAGE> 66
With copies to:
Shumaker, Loop & Kendrick
Post Office Box 172609
101 E. Kennedy Boulevard, Suite 2800
Tampa, Florida 33672-0609
Facsimile No. (813) 229-1660
Attn: Darrell C. Smith, Esquire
If to the Company and the Shareholder addressed to:
Eye Specialists of Arizona Network, P.C.
4845 Thunderbird Road
Scottsdale, Arizona 85254
Attn: Daniel B. Feller, M.D.
With copies to:
Stephen M. Goldstein, Esquire
Sacks Tierney, P.A.
2929 North Central Avenue
Fourteenth Floor
Phoenix, Arizona 85012-2742
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 18.4. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery or
refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
18.5. Choice of Law. This Agreement shall be construed,
interpreted, and the rights of the parties determined in accordance with, the
laws of the State of Florida except with respect to matters of law concerning
the internal affairs of any corporate or partnership entity which is a party to
or the subject of this Agreement, and as to those matters the law of the state
of incorporation or organization of the respective entity shall govern.
18.6. Entire Agreement; Amendments and Waivers. This
Agreement, together with the documents contemplated by this Agreement and all
Exhibits and Schedules hereto and thereto, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof. No supplement, modification or waiver
of any of the provisions of this Agreement shall be binding unless it shall be
specifically designated to be a supplement, modification or waiver of this
Agreement and shall be executed in writing by the party to be bound thereby. No
waiver
58
<PAGE> 67
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
18.7. Confidentiality Agreements. The provisions of any
prior confidentiality agreements and letters of intent between or among Vision
21, the Company and the Shareholder, as amended, shall terminate and cease to be
of any force or effect at and upon the Closing.
18.8. Reformation Clause. It is the intention of the
parties hereto to conform strictly to applicable laws regarding the practice and
regulation of medicine, whether such laws are now or hereafter in effect,
including the laws of the United States of America, the State or any other
applicable jurisdiction, and including any subsequent revisions to, or judicial
interpretations of, those laws, in each case to the extent they are applicable
to this Agreement (the "Applicable Laws"). Accordingly, if the ownership of any
Asset by Vision 21 violates any Applicable Law, then the parties hereto agree as
follows: (a) the provisions of this Section 18.8 shall govern and control; (b)
if none of the parties hereto are materially economically disadvantaged, then
any Asset, the ownership of which violates any Applicable Law, shall be deemed
to have never been owned by Vision 21; (c) if one or more of the parties hereto
is materially economically disadvantaged, then the parties hereto agree to
negotiate in good faith such changes to the structure and terms of the
transactions provided for in this Agreement as may be necessary to make these
transactions, as restructured, lawful under applicable laws and regulations,
without materially disadvantaging either party; (d) this Agreement shall be
deemed reformed; and (e) the parties to this Agreement shall execute and deliver
all documents or instruments necessary to effect or evidence the provisions of
this Section 18.8.
18.9. Assignment. The Agreement may not be assigned by
operation of law or otherwise except that Vision 21 shall have the right to
assign this Agreement, at any time, to any Affiliate or direct or indirect
wholly-owned subsidiary. In the event of such assignment, Vision 21 shall remain
liable hereunder.
18.10. Attorneys' Fees. Except as otherwise specifically
provided herein, if any action or proceeding is brought by any party with
respect to this Agreement or the other documents contemplated with respect to
the interpretation, enforcement or breach hereof, the prevailing party in such
action shall be entitled to an award of all reasonable costs of litigation or
arbitration, including, without limitation, attorneys' fees, to be paid by the
losing party, in such amounts as may be determined by the court having
jurisdiction of such action or proceeding or by the arbitrators deciding such
action or proceeding.
18.11. Further Assurances. From time to time hereafter and
without further consideration, each of the parties hereto shall execute and
deliver such additional or further instruments of conveyance, assignment and
transfer and take such other actions as any of the other parties hereto may
reasonably request in order to more effectively consummate the transactions
contemplated hereunder or as shall be reasonably necessary or appropriate in
59
<PAGE> 68
connection with the carrying out of the parties' respective obligations
hereunder for the purposes of this Agreement.
18.12. Announcements and Press Releases. Any press releases
or any other public announcements concerning this Agreement or the transactions
contemplated hereunder shall be approved in advance by Vision 21 and the
Company; provided, however, that such approval shall not be unreasonably
withheld and if any party reasonably believes that it has a legal obligation to
make a press release and the consent of the other party cannot be obtained, then
the release may be made without such approval.
18.13. No Tax Representations. Each party acknowledges that
it is relying solely on its advisors to determine the tax consequences of the
transactions contemplated hereunder and that no representation or warranty has
been made by any party as to the tax consequences of such transactions except as
otherwise specifically set forth in this Agreement.
18.14. No Rights as Stockholder. The Company and Shareholder
shall have no rights as a stockholder with respect to any shares of Common Stock
until the issuance of a stock certificate evidencing such shares. Except as
otherwise provided in the Agreement, no adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to such date
any stock certificate is issued.
18.15. Multiple 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.
18.16. Headings. The headings of the several articles and
sections herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
18.17. Severability. Each article, section and subsection of
this Agreement constitutes a separate and distinct undertaking, covenant or
provision of this Agreement. If any such provision shall finally be determined
to be unlawful, such provision shall be deemed severed from this Agreement, but
every other provision of this Agreement shall remain in full force and effect.
18.18. Form of Transaction. If after the execution hereof,
Vision 21 determines that the sale of the Assets of the Company can be better
achieved through a different form of transaction without economic injury to the
Company or the Shareholder, or delay of the consummation of the transaction, the
Company and the Shareholder shall cooperate in revising the structure of the
transaction and shall negotiate in good faith to so amend this Agreement;
provided, that Vision 21 shall reimburse the Company and the Shareholder at
Closing for all reasonable additional expenses incurred by the Company and the
Shareholder as a result of such change in form.
60
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
"COMPANY"
EYE SPECIALISTS OF ARIZONA
NETWORK, P.C.
/s/ By: /s/ Daniel B. Feller
- -------------------------------- -----------------------------------
Witness Daniel B. Feller, M.D., President
/s/
- --------------------------------
Witness
"SHAREHOLDER"
/s/ /s/ Daniel B. Feller
- -------------------------------- --------------------------------------
Witness Daniel B. Feller, M.D.
/s/
- --------------------------------
Witness
"VISION 21"
VISION 21, INC.
/s/ By: /s/ Daniel B. Feller
- -------------------------------- -----------------------------------
Witness Theodore N. Gillette, President
/s/
- --------------------------------
Witness
61
<PAGE> 70
Schedule 2.1(b)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Personal Property Leases of the Company
None.
<PAGE> 71
Schedule 2.1(c)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Real Property Leases of the Company
None.
<PAGE> 72
Schedule 2.1(d)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Assumed Contracts
1. Managed Care Contracts with FHP, Humana, Health Choice, and
Talbert.
2. Contracts with Providers (see attached list)
3. Disease State Management/Allergan and Covance Pilot Program -
(no compensation: Participation requires information only)
[DIRECTORY OF PROVIDERS IS OMITTED]
<PAGE> 73
Schedule 2.1(e)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Tangible Personal Property
None.
<PAGE> 74
Schedule 2.1(g)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Franchises, Licenses, Permits, Certificates and Authorizations
None.
<PAGE> 75
Schedule 2.2
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Excluded Assets
None.
<PAGE> 76
Schedule 2.3
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Assumed Obligations
See Schedule 2.1(d).
<PAGE> 77
Schedule 2.4A
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Purchase Price
$88,614 in cash and 107,505 shares of Vision 21 common stock payable pursuant
to the Subordinated Promissory Note
<PAGE> 78
Schedule 2.8
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Allocation of Purchase Price
To be completed after Purchase Price Adjustment.
<PAGE> 79
Schedule 3
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Individuals - Best Knowledge Regarding
Representations and Warranties of the Company
1. Daniel B. Feller M.D., Medical Director
2. Sarah Nelson, Executive Director
<PAGE> 80
Schedule 3.1
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Capital Stock or Other Interest owned
by the Company or the Shareholder in Competitor
None.
<PAGE> 81
Schedule 3.2
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Sale, Distribution or Spin-Off of Significant Assets
of the Company or Its Affiliates within the Last Two Years
None.
<PAGE> 82
Schedule 3.4
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Violations or Conflicts Resulting from Execution,
Delivery and Consummation of Transaction By the Company
Consents required for assignments of managed care contracts.
<PAGE> 83
Schedule 3.5
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Consents Required by Company from
Governmental Authority or Any Other Persons
1. Specialty Provider Services Agreement between Talbert Medical
Group and Eye Specialists of Arizona dated September 10, 1996
at Sections 9.09 and 9.10.
2. Letter of Agreement between Talbert Medical Group and Eye
Specialists of Arizona dated September 10, 1996 at Sections
7 and 8.
3. Physician Agreement between Humana Health Plan, Inc. and Eye
Specialists of Arizona dated October 1, 1995 at Section 24.
4. Specialty Provider Services Agreement between Talbert Medical
Group and Eye Specialists of Arizona dated October 29, 1996 at
Sections 9.09 and 9.10.
5. FHP Agreement with Eye Specialists of Arizona dated October
22, 1996 at Sections 10.8 and 10.9.
6. AHCCCSA consents under Media Agreement and Specialists
Physician Capitated Subcontract with St. Luke's Health System.
<PAGE> 84
Schedule 3.7
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Liabilities of the Company
Not Reflected on Financial Statements
None.
<PAGE> 85
Schedule 3.8(a)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Cash Compensation of All Employees of the Company
None.
<PAGE> 86
Schedule 3.8(b)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Compensations Plans, Arrangements or Practices
Sponsored by Company or to which the Company
Contributes on Behalf of Its Employees
(Excluding Employment Agreements and Employee Benefit Plans)
None.
<PAGE> 87
Schedule 3.8(c)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employment Agreements
None.
<PAGE> 88
Schedule 3.8(d)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employee Policies and Procedures
None.
<PAGE> 89
Schedule 3.8(f)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Exceptions to Labor Compliance
None.
<PAGE> 90
Schedule 3.8(g)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Union Participation of Company Employees
None.
<PAGE> 91
Schedule 3.9(a)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employee Benefit Plans Sponsored By the Company
or to which the Company Contributes on
Behalf of Its Employees in the Past Three Years
None.
<PAGE> 92
Schedule 3.9(b)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Exceptions to Employee Benefit Plan Compliance
None.
<PAGE> 93
Schedule 3.9(c)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizon Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Audits,
Investigations or Enforcement Actions
None.
<PAGE> 94
Schedule 3.9(d)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Prohibited Transactions
None.
<PAGE> 95
Schedule 3.9(e)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Claims and Litigation Regarding Employee Benefit Plans
None.
<PAGE> 96
Schedule 3.9(f)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Determination Letter or IRS Ruling
None.
<PAGE> 97
Schedule 3.9(g)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Accumulated Funding Deficiency
Not applicable.
<PAGE> 98
Schedule 3.9(h)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Excise Taxes
None.
<PAGE> 99
Schedule 3.10
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Changes to Company since
Balance Sheet Date
FHP Contract and Talbert Contract expanded into Tucson as of December 1, 1996.
<PAGE> 100
Schedule 3.11(b)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Permitted Encumbrances on Personal Property
None.
<PAGE> 101
Schedule 3.11(c)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Real Property Leases and Personal Property Leases
None.
<PAGE> 102
Schedule 3.12
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Commitments of the Company; Defaults; Consents
Contracts:
Humana Commercial and Service Products
FHP Commercial and Service Products
Health Choice Commercial Products
Talbert Medical Group Commercial and Service Products
It is uncertain whether any consents need to be obtained from these
entities.
<PAGE> 103
Schedule 3.13
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Insurance policies; Cancellations; Consents;
Outstanding Claims, Settlements or Premiums Owed;
Claims in Excess of $10,000 Per Occurrence Since 1/1/94
See chart attached hereto and made a part hereof.
<PAGE> 104
PARADISE VALLEY EYE - Schedule 3.13: Insurance
<TABLE>
<S> <C> <C> <C> <C>
Insured Daniel B. Feller, M.D. Shirley Jean Lambert, Pamela H. Williams, Paradise Valley Eye
Additional insureds: dba O.D. M.D. Specialists
Paradise Valley Eye
Specialists
Liability limits: $1 million / $3 million $2 million/$4 million $1 million/$3 million NO PROFESSIONAL
Professional liability Professional Liability Professional Liability LIABILITY INSURANCE
Vicarious liability
endorsement for Shirley Umbrella:
Jean Lambert (not $100,000 / $100,000 $5 million / $5 million
direct liability coverage (injuries to patients &
for Lambert) third parties; peer Commercial/General:
review) $1 million / $2 million
$100,000 / $100,000 (UNCLEAR - CONFLICTING
(injuries to patients & third PROVISIONS.)
parties; peer review)
$10,000 medical expenses
MICA Chicago Insurance Co. MICA per person
EMPLOYER'S LIABILITY:
NOT COVERED
Also: $10,000 self-
insurance retention
Expiration date 11-16-97 8/14/97 12/1/97 1-1-98
Retroactive date 11-16-83 12/1/9/97
Occurrence vs.
Claims Made Claims made (tail offered at
time insurance is cancelled)
Claims N/A N/A N/A
</TABLE>
[CERTAIN INSURANCE POLICIES
AND OTHER POLICY DESCRIPTIONS ARE OMITTED]
<PAGE> 105
Schedule 3.14
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Description of Proprietary Rights (Trademarks,
Tradenames, Service Marks, Agreements Relating
to Technology, Know-How or Processes); Consents
Contracting Methodology
Disease State Management/Allergan and Covance Pilot Program
<PAGE> 106
Schedule 3.15
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Good Faith Disputes Over Payment of Taxes;
Tax Deficiencies or Delinquencies
None.
<PAGE> 107
Schedule 3.16
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Licenses, Franchises, Permits and Governmental
Authorizations; Notice of Noncompliance
1. Arizona Corporation Commission, Business Corporation Annual
Report and Certificate of Disclosure for Daniel B. Feller,
M.D., P.C.
<PAGE> 108
Schedule 3.17
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Finder's, Broker's or Agent's Fee Owed By Company
None.
<PAGE> 109
Schedule 3.18
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Company Litigation
None.
<PAGE> 110
Schedule 3.21
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
List of Company Checking Accounts,
Borrowing Arrangements, Safe Deposit Boxes
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 111
Schedule 3.22
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Ownership Interest in Customer or Supplier
or Entity with Material Contract with Company;
Contracts within Past Three Years with
Persons Engaged in Managed Care Business
Paradise Valley Eye Specialists and Sharona Optical, Inc.
<PAGE> 112
Schedule 3.23
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Investments in Competitors
None.
<PAGE> 113
Schedule 3.28
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Names and Addresses of Third Party Payor
Programs; Notices of Discontinuance of Programs
Talbert Medical Group and Eye Specialists of Arizona
Talbert Medical Management Corp.
1604 S. Edward Drive
Tempe, AZ 85281
Humana and Eye Specialists of Arizona
Humana Health Care Plans
2710 East Camelback Road
Phoenix, AZ 85016
(800) 889-0301
(602) 381-4334
Agreement between FHP and Provider (Eye Specialists of
Arizona)
Arizona Regional
Vice President, Plans
FHP, Inc.
P. O. Box 52078
Phoenix, AZ 85072-2078
Health Choice and Eye Specialists of Arizona
Health Choice
1600 West Broadway
Suite 260
Tempe, AZ 85282
<PAGE> 114
Schedule 3.32
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Exceptions to Representation Regarding
Good Operating Condition of
Personal Property of the Company
None.
<PAGE> 115
Schedule 3.33
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Exceptions to Representation that
There Are No Material Breach or Default,
No Repudiation, No Disputes Under Leases
None.
<PAGE> 116
Schedule 3.34
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Exceptions to Representation that
There Are No Material Defaults Under Assumed Contracts
None.
<PAGE> 117
Schedule 4.2
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Violations or Conflicts Resulting
from Execution, Delivery and Consummation
of Transaction By the Shareholder
None.
<PAGE> 118
Schedule 4.5
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Finder's, Broker's or Agent's Fee Owed By Shareholder
None.
<PAGE> 119
Schedule 4.6
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Ownership Interest in Customer or Supplier
or Entity with Material Contract with Company;
Contracts within Past Three Years with
Persons Engaged in Managed Care Business
Paradise Valley Eye Specialists
Sharona Optical, Inc.
<PAGE> 120
Schedule 4.7
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Investments in Competitors
None.
<PAGE> 121
Schedule 5
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Individuals - Best Knowledge Regarding
Representations and Warranties of Vision 21
1. Theodore N. Gillette
2. Richard L. Sanchez
3. Richard T. Welch
4. Nicholas M. Arfaras
<PAGE> 122
Schedule 5.1
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Jurisdictions in which Vision 21 is Qualified to Do Business
1. Florida
2. Arizona
3. Minnesota
4. New York
<PAGE> 123
Schedule 5.6
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Consents Required by Vision 21 from
Governmental Authority or Any Other Persons
None.
<PAGE> 124
Schedule 5.7
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Finder's, Broker's or Agent's Fee Owed By Vision 21
None.
<PAGE> 125
Schedule 5.10
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Liabilities of Vision 21 Not Reflected on Financial Statements
None.
<PAGE> 126
Schedule 6.1(b)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Investment Representations and Covenants of Shareholder
None.
<PAGE> 127
Schedule 6.1(d)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Shareholder's Principal Residence
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 128
Schedule 8.4
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Personal Liabilities of Shareholder
to which Vision 21 Will Use Best Efforts to Obtain Releases
None.
<PAGE> 129
Schedule 12.1(k)
TO MANAGED CARE ORGANIZATION ASSET PURCHASE AGREEMENT
Among Eye Specialists of Arizona Network, P.C. (the "Company"),
Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement"), dated as of
______________, 1996, is by and between Vision 21, Inc., a Florida corporation
and any successor ("Vision 21"), and Eye Specialists of Arizona Network, P.C.,
a professional corporation ("Shareholder")located at 4845 East Thunderbird
Road, Scottsdale, Arizona 85254.
1. Registration Rights.
(a) In the event that Vision 21 proposes to file a
registration statement under the Securities Act for purposes of effecting an
underwritten public offering of shares of Vision 21 common stock for cash
(including, but not limited to, a registration statement relating to a
secondary offering of Vision 21 common stock, but excluding registration
statements relating to any employee benefit plan or a corporate
reorganization), Vision 21 shall give written notice of such proposed filing to
the Shareholder at least fifteen (15) days before the anticipated filing date,
and such notice shall offer Shareholder the opportunity to register such number
of the Shareholder's shares of common stock as Shareholder may request in
writing within ten (10) days after receipt of such notice; provided, however,
that the maximum number of shares of common stock that such Shareholder may
request to include in any registration statement shall be limited as provided
in Section 1(c).
(b) In the event that (i) one (1) year has elapsed from
the date of effectiveness of the registration statement filed in connection
with an underwritten initial public offering of shares of Vision 21 common
stock, and (ii) Vision 21 receives a written request from holders holding in
the aggregate a minimum of 300,000 shares of Vision 21 common stock issued to
the founding practices described in Vision 21's Confidential Information
Memorandum dated September 27, 1996, as amended, and issued to certain
professionals owning equity interests in such founding practices (the founding
practices and professionals of such practices holding share's of common stock
of Vision 21 are collectively referred to as the "Founding Shareholders"), that
Vision 21 file a registration statement under the Securities Act effecting an
offering of shares of Vision 21 common stock; then Vision 21 shall as soon as
practicable file a registration statement at its own expense effecting a public
offering of shares of Vision 21 common stock held by Founding Shareholders, as
well as any other Vision 21 shares owned by any other shareholders which Vision
21 wishes to include in the offering (which offering may be an underwritten
offering at Vision 21's sole discretion); provided however that Vision 21 shall
be obligated to effect only one registration statement containing each
Shareholder, and Vision 21 shall be obligated to file only two (2) registration
statements in the aggregate, pursuant to this Section 1(b).
<PAGE> 130
(c) The maximum aggregate number of shares of common
stock that Shareholder may request to be registered under this Agreement shall
be sixty percent (60%) of Shareholder's original shares of Vision 21 common
stock. In no event shall the total number of Shareholder's shares of common
stock that Vision 21 is obligated to register under this Agreement exceed sixty
percent (60%) of Shareholder's original shares of Vision 21 common stock, and
in no event shall Vision 21 be obligated to register more than (i) in an
initial offering, thirty percent (30%) of Shareholder's original shares of
Vision 21 common stock or (ii) in a second offering, sixty percent (60%) of the
Shareholder's original shares minus the percent of the Shareholder's original
shares that the Shareholder registered in the first offering. The "original
shares" of Vision 21 as described herein shall be deemed to be the
_________________ shares of common stock received by the Shareholder on the
date of this Agreement.
(d) Vision 21 shall have the sole and exclusive right to
select the underwriters of any public offering of shares of Vision 21 common
stock, including any public offering conducted pursuant to the demand
registration right set forth in Section 1(b) above. The use of underwriters in
any demand registration right set forth in Section 1(b) above is subject to
Vision 21's ability to engage underwriters under terms and conditions deemed
reasonable by Vision 21.
(e) If the managing underwriter of any offering advises
Vision 21 that the total number of shares of Vision 21's common stock which
Vision 21, the Shareholder and any other persons intend to include in such
offering would adversely affect the success of such offering, then the amount
of shares of common stock to be offered for the account of Shareholder shall be
reduced to the extent necessary to reduce the total number of shares of common
stock to be included in such offering to the amount recommended by such
managing underwriter.
(f) Vision 21 shall not be required to (i) reduce the
amount of shares of common stock to be offered by Vision 21 in such offering
for any reason or (ii) include any shares of common stock of Shareholder in any
public offering for which a registration statement is or is proposed to be
filed if such shares of common stock are, at the time of effectiveness of such
registration statement, eligible to be sold under Rule 144 under the Securities
Act or otherwise eligible for sale to the public without registration.
(g) Vision 21 shall have the right to extend or delay the
effectiveness of any registration statement for a period of up to ninety (90)
days if, upon the advice of counsel, such delay is advisable and in the best
interests of Vision 21 because of the existence of non-public material
information, or to allow Vision 21 to complete any pending audit of its
financial statements or any public financing plan.
(h) Shareholder agrees to cooperate with Vision 21 in all
respects in connection with registration of the common stock, including timely
supplying all information and executing and returning all documents requested
by Vision 21 and its managing underwriter.
Exhibit 12.1(k) - Page 2
<PAGE> 131
(i) Vision 21 shall not be required to include any of
Shareholder's shares of common stock in any registration statement unless
Shareholder accepts the terms of the underwriting as agreed upon between Vision
21 and its underwriters.
(j) Vision 21 shall have the right to defer the filing of
any registration statement if the Board of Directors of Vision 21 determines in
good faith that it would be seriously detrimental to Vision 21 and its
shareholders for such registration statement to be filed.
(k) This Agreement shall expire two (2) years from the
date of an initial public offering of Vision 21 common stock.
2. Covenants of Vision 21. Vision 21 hereby covenants and
agrees:
(a) To take such steps as may be necessary to comply with
the Blue Sky laws of such states as the managing underwriter may reasonably
request; provided that in no event shall Vision 21 be obligated to qualify to
do business in any state where it is not so qualified or to take any action
which would subject it to unlimited service of process in any state where it is
not at such time so subject;
(b) To use reasonable efforts to cause the registration
statement to become effective and to keep the registration statement effective
for such period as may be required under the terms of the underwriting
agreement relating thereto but no longer than for a period of forty-five (45)
days, to file such post-effective amendments as may be necessary to keep any
prospectus contained in such registration statement true and complete during
such period as the registration statement shall be effective, and to furnish
and file such other amendments, supplements, and other documents the managing
underwriter may reasonably request;
(c) To supply such numbers of prospectuses as may be
reasonably required by the managing underwriter;
(d) To pay the reasonable costs and expenses of the
registration statement including without limitation all registration and Blue
Sky filing fees, all fees and expenses of Vision 21's counsel (but not the fees
and expenses of counsel for Shareholder), all accounting costs (including costs
associated with the preparation of interim period financial statements), NASD
fees, printing costs, experts' fees, expenses, costs of post-effective
amendments, and all other usual and customary expenses in connection with the
registration statement, except for Shareholder's pro rata share of underwriting
discounts, fees, and selling commissions (calculated in the manner set forth in
Section 3(a)(ii) of this Agreement); and
(e) With respect to any registration statement filed
pursuant to this Agreement, where underwriters are utilized, to cooperate with
the underwriters to the best of its abilities and to enter into an underwriting
agreement with such underwriters containing such representations,
Exhibit 12.1(k) - Page 3
<PAGE> 132
warranties, and covenants on the part of Vision 21 as are usual and customary
in an underwritten public sale of common stock.
3. Covenants of Shareholder.
(a) Shareholder hereby covenants and agrees:
(i) To cooperate with Vision 21 in its compliance
with all federal and state securities laws, including without limitation
providing such information and signing such documents as are necessary to
effect a registration or reasonably requested by underwriters pursuant to this
Agreement;
(ii) To pay his pro rata portion (calculated on
the basis of the ratio of the aggregate offering price attributable to the
shares of Shareholder being registered and sold in relation to the aggregate
offering price attributable to the total number of securities being registered
and sold, including securities being registered and sold by other selling
stockholders) of the underwriting discounts and selling commissions and to pay
all the fees and disbursements of his counsel; and
(iii) To the entry of stop transfer instructions
with the Company's transfer agent against the transfer of any shares of
Shareholder's Vision 21 common stock except in compliance with the restrictions
as set forth in this Section 3.
(b) Shareholder shall be considered an "affiliate" of
Vision 21 for purposes of Rule 144 under the Securities Act, even in the event
Shareholder is not technically an affiliate of Vision 21 as defined in Rule
144, and the Vision 21 common stock owned by Shareholder shall be subject to
the restrictions and limitations on resale imposed by Rule 144 on affiliates of
Vision 21. Shareholder shall not sell any of his shares of Vision 21 common
stock under Rule 144 unless Shareholder would be eligible to do so under the
provisions applicable to affiliates.
(c) In addition to the transfer restrictions otherwise
provided for herein, Shareholder shall not, whether or not Shareholder elects
to cause the registration of his shares pursuant to this Agreement, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of any shares of Vision 21 common stock
(other than the shares covered by such registration, which may be sold in
accordance with the plan or plans of distribution described in the registration
statement) owned by Shareholder for a period of one hundred eighty (180) days
or such shorter period as negotiated by the Company following the effective
date of such registration statement without the prior written consent of Vision
21. In the event that Shareholder is a corporation, professional corporation
or professional limited liability company, Shareholder may after receiving the
written approval of Vision 21 (which approval shall not be unreasonably
withheld) transfer its shares of Vision 21 Common Stock to any of the
individuals and/or trusts described in Sections 7(a), (b) and
Exhibit 12.1(k) - Page 4
<PAGE> 133
(c) hereof. Such transferee shall, for purposes of the transfer restrictions
contained in this Agreement, be deemed to have held such transferred shares for
the same period as Shareholder.
4. Indemnification of Shareholder.
Whenever registration with respect to any shares of Shareholder's
common stock is effected under the Securities Act pursuant hereto, Vision 21
will indemnify and hold harmless Shareholder, each underwriter, the directors,
officers, employees and agents of each underwriter, and each person, if any,
who controls each underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, (including any securities law
violations) insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or alleged omission to state
in such document a material fact required to be stated in it or necessary to
make the statements in it not misleading, provided that Vision 21 will not be
liable to Shareholder to the extent that such loss, claim, liability, expense
or damage is based on an untrue statement or omission made in reliance on and
in conformity with information furnished to Vision 21 by Shareholder, or by
Shareholder through any attorney-in-fact, expressly for inclusion in the
registration statement or any prospectus included in such registration
statement.
5. Indemnification of Vision 21.
Whenever registration with respect to any shares of Shareholder's
common stock is effected under the Securities Act pursuant hereto, Shareholder
will indemnify and hold harmless Vision 21, each of Vision 21's directors and
officers, each person who controls Vision 21 within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, each underwriter, the
directors, officers, employees and agents of each underwriter, and each person,
if any, who controls each underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact required to be stated
in it or necessary to make the statements in it not misleading; provided that
Shareholder will not be liable except to the extent that such loss, claim,
liability, expense or damage arises from or is based upon an untrue statement
or omission or alleged untrue statement or omission made in reliance on and in
conformity with information furnished to Vision 21 by the Shareholder, or
Exhibit 12.1(k) - Page 5
<PAGE> 134
by Shareholder through any attorney-in-fact, expressly for inclusion in the
registration statement or any prospectus included in such registration
statement.
6. Defense of Claim.
Promptly after receipt by an indemnified party of notice of the
commencement of any action, the indemnified party shall notify the indemnifying
party in writing of the commencement thereof if a claim in respect thereof is
to be made against an indemnifying party under this Agreement, but the omission
of such notice shall not relieve the indemnifying party from liability which it
may have to the indemnified party under this Agreement, except to the extent
that the indemnifying party is actually prejudiced by such failure to give
notice, and shall not relieve the indemnifying party from any liability which
it may have to any indemnified party otherwise than under this Agreement. In
case any action is brought against the indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in, and to the extent that it chooses, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party that it so chooses, the indemnifying party shall not be
liable for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof; provided however that (i) if the
indemnifying party fails to take reasonable steps necessary to defend
diligently the claim within twenty (20) days after receiving notice from the
indemnified party that the indemnified party believes the indemnifying party
has failed to diligently defend such claim, or (ii) if the indemnified party
who is a defendant in any action or proceeding which is also brought against
the indemnifying party reasonably shall have concluded that there are legal
defenses available to the indemnified party which conflict with the defense
strategy of the indemnifying party, or (iii) if representation under applicable
standards of professional conduct require separate representation of the
indemnified party and the indemnifying party, then the indemnified party shall
have the right to assume or continue its own defense as set forth above and the
indemnifying party shall reimburse the indemnified party for the costs of such
defense as provided in Section 4 and 5. In no event shall the indemnifying
party be responsible for the fees of more than one firm for all indemnified
parties.
7. Non-Transferability.
The registration rights and benefits set forth herein, including
indemnification by Vision 21 are granted for the sole and personal benefit of
Shareholder and may not be transferred or assigned except for (a) gifts to
his/her family members (b) assignment to a trust controlled by the Shareholder,
(c) transfers to Shareholder;s heirs which occur by operation of law as a
result of the death of the Shareholder, or (d) if the Shareholder is a
corporation, professional corporation or professional limited liability
company, transfers or assignments to the individuals who are current equity
holders of Shareholder and by such equity holders to the individuals and/or
trusts described in subsection (i) and (ii) of this Section.
Exhibit 12.1(k) - Page 6
<PAGE> 135
8. Survival of Indemnity.
The indemnifications provided by this Agreement shall be a continuing
right to indemnification and shall survive the registration and sale of any
securities by any person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
9. Delay of Registration.
Shareholder agrees that he shall have no right to obtain or seek an
injunction restraining or otherwise delaying any registration statement filed
by Vision 21.
10. Notices.
(a) All communications under this Agreement shall be in
writing and shall be sufficient in all respects if when personally delivered
or mailed by prepaid certified or registered mail, return receipt requested,
addressed as follows:
(i) If to Vision 21, at:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34647
Attn: Theodore N. Gillette,
Chief Executive Officer
With a copy to:
Darrell C. Smith, Esquire
c/o Shumaker, Loop & Kendrick, LLP
101 E. Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
or at such other address as Vision 21 may have furnished in writing to
Shareholder at the time outstanding, or
(ii) If to Shareholder at:
Eye Specialists of Arizona Network, P.C.
4845 E. Thunderbird Rd.
Nos. 1 & 1A
Scottsdale, Arizona 85254
Attn: Daniel B. Feller, M.D.
Exhibit 12.1(k) - Page 7
<PAGE> 136
With a copy to:
Steven M. Goldstein, Esquire
Sacks Tierney P.A. Lawyers
2929 North Central Avenue
Fourteenth Floor
Phoenix, Arizona 85012-2742
(b) Any notice so addressed, when mailed by registered or
certified mail shall be deemed to be given three days after so mailed, and when
delivered by hand shall be deemed to be given immediately.
11. Counterparts.
One or more counterparts of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
12. Governing Law.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Florida, which shall prevail in all matters
arising under or in connection with this Agreement.
13. Headings.
The headings in this Agreement are for convenience of reference only
and shall not be deemed to alter or affect the meaning or interpretation of any
provisions hereof.
14. Stock Lettering.
The Company shall have the right to provide a legend on the shares of
stock covered hereunder reflecting the restriction described hereunder.
Exhibit 12.1(k) - Page 8
<PAGE> 137
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date and year first above written.
"VISION 21"
VISION 21, INC.
By:_____________________________________
Theodore N. Gillette, Chief Executive
Officer
"SHAREHOLDER"
Eye Specialists of Southern Arizona
Network, P.C.
________________________________________
Daniel B. Feller, M.D.
Exhibit 12.1(k) - Page 9
<PAGE> 1
EXHIBIT 10.38
"CONFIDENTIAL TREATMENT REQUESTED
BY VISION TWENTY-ONE, INC."
OPTICAL ASSET PURCHASE AGREEMENT
DATED: DECEMBER 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS............................................................................................ 1
1.1. AAA........................................................................................ 1
1.2. Accountants................................................................................ 1
1.3. Accounts Receivable........................................................................ 2
1.4. Acquisition Proposal....................................................................... 2
1.5. Affiliate.................................................................................. 2
1.6. Applicable Laws............................................................................ 2
1.7. Assumed Contracts.......................................................................... 2
1.8. Assumed Obligations........................................................................ 2
1.9. Audit...................................................................................... 2
1.10. Business Management Agreement.............................................................. 2
1.11. Business Records........................................................................... 2
1.12. Cash Compensation.......................................................................... 2
1.13. Claim Notice............................................................................... 2
1.14. Closing.................................................................................... 2
1.15. Closing Date............................................................................... 2
1.16. Code....................................................................................... 2
1.17. Commitments................................................................................ 3
1.18. Common Stock............................................................................... 3
1.19. Company Balance Sheet...................................................................... 3
1.20. Company Balance Sheet Date................................................................. 3
1.21. Compensation Plans......................................................................... 3
1.22. Competing Management Business.............................................................. 3
1.23. Competitor................................................................................. 3
1.24. Confidential Information Memorandum........................................................ 3
1.25. Controlled Group........................................................................... 3
1.26. Corporation Law............................................................................ 3
1.27. Damages.................................................................................... 3
1.28. Election Period............................................................................ 3
1.29. Employee Benefit Plans..................................................................... 4
1.30. Employee Policies and Procedures........................................................... 4
1.31. Employment Agreements...................................................................... 4
1.32. Environmental Laws......................................................................... 4
1.33. ERISA...................................................................................... 4
1.34. Exchange Act............................................................................... 4
1.35. Excluded Assets............................................................................ 4
1.36. FBCA....................................................................................... 4
1.37. Financial Statements....................................................................... 4
1.38. GAAP....................................................................................... 4
1.39. Governmental Authority..................................................................... 4
1.40. Indemnified Party.......................................................................... 4
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
1.41. Indemnifying Party......................................................................... 4
1.42. Indemnity Notice........................................................................... 5
1.43. Initial Public Offering.................................................................... 5
1.44. Insurance Policies......................................................................... 5
1.45. Lease Assignments.......................................................................... 5
1.46. Leased Property............................................................................ 5
1.47. IRS........................................................................................ 5
1.48. Management Business........................................................................ 5
1.49. Material Adverse Effect.................................................................... 5
1.50. Non-optical Assets......................................................................... 5
1.51. Note....................................................................................... 5
1.52. Optical Assets............................................................................. 5
1.53. Optical Business........................................................................... 5
1.54. Payors..................................................................................... 5
1.55. Permitted Encumbrances..................................................................... 6
1.56. Personal Property Leases................................................................... 6
1.57. Prepaid Items.............................................................................. 6
1.58. Proposed Purchase Price Adjustment......................................................... 6
1.59. Proprietary Rights......................................................................... 6
1.60. Purchase Price............................................................................. 6
1.61. Real Property Leases....................................................................... 6
1.62. Registration Statement..................................................................... 6
1.63. Related Acquisitions....................................................................... 6
1.64. SEC........................................................................................ 6
1.65. Securities................................................................................. 6
1.66. Securities Act............................................................................. 6
1.67. State...................................................................................... 6
1.68. Tangible Personal Property................................................................. 6
1.69. Tax Returns................................................................................ 7
1.70. Third Party Claim.......................................................................... 7
1.71. Transaction................................................................................ 7
1.72. Vision 21 Financial Statements............................................................. 7
2. PURCHASE AND SALE OF OPTICAL ASSETS AND NON-OPTICAL
ASSETS................................................................................................. 7
2.1. Purchase and Sale of Optical Assets........................................................ 7
Purchase and Sale of Non-Optical Assets.................................................... 7
Excluded Assets............................................................................ 9
2.4. Assumption of Obligations and Liabilities.................................................. 9
2.5. Purchase Price............................................................................. 9
2.6. The Closing................................................................................ 10
2.7. Purchase Price Adjustments................................................................. 10
2.8. Subsequent Actions......................................................................... 11
2.9. Allocation of Purchase Price............................................................... 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER............................................................................................ 11
3.1. Organization and Good Standing; Qualification.............................................. 11
3.2. Continuity of Business Enterprise.......................................................... 11
3.3. Authorization and Validity................................................................. 12
3.4. Compliance................................................................................. 12
3.5. Consents................................................................................... 12
3.6. Financial Statements....................................................................... 12
3.7. Liabilities and Obligations................................................................ 13
3.8. Employee Matters........................................................................... 13
a. Cash Compensation............................................................... 13
b. Compensation Plans.............................................................. 13
c. Employment Agreements........................................................... 13
d. Employee Policies and Procedures................................................ 13
e. Unwritten Amendments............................................................ 14
f. Labor Compliance................................................................ 14
g. Unions.......................................................................... 14
h. Aliens.......................................................................... 14
3.9. Employee Benefit Plans..................................................................... 15
a. Identification.................................................................. 15
b. Administration.................................................................. 15
c. Examinations.................................................................... 15
d. Prohibited Transactions......................................................... 15
e. Claims and Litigation........................................................... 15
f. Qualification................................................................... 16
g. Funding Status.................................................................. 16
h. Excise Taxes.................................................................... 16
i. Multiemployer Plans............................................................. 16
j. Pension Benefit Guaranty Corporation............................................ 16
k. Retirees........................................................................ 16
l. Other Compensation.............................................................. 16
3.10. Absence of Certain Changes................................................................. 16
3.11. Title; Leased Assets....................................................................... 18
a. Real Property................................................................... 18
b. Personal Property............................................................... 18
c. Leases.......................................................................... 18
3.12. Commitments................................................................................ 19
a. Commitments; Defaults........................................................... 19
b. No Cancellation or Termination of Commitment.................................... 20
3.13. Insurance.................................................................................. 20
3.14. Proprietary Rights and Information......................................................... 21
3.15. Taxes...................................................................................... 21
a. Filing of Tax Returns........................................................... 21
b. Payment of Taxes................................................................ 22
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
c. No Pending Deficiencies, Delinquencies, Assessments or
Audits.......................................................................... 22
d. No Extension of Limitation Period............................................... 22
e. All Withholding Requirements Satisfied.......................................... 22
f. Foreign Person.................................................................. 22
3.16. Compliance with Laws....................................................................... 22
3.17. Finder's Fee............................................................................... 23
3.18. Litigation................................................................................. 23
3.19. Condition of Fixed Assets.................................................................. 23
3.20. Distributions and Repurchases.............................................................. 23
3.21. Banking Relations.......................................................................... 23
3.22. Ownership Interests of Interested Persons; Affiliations.................................... 24
3.23. Investments in Competitors................................................................. 24
3.24. Environmental Matters...................................................................... 24
a. Environmental Laws.............................................................. 24
b. Permits......................................................................... 24
c. Superfund List.................................................................. 24
3.25. Certain Payments........................................................................... 25
3.26. Medicare and Medicaid Programs............................................................. 25
3.27. Fraud and Abuse............................................................................ 25
3.28. Payors..................................................................................... 26
3.29. Acquisition Proposals...................................................................... 26
3.30. Consistent Treatment of Expenses........................................................... 26
3.31. Accounts Receivable/Payable................................................................ 27
3.32. Projections................................................................................ 27
3.33. Tangible Personal Property................................................................. 27
3.34. Leases..................................................................................... 27
3.35. Contract Rights............................................................................ 28
3.36. Prepaid Items.............................................................................. 28
3.37. Completeness of Assets..................................................................... 28
3.38. Disclosure................................................................................. 28
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER...................................................... 28
4.1. Validity; Shareholder Capacity............................................................. 29
4.2. No Violation............................................................................... 29
4.3. Consents................................................................................... 29
4.4. Certain Payments........................................................................... 29
4.5. Finder's Fee............................................................................... 29
4.6. Ownership of Interested Persons; Affiliations.............................................. 29
4.7. Investments in Competitors................................................................. 30
5. REPRESENTATIONS AND WARRANTIES OF VISION 21............................................................ 30
5.1. Organization and Good Standing............................................................. 30
5.2. Capitalization............................................................................. 30
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
5.3. Corporate Records.......................................................................... 30
5.4. Authorization and Validity................................................................. 30
5.5. Compliance................................................................................. 31
5.6. Consents................................................................................... 31
5.7. Finder's Fee............................................................................... 31
5.8. Capital Stock.............................................................................. 31
5.9. Vision 21 Financial Statements; Confidential Information
Memorandum................................................................................. 31
5.10. Liabilities and Obligations................................................................ 32
5.11. Compliance with Laws....................................................................... 32
5.12. Insolvency Proceedings..................................................................... 32
5.13. Employment of Company's Employees.......................................................... 32
6. SECURITIES LAW MATTERS................................................................................. 33
6.1. Investment Representations and Covenants of Shareholder.................................... 33
6.2. Current Public Information................................................................. 35
7. COVENANTS OF THE COMPANY, THE SHAREHOLDER AND NEW
P.C.................................................................................................... 35
7.1. Consummation of Agreement.................................................................. 35
7.2. Business Operations........................................................................ 35
7.3. Access..................................................................................... 36
7.4. Notification of Certain Matters............................................................ 36
7.5. Approvals of Third Parties................................................................. 36
7.6. Employee Matters........................................................................... 36
7.7. Contracts.................................................................................. 37
7.8. Capital Assets; Payments of Liabilities.................................................... 37
7.9. Mortgages, Liens and Guaranties............................................................ 37
7.10. Acquisition Proposals...................................................................... 38
7.11. Distributions and Repurchases.............................................................. 38
7.12. Requirements to Effect the Transaction..................................................... 38
7.13. Shareholder Retained Equity................................................................ 38
7.14. Termination of Retirement Plans............................................................ 38
7.15. Delivery of Schedules...................................................................... 39
8. COVENANTS OF VISION 21................................................................................. 39
8.1. Consummation of Agreement.................................................................. 39
8.2. Notification of Certain Matters............................................................ 39
8.3. Licenses and Permits....................................................................... 39
8.4. Release of Shareholder From Practice Liabilities........................................... 39
9. COVENANTS OF VISION 21, THE COMPANY, NEW P.C. AND THE
SHAREHOLDER............................................................................................ 39
9.1. Filings; Other Action...................................................................... 40
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
9.2. Amendment of Schedules..................................................................... 40
9.3. Fees and Expenses.......................................................................... 41
....................................................................................................... 42
10. CONDITIONS PRECEDENT OF VISION 21...................................................................... 42
10.1. Representations and Warranties............................................................. 42
10.2. Covenants.................................................................................. 42
10.3. Legal Opinion.............................................................................. 42
10.4. Proceedings................................................................................ 42
10.5. No Material Adverse Change................................................................. 42
10.6. Government Approvals and Required Consents................................................. 42
10.7. Closing Deliveries......................................................................... 42
10.8. Due Diligence.............................................................................. 43
10.9. Financial Audit............................................................................ 43
10.10. Compliance Audit........................................................................... 43
10.11. Exemption Under State Securities Laws...................................................... 43
11. CONDITIONS PRECEDENT OF THE COMPANY, NEW P.C. AND THE
SHAREHOLDER............................................................................................ 43
11.1. Representations and Warranties............................................................. 43
11.2. Covenants.................................................................................. 43
11.3. Legal Opinions............................................................................. 43
11.4. Proceedings................................................................................ 43
11.5. Government Approvals and Required Consents................................................. 43
11.6. Closing Deliveries......................................................................... 44
11.7. No Change in Voting or Ownership Control................................................... 44
11.8. No Material Adverse Change; Delivery of Amended Confidential
Information Memorandum..................................................................... 44
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS................................................................ 44
12.1. Deliveries of the Company, New P........................................................... 44
12.2. Deliveries of Vision 21.................................................................... 46
12.3. Release of Escrow Materials................................................................ 47
13. POST CLOSING MATTERS................................................................................... 47
13.1. Further Instruments of Transfer............................................................ 47
14. REMEDIES............................................................................................... 48
14.1. Indemnification by the Company, New P...................................................... 48
14.2. Indemnification by Vision 21............................................................... 48
14.3. Conditions of Indemnification.............................................................. 49
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
14.4. Remedies Not Exclusive..................................................................... 51
14.5. Costs, Expenses and Legal Fees............................................................. 51
14.6. Indemnification Limitations................................................................ 52
14.7. Tax Benefits; Insurance Proceeds........................................................... 52
14.8. Payment of Indemnification Obligation...................................................... 52
15. TERMINATION............................................................................................ 53
15.1. Termination................................................................................ 53
15.2. Effect of Termination...................................................................... 54
16. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.......................................................... 54
16.1. Shareholder, New P.C. and Company Non-Competition Covenant................................. 54
16.2. Shareholder, New P.C. and Company Confidentiality Covenant................................. 56
16.3. Survival................................................................................... 57
17. DISPUTES............................................................................................... 57
17.1. Mediation and Arbitration.................................................................. 57
18. MISCELLANEOUS.......................................................................................... 58
18.1. Taxes...................................................................................... 58
18.2. Remedies Not Exclusive..................................................................... 58
18.3. Parties Bound.............................................................................. 58
18.4. Notices.................................................................................... 58
18.5. Choice of Law.............................................................................. 59
18.6. Entire Agreement; Amendments and Waivers................................................... 59
18.7. Confidentiality Agreements................................................................. 59
18.8. Reformation Clause......................................................................... 60
18.9. Assignment................................................................................. 60
18.10. Attorneys' Fees............................................................................ 60
18.11. Further Assurances......................................................................... 60
18.12. Announcements and Press Releases........................................................... 60
18.13. No Tax Representations..................................................................... 61
18.14. No Rights as Stockholder................................................................... 61
18.15. Multiple Counterparts...................................................................... 61
18.16. Headings................................................................................... 61
18.17. Severability............................................................................... 61
18.18. Form of Transaction........................................................................ 61
</TABLE>
vii
<PAGE> 9
OPTICAL ASSET PURCHASE AGREEMENT
This Optical Asset Purchase Agreement (this "Agreement"), dated as of
December 1, 1996, is by and among Sharona Optical, Inc. an Arizona corporation
(the "Company"), Millennium Vision, P.C., an Arizona professional corporation
("New P.C."), Daniel B. Feller, M.D. and Sharona Feller (together, the
"Shareholder"), and Vision 21, Inc., a Florida corporation ("Vision 21").
RECITALS
A. Shareholder is a physician licensed to practice medicine in
the State (as defined herein) and currently conducts an Optical Business (as
defined herein) through the Company.
B. Shareholder owns all of the issued and outstanding shares
of capital stock of the Company and New P.C.
C. New P.C. is a newly-formed professional corporation which
has contemporaneously herewith acquired all of the medical assets of the
shareholder's wholly-owned professional corporation, Daniel B. Feller, M.D.,
P.C.
D. Vision 21 provides business management services and
facilities for eye care professionals and related businesses and has
contemporaneously herewith acquired all of the non- medical assets of Daniel B.
Feller, M.D., P.C.
E. The Company desires to sell, assign and transfer all of its
Optical Assets (as defined herein) to New P.C. and all of its Non-optical Assets
(as defined herein) to Vision 21 and New P.C. and Vision 21 desire to purchase,
assume and acquire such assets and assume certain liabilities of the Company in
exchange for capital stock of Vision 21 and other consideration, all as more
specifically provided herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
1.1. AAA. The term "AAA" shall mean the American Arbitration
Association.
1.2. Accountants. The term "Accountants" shall mean the
accounting firm for Vision 21.
1
<PAGE> 10
1.3. Accounts Receivable. The term "Accounts Receivable"
shall have the meaning set forth in Section 2.2(a).
1.4. Acquisition Proposal. The term "Acquisition Proposal"
shall have the meaning set forth in Section 3.29.
1.5. Affiliate. The term "Affiliate" with respect to any
person or entity shall mean a person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by or is under
common control with, such person or entity.
1.6. Applicable Laws. The term "Applicable Laws" shall have
the meaning set forth in Section 18.8.
1.7. Assumed Contracts. The term "Assumed Contracts" shall
have the meaning set forth in Section 2.2(d).
1.8. Assumed Obligations. The term "Assumed Obligations"
shall have the meaning set forth in Section 2.4.
1.9. Audit. The term "Audit" shall have the meaning set
forth in Section 3.6.
1.10. Business Management Agreement. The term "Business
Management Agreement" shall mean the Business Management Agreement entered into
between Daniel B. Feller, M.D., P.A. and Vision 21 at the Closing.
1.11. Business Records. The term "Business Records" shall
have the meaning set forth in Section 2.2(f)
1.12. Cash Compensation. The term "Cash Compensation" shall
have the meaning set forth in Section 3.8(a).
1.13. Claim Notice. The term "Claim Notice" shall have the
meaning set forth in Section 14.3(a).
1.14. Closing. The term "Closing" shall mean the consummation
of the transactions contemplated by this Agreement.
1.15. Closing Date. The term "Closing Date" shall mean
December 1, 1996, or such other date as mutually agreed upon by the parties.
1.16. Code. The term "Code" shall mean the Internal Revenue
Code of 1986, as amended.
2
<PAGE> 11
1.17. Commitments. The term "Commitments" shall have the
meaning set forth in Section 3.12(a).
1.18. Common Stock. The term "Common Stock" or "Vision 21
Common Stock" shall mean the common stock, par value $.01 per share, of Vision
21.
1.19. Company Balance Sheet. The term "Company Balance Sheet"
shall have the meaning set forth in Section 3.6.
1.20. Company Balance Sheet Date. The term "Company Balance
Sheet Date" shall have the meaning set forth in Section 3.6.
1.21. Compensation Plans. The term "Compensation Plans" shall
have the meaning set forth in Section 3.8(b).
1.22. Competing Management Business. The term "Competing
Management Business" shall have the meaning set forth in Section 16.1(b).
1.23. Competitor. The term "Competitor" shall mean any person
or entity which, individually or jointly with others, whether for its own
account or for that of any other person or entity, owns, or holds any ownership
or voting interest in any person or entity engaged in Optical Business;
provided, however, that such term shall not include any Affiliate of Vision 21
or any entity with which Vision 21 has an agreement similar to the Business
Management Agreement in effect.
1.24. Confidential Information Memorandum. The term
"Confidential Information Memorandum" shall mean that certain disclosure
memorandum distributed by Vision 21 to the Company and Shareholder dated as of
September 27, 1996, and any amendments or revisions thereto.
1.25. Controlled Group. The term "Controlled Group" shall
have the meaning set forth in Section 3.9(g).
1.26. Corporation Law. The term "Corporation Law" shall mean
the statutes, regulations and laws governing business corporations and
professional corporations in the State.
1.27. Damages. The term "Damages" shall have the meaning set
forth in Section 14.1.
1.28. Election Period. The term "Election Period" shall have
the meaning set forth in Section 14.3(a).
3
<PAGE> 12
1.29. Employee Benefit Plans. The term "Employee Benefit
Plans" shall have the meaning set forth in Section 3.9(a).
1.30. Employee Policies and Procedures. The term "Employee
Policies and Procedures" shall have the meaning set forth in Section 3.8(d).
1.31. Employment Agreements. The term "Employment Agreements"
shall have the meaning set forth in Section 3.8(c).
1.32. Environmental Laws. The term "Environmental Laws" shall
have the meaning set forth in Section 3.24(a).
1.33. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.34. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
1.35. Excluded Assets. The term "Excluded Assets" shall have
the meaning set forth in Section 2.3.
1.36. FBCA. The term "FBCA" shall mean the Florida Business
Corporation Act.
1.37. Financial Statements. The term "Financial Statements"
shall have the meaning set forth in Section 3.6.
1.38. GAAP. The term "GAAP" shall mean generally accepted
accounting principles, applied on a consistent basis with prior periods, set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of the determination.
1.39. Governmental Authority. The term "Governmental
Authority" shall mean any national, state, provincial, local or tribunal
governmental, judicial or administrative authority or agency.
1.40. Indemnified Party. The term "Indemnified Party" shall
have the meaning set forth in Section 14.3(a).
1.41. Indemnifying Party. The term "Indemnifying Party" shall
have the meaning set forth in Section 14.3(a).
4
<PAGE> 13
1.42. Indemnity Notice. The term "Indemnity Notice" shall
have the meaning set forth in Section 14.3(d).
1.43. Initial Public Offering. The term "Initial Public
Offering" shall mean the potential initial underwritten public offering of
Vision 21 Common Stock contemplated by Vision 21.
1.44. Insurance Policies. The term "Insurance Policies" shall
have the meaning set forth in Section 3.13.
1.45. Lease Assignments. The term "Lease Assignments" shall
have the meaning set forth in Section 12.1(m).
1.46. Leased Property. The term "Leased Property" shall have
the meaning set forth in Section 2.2(c).
1.47. IRS. The term "IRS" shall mean the Internal Revenue
Service.
1.48. Management Business. The term "Management Business"
shall have the meaning set forth in Section 16.1(b)(i).
1.49. Material Adverse Effect. The term "Material Adverse
Effect" shall mean a material adverse effect on the Non-optical Assets and the
Company's business, operations, condition (financial or otherwise) or results of
operations, taken as a whole, considering all relevant facts and circumstances.
1.50. Non-optical Assets. The term "Non-optical Assets" shall
mean all of the assets of the Company except for the Optical Assets, as such
assets are more fully described in Section 2.2 and the Excluded Assets.
1.51. Note. The term "Note" shall mean the subordinated
promissory note, to be delivered to the Shareholder at the Closing.
1.52. Optical Assets. The term "Optical Assets" shall mean
the Company's right, title and interest in those assets set forth on Schedule
1.52.
1.53. Optical Business. The term "Optical Business" shall
mean the sale of lenses, eyeglasses and other prescription and non-prescription
eyewear.
1.54. Payors. The term "Payors" shall have the meaning set
forth in Section 3.28.
5
<PAGE> 14
1.55. Permitted Encumbrances. The term "Permitted
Encumbrances" shall have the meaning set forth in Section 3.11(b).
1.56. Personal Property Leases. The term "Personal Property
Leases" shall have the meaning set forth in Section 2.2(b).
1.57. Prepaid Items. The term "Prepaid Items" shall have the
meaning set forth in Section 2.2(l).
1.58. Proposed Purchase Price Adjustment. The term "Proposed
Purchase Price Adjustment" shall have the meaning set forth in Section 2.7(b).
1.59. Proprietary Rights. The term "Proprietary Rights" shall
have the meaning set forth in Section 3.14.
1.60. Purchase Price. The term "Purchase Price" shall mean
the consideration set forth in Section 2.5 of this Agreement.
1.61. Real Property Leases. The term "Real Property Leases"
shall have the meaning set forth in Section 2.2(c).
1.62. Registration Statement. The term "Registration
Statement" shall have the meaning set forth in Section 9.1.
1.63. Related Acquisitions. The term "Related Acquisitions"
shall mean the pending acquisitions by Vision 21 with third parties which are
expected to be completed simultaneously with this Transaction.
1.64. SEC. The term "SEC" shall mean the Securities and
Exchange Commission.
1.65. Securities. The term "Securities" shall mean the Note
and the shares of Vision 21 Common Stock which shall be delivered to the Company
under the terms of the Note.
1.66. Securities Act. The term "Securities Act" shall mean
the Securities Act of 1933, as amended.
1.67. State. The term "State" shall mean the State in which
the Company is incorporated.
1.68. Tangible Personal Property. The term "Tangible Personal
Property" shall have the meaning set forth in Section 2.1(f).
6
<PAGE> 15
1.69. Tax Returns. The term "Tax Returns" shall have the
meaning set forth in Section 3.15(a).
1.70. Third Party Claim. The term "Third Party Claim" shall
have the meaning set forth in Section 14.3(a).
1.71. Transaction. The term "Transaction" shall mean the
purchase and sale of the Optical Assets and the Non-optical Assets and the
assumption of the Assumed Obligations pursuant to this Agreement.
1.72. Vision 21 Financial Statements. The term "Vision 21
Financial Statements" shall have the meaning set forth in Section 5.9.
2. PURCHASE AND SALE OF OPTICAL ASSETS AND NON-OPTICAL ASSETS.
2.1. Purchase and Sale of Optical Assets. Subject to the
terms and conditions herein set forth, the Company agrees to sell, convey,
assign, transfer and deliver to New P.C., and New P.C. agrees to purchase,
assume, accept and acquire, the Optical Assets owned by the Company as of the
Closing Date.
2.2. Purchase and Sale of Non-Optical Assets. Subject to the
terms and conditions herein set forth, and in reliance upon the representations
and warranties set forth herein, the Company agrees to sell, convey, assign,
transfer and deliver to Vision 21, and Vision 21 agrees to purchase, assume,
accept and acquire, the assets consisting of all the assets (other than the
Optical Assets specified in Section 2.1 hereof) owned by the Company as of the
Closing Date, of every kind, character and description, whether tangible, real,
personal, or mixed, and wheresoever located, whether carried on the books of the
Company or not carried on the books of the Company due to having been expended,
fully depreciated, or otherwise (the "Non-Optical Assets"), including without
limitation the following (except to the extent that any of the following are
specifically enumerated as Excluded Assets in Section 2.3 hereof) to the extent
permitted by applicable law:
(a) All of the accounts receivable or other rights to receive
payment owing to the Company ("Accounts Receivable");
(b) All of the Company's rights in, to and under all leases of
supplies, instruments, equipment, furniture, machinery and other items of
tangible personal property ("Personal Property Leases"), including, without
limitation, the Personal Property Leases described on Schedule 2.2(b);
(c) All of the Company's rights as a lessee in, to and under all
real property lease agreements (such real property lease agreements are
hereinafter referred to as "Real Property Leases" and the parcels of real
property in which the Company has a leasehold interest and that
7
<PAGE> 16
are subject to the Real Property Leases are hereinafter referred to as "Leased
Property"), including, without limitation, estates created by, and rights
conferred under, the Real Property Leases described on Schedule 2.2(c), and any
and all estates, rights, titles and interests in, to and under all warehouses,
storage facilities, buildings, works, structures, fixtures, landings,
constructions in progress, improvements, betterments, installations, and
additions constructed or located on or affixed to the Leased Property;
(d) All of the Company's rights in, to and under all contracts,
agreements, leases, insurance policies, purchase orders and commitments (the
"Assumed Contracts"), including, without limitation, the Assumed Contracts
described on Schedule 2.2(d);
(e) All tangible personal property (including supplies,
instruments, equipment, furniture and machinery) owned by the Company ("Tangible
Personal Property"), including, without limitation, the Tangible Personal
Property described on Schedule 2.2(e);
(f) All books and records of the Company, including, without
limitation, all credit records, payroll records, computer records, computer
programs, contracts, agreements, operating manuals, schedules of assets,
correspondence, books of account, files, papers, books and all other public and
confidential business records (together the "Business Records"), whether such
Business Records are in hard copy form or are electronically or magnetically
stored;
(g) All franchises, licenses, permits, certificates, approvals and
other governmental authorizations necessary to own and operate any of the other
Non-optical Assets, a complete and correct list of which is set forth on
Schedule 2.2(g);
(h) All (i) United States and foreign patents, patent
applications, trademarks, trademark applications and registrations, service
marks, service mark applications and registrations, copyrights, copyright
applications and registrations and trade names of the Company; (ii) proprietary
data and technical, manufacturing know-how and information (and all materials
embodying such information) of the Company; (iii) developments, discoveries,
inventions, ideas and trade secrets of the Company; and (iv) rights to sue for
past infringement;
(i) All of the Company's right, title and interest in, to and
under all telephone numbers used by the Company, including all extensions
thereto;
(j) All rights in, to and under all representations, warranties,
covenants and guaranties made or provided by third parties to or for the benefit
of the Company with respect to any of the other Non-optical Assets;
(k) All cash in registers or petty cash drawers (which shall on
the Closing Date be at least ninety percent (90%) of the average daily cash
balance held in such locations in the twelve (12) month period preceding the
Closing Date); and
8
<PAGE> 17
(l) All of the Company's prepaid expenses, prepaid insurance,
deposits and other similar items ("Prepaid Items").
If and to the extent the assignment of any personal property lease,
real property lease, contract, agreement, purchase order, work order,
commitment, license, permit, certificate or approval listed on the foregoing
Schedules shall require the consent of another party thereto, then (i) such
personal property lease, real property lease, contract, agreement, purchase
order, work order, commitment, license, permit, certificate or approval shall
constitute a Personal Property Lease, Real Property Lease, Assumed Contract or
License, as the case may be, only upon and subject to receipt of such consent;
(ii) such personal property lease, contract, agreement, purchase order, work
order, commitment, license, permit, certificate or approval shall not be a
Personal Property Lease, Real Property Lease, Assumed Contract or License, as
the case may be, if and for so long as the attempted assignment would constitute
a breach thereof; and (iii) the Company shall cooperate fully with Vision 21 (or
Vision 21's successor-in-interest) in seeking such consent or reasonable
arrangement designed to provide to Vision 21 (or such successor-in-interest) the
benefits, claim or rights arising thereunder.
2.3. Excluded Assets. The Company shall not sell, convey,
assign, transfer or deliver to Vision 21, and Vision 21 shall not be obligated
to purchase, accept or acquire (or make any payments or otherwise discharge any
liability or obligation of the Company with respect to), (a) life insurance
policies covering the life of any employee of the Company, (b) personal effects
listed on Schedule 2.3; and (c) cash and cash equivalents in banks, certificates
of deposit, commercial paper and securities owned by the Company (but excluding
cash held in registers or petty cash drawers on the Closing Date) (collectively,
the "Excluded Assets").
2.4. Assumption of Obligations and Liabilities. At the
Closing, Vision 21 shall assume and agree to pay or perform, promptly as they
become due, only those obligations and liabilities of the Company expressly set
forth on Schedule 2.4 (the "Assumed Obligations"). Except for the Assumed
Obligations, Vision 21 shall not assume or be deemed to have assumed and shall
not be responsible for any other obligation or liability of the Company, direct
or indirect, known or unknown, absolute or contingent, including without
limitation (i) any and all obligations regarding any foreign, Federal, state or
local income, sales, use, franchise or other tax liabilities, (ii) any and all
obligations or liabilities relating to any fees or expenses of the Company's or
Shareholders' counsel, accountants or other experts incident to the negotiation
and preparation of any of the documents contemplated herein and consummation of
the transactions contemplated thereby, and (iii) any and all liabilities
relating to or arising from personal injuries relating to Optical Assets sold by
the Company to the Company's customers prior to the Closing Date.
2.5. Purchase Price. Vision 21 agrees that, subject to the
terms and conditions of this Agreement, and in full consideration for the
aforesaid sale, transfer, conveyance, assignment and delivery of the Non-optical
Assets of the Company to Vision 21, and the acceptance by Vision 21 of such
Non-optical Assets and the assumption of the Assumed Obligations of the Company
by Vision 21, Vision 21 shall deliver to the Company at the Closing
9
<PAGE> 18
the consideration (the "Vision 21 Purchase Price") set forth in Schedule 2.5A
which shall be paid pursuant to a Note in substantially the form attached hereto
and made a part hereof as Schedule 2.5B. New P.C. agrees that, subject to the
terms and conditions of this Agreement, and in full consideration of the
aforesaid sale, transfer, conveyance, assignment and delivery of the Optical
Assets, New P.C. shall deliver to the Company at the Closing the consideration
set forth in Schedule 2.5C.
2.6. The Closing. The Closing shall take place on the
Closing Date at the offices of Shumaker, Loop & Kendrick, 101 E. Kennedy
Boulevard, Suite 2800, Tampa, Florida 33602 or at such other location in the
State as the parties shall mutually agree.
2.7. Purchase Price Adjustments.
(a) The Purchase Price shall be subject to adjustment
to the extent that Current Assets (as defined herein) or Current Liabilities
Assumed (as defined herein) materially differ from the amounts customarily
arising in the ordinary course of business of the Company as of November 30,
1996. The term "Current Assets" shall mean petty cash, Accounts Receivable,
prepaid expenses, inventory, supplies and other current assets (excluding cash
in banks, certificates of deposit, other cash equivalents, current portion of
capital leases and prepaid Income Taxes). The term "Current Liabilities Assumed"
shall mean the audited balances as of November 30, 1996 of trade accounts
payable, accrued payroll, accrued payroll taxes, accrued benefits, and other
current liabilities (excluding notes payable, current portion of capital leases
and long-term debt and income and franchise taxes and accrued shareholder
expenses). The adjustment shall be settled in cash (which shall be set-off from
moneys due Daniel B. Feller, M.D., P.A. pursuant to the Business Management
Agreement) or Vision 21 Common Stock at Vision 21's option. The parties also
agree that to the extent the adjustments materially impact the goodwill created
by the transaction, there shall be an adjustment for the related impact of net
income created by the change in amortization of such goodwill and the Purchase
Price shall be increased or reduced to reflect the impact on net income settled
in cash or Vision 21 Common Stock at Vision 21's option.
(b) Within sixty (60) days following the Closing
Date, Vision 21 shall present to the Shareholder its Purchase Price adjustment
(the "Proposed Purchase Price Adjustment") calculated in accordance with Section
2.7(a) hereof. The Shareholder shall, within thirty (30) days after the delivery
by Vision 21 of the Proposed Purchase Price Adjustment, complete his review
thereof. In the event that the Shareholder believes that the Proposed Purchase
Price Adjustment has not been prepared on the basis set forth in Section 2.7(a)
or otherwise contests any item set forth therein, the Shareholder shall, on or
before the last day of such 30 day period, so object to Vision 21 in writing,
setting forth a specific description of the nature of the objection and the
corresponding adjustments the Shareholder believes should be made. If no
objection is received by Vision 21 on or before the last day of such 30 day
period, then the Proposed Purchase Price Adjustment delivered by Vision 21 shall
be final. If an objection has been made and Vision 21 and the Shareholder are
unable to resolve all of their disagreements with respect to the proposed
adjustments within 15 days following the delivery
10
<PAGE> 19
of the Shareholder's objection, the dispute shall be submitted to arbitration as
provided in Section 18.1 except that the arbitrator shall be instructed to
deliver his determination of the dispute to the parties no later than 30 days
after the arbitration hearing. Vision 21 shall provide to the Shareholder and
his accountants full access to all relevant books, records and work papers
utilized in preparing the Proposed Purchase Price Adjustment.
2.8. Subsequent Actions. If, at any time after the Closing
Date, Vision 21 shall determine or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Vision 21 its
right, title or interest in, to or under any of the rights, properties or assets
of the Company acquired or to be acquired by Vision 21 as a result of, or in
connection with, the Transaction, or otherwise to carry out this Agreement, the
officers and directors of Vision 21 shall, at the sole cost and expense of
Vision 21, be authorized to execute and deliver, in the name and on behalf of
the Company, such deeds, bills of sale, assignments and assurances, and to take
and do, in the name and on behalf of the Company, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
Vision 21 or otherwise to carry out this Agreement.
2.9. Allocation of Purchase Price. The Purchase Price
shall be allocated among the Non-optical Assets and the Optical Assets as set
forth on Schedule 2.9. Each of Vision 21, the Company and the Shareholder
covenants and agrees that he or it shall not take a position that is in any way
inconsistent with the terms of this Section 2.9 on any income tax return, before
any governmental agency charged with the collection of any income tax or in any
judicial proceeding.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER. The Company and the Shareholder, jointly and severally, represent
and warrant to Vision 21 that the following are true and correct as of the date
hereof, and shall be true and correct through the Closing Date as if made on
that date; when used in this Section 3, the term "best knowledge" shall mean in
the case of the Company the best knowledge of those individuals listed on
Schedule 3:
3.1. Organization and Good Standing; Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State, with all requisite corporate power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Company is not duly qualified and licensed to do
business in any other jurisdiction. The Company does not have any assets,
employees or offices in any state other than the State. Except as set forth on
Schedule 3.1, neither the Company nor the Shareholder owns, directly or
indirectly, any of the capital stock of any other corporation or any equity,
profit sharing, participation or other interest in any corporation, partnership,
joint venture or other entity that is engaged in a business that is a
Competitor.
11
<PAGE> 20
3.2. Continuity of Business Enterprise. Except as set
forth on Schedule 3.2, and except as contemplated by this Agreement, there has
not been any sale, distribution or spin-off of significant assets of the Company
or any of its Affiliates other than in the ordinary course of business within
the two (2) year period preceding the date of this Agreement.
3.3. Authorization and Validity. The execution, delivery
and performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby to be performed by the Company, have been duly authorized by
the Company. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
Company has obtained, in accordance with applicable law and its Articles or
Certificate of Incorporation and Bylaws, the approval of its stockholders
necessary for the consummation of the transactions contemplated hereby.
3.4. Compliance. Except as disclosed on Schedule 3.4, the
execution and delivery of the documents contemplated hereunder and the
consummation of the transactions contemplated thereby by the Company will not
(i) violate any provision of the Company's organizational documents, (ii)
violate any material provision of or result in the breach of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under, any mortgage, lien, lease, contract,
license, instrument or any other agreement to which the Company is a party,
(iii) result in the creation or imposition of any material lien, charge, pledge,
security interest or other material encumbrance upon any property of the Company
or (iv) violate or conflict with any order, award, judgment or decree or other
material restriction or to the best of the Company's knowledge violate or
conflict with any law, ordinance or regulation to which the Company or its
property is subject.
3.5. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by the Company or the consummation
by such party of the transactions contemplated thereby, except for those
consents or approvals set forth on Schedule 3.5.
3.6. Financial Statements. The Company has furnished to
Vision 21 its unaudited balance sheet and related unaudited statements of
income, retained earnings and cash flows for its prior three (3) full fiscal
years, and its unaudited interim balance sheet for the fiscal period ended
September 30, 1996 (the "Company Balance Sheet", and the date thereof shall be
referred to as the "Company Balance Sheet Date") and related unaudited
statements of income, retained earnings and cash flows for the twelve months
then ended (all collectively, with the related notes thereto, the "Financial
Statements"). The Financial Statements fairly present the financial condition
and results of operations of the Company as of the dates and for the periods
indicated except as otherwise indicated in the Financial Statements. The Company
and the Shareholder expressly warrant that they will have prior to the Closing
fairly, accurately and
12
<PAGE> 21
completely provided all necessary information requested in or relevant to the
preparation of the audit to be conducted by the Accountants or their designees
prior to Closing (the "Audit"). The cost of the Audit shall be paid by Vision 21
and all materials prepared by Vision 21's Accountants in connection with the
Audit shall be solely the property of Vision 21.
3.7. Liabilities and Obligations. Except as set forth on
Schedule 3.7, the Financial Statements reflect all liabilities of the Company,
accrued, contingent or otherwise that would be required to be reflected thereon,
or in the notes thereto, prepared in accordance with GAAP, except for
liabilities and obligations incurred in the ordinary course of business since
the Company Balance Sheet Date. Except as set forth in the Financial Statements
or on Schedule 3.7, the Company is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
the Company does not know of any valid basis for the assertion of any other
claims or liabilities of any nature or in any amount.
3.8. Employee Matters.
a. Cash Compensation. Schedule 3.8(a) contains
a complete and accurate list of the names, titles and annual cash compensation
as of the Closing Date, including without limitation wages, salaries, bonuses
(discretionary and formula) and other cash compensation (the "Cash
Compensation") of all employees of the Company. In addition, Schedule 3.8(a)
contains a complete and accurate description of (i) all increases in Cash
Compensation of employees of the Company during the current fiscal year and the
immediately preceding fiscal year and (ii) any promised increases in Cash
Compensation of employees of the Company that have not yet been effected.
b. Compensation Plans. Schedule 3.8(b) contains
a complete and accurate list of all compensation plans, arrangements or
practices (the "Compensation Plans") sponsored by the Company or to which the
Company contributes on behalf of its employees, other than Employment Agreements
listed on Schedule 3.8(c) and Employee Benefit Plans listed on Schedule 3.9(a).
The Compensation Plans include without limitation plans, arrangements or
practices that provide for performance awards, and stock ownership or stock
options. The Company has provided or made available to Vision 21 a copy of each
written Compensation Plan and a written description of each unwritten
Compensation Plan. Except as set forth on Schedule 3.8(b), each of the
Compensation Plans can be terminated or amended at will by the Company.
c. Employment Agreements. Except as set forth
on Schedule 3.8(c), the Company is not a party to any employment agreement
("Employment Agreements") with respect to any of its employees. Employment
Agreements include without limitation employee leasing agreements, employee
services agreements and non-competition agreements.
13
<PAGE> 22
d. Employee Policies and Procedures. Schedule
3.8(d) contains a complete and accurate list of all employee manuals and all
material policies, procedures and work-related rules (the "Employee Policies and
Procedures") that apply to employees of the Company. The Company has provided or
made available to Vision 21 a copy of all written Employee Policies and
Procedures and a written description of all material unwritten Employee Policies
and Procedures.
e. Unwritten Amendments. Except as described on
Schedule 3.8(b), 3.8(c), or 3.8(d), no material unwritten amendments have been
made, whether by oral communication, pattern of conduct or otherwise, with
respect to any Compensation Plans or Employee Policies and Procedures.
f. Labor Compliance. To the best knowledge of
the Company and the Shareholder, the Company has been and is in compliance with
all applicable laws, rules, regulations and ordinances respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except for any such failures to be in compliance that, individually or in the
aggregate, would not result in a Material Adverse Effect, and the Company is not
liable for any arrearages of wages or penalties for failure to comply with any
of the foregoing. The Company has not, to the best of Shareholder's and the
Company's knowledge, engaged in any unfair labor practices or discriminated on
the basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices that would, individually or
in the aggregate, result in a Material Adverse Effect. Except as set forth on
Schedule 3.8(f), there are no (i) unfair labor practice charges or complaints or
racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the actual knowledge of the
Company and the Shareholder, threatened against the Company before any federal,
state or local court, board, department, commission or agency (nor, to the best
knowledge of the Company and the Shareholder, does any valid basis therefor
exist) or (ii) existing or, to the actual knowledge of the Company, threatened
labor strikes, disputes, grievances, controversies or other labor troubles
affecting the Company (nor, to the best knowledge of the Company and the
Shareholder, does any valid basis therefor exist).
g. Unions. The Company has never been a party
to any agreement with any union, labor organization or collective bargaining
unit. No employees of the Company are represented by any union, labor
organization or collective bargaining unit. Except as set forth on Schedule
3.8(g), to the actual knowledge of the Company, none of the employees of the
Company has threatened to organize or join a union, labor organization or
collective bargaining unit.
h. Aliens. All employees of the Company are,
to the best knowledge of the Company, citizens of, or are authorized in
accordance with federal immigration laws to be employed in, the United States.
14
<PAGE> 23
3.9. Employee Benefit Plans.
a. Identification. Schedule 3.9(a) contains a
complete and accurate list of all employee benefit plans (within the meaning of
Section 3(3) of ERISA sponsored by the Company or to which the Company
contributes on behalf of its employees and all employee benefit plans previously
sponsored or contributed to on behalf of its employees within the three (3)
years preceding the date hereof (the "Employee Benefit Plans"). The Company has
provided or made available to Vision 21 copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. In
addition, the Company has provided or made available to Vision 21 a written
description of all existing practices engaged in by the Company that constitute
Employee Benefit Plans. Except as set forth on Schedule 3.9(a) and subject to
the requirements of the Code and ERISA, each of the Employee Benefit Plans can
be terminated or amended at will by the Company. Except as set forth on Schedule
3.9(a), no unwritten amendment exists with respect to any Employee Benefit Plan.
Except as set forth on Schedule 3.9(b)-(l), each of the following paragraphs is
true and correct.
b. Administration. To the best knowledge of the
Company and the Shareholder, each Employee Benefit Plan has been administered
and maintained in compliance with all applicable laws, rules and regulations,
except where the failure to be in compliance would not, individually or in the
aggregate, result in a Material Adverse Effect. The Company and the Shareholder
have (i) made all necessary filings with respect to such Employee Benefit Plans,
including the timely filing of Form 5500 if applicable, and (ii) made all
necessary filings, reports and disclosures pursuant to and have complied with
all requirements of the IRS Voluntary Compliance Resolution Program, if
applicable, with respect to all profit sharing retirement plans and pension
plans in which employees of the Company participate.
c. Examinations. Except as set forth on
Schedule 3.9(c), the Company has not received any notice that any Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency.
d. Prohibited Transactions. To the best
knowledge of the Company and the Shareholder, no prohibited transactions (within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA) have
occurred with respect to any Employee Benefit Plans.
e. Claims and Litigation. No pending or, to the
actual knowledge of the Company and the Shareholder, threatened, claims, suits,
or other proceedings exist with respect to any Employee Benefit Plan other than
normal benefit claims filed by participants or beneficiaries.
15
<PAGE> 24
f. Qualification. As set forth in more detail
on Schedule 3.9(f), the Company has received a favorable determination letter or
ruling from the IRS for each of the Employee Benefit Plans intended to be
qualified within the meaning of Section 401(a) of the Code and/or tax-exempt
within the meaning of Section 501(a) of the Code. Except as set forth on
Schedule 3.9(e), no proceedings exist or, to the actual knowledge of the Company
have been threatened that could result in the revocation of any such favorable
determination letter or ruling.
g. Funding Status. To the best knowledge of the
Company and the Shareholder, no accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether or not waived, exists with respect
to any Employee Benefit Plan or any plan sponsored by any member of a controlled
group (within the meaning of Section 412(n)(6)(B) of the Code) in which the
Company is a member ("Controlled Group"). With respect to each Employee Benefit
Plan subject to Title IV of ERISA, the assets of each such plan are at least
equal in value to the present value of accrued benefits determined on an ongoing
basis as of the date hereof. The Company does not sponsor any Employee Benefit
Plan described in Section 501(c)(9) of the Code. None of the Employee Benefit
Plans are subject to actuarial assumptions.
h. Excise Taxes. Neither the Company nor any
member of a Controlled Group has any liability to pay excise taxes with respect
to any Employee Benefit Plan under applicable provisions of the Code or ERISA.
i. Multiemployer Plans. Neither the Company nor
any member of a Controlled Group is or ever has been obligated to contribute to
a multiemployer plan within the meaning of Section 3(37) of ERISA.
j. Pension Benefit Guaranty Corporation. None
of the Employee Benefit Plans are subject to the requirements of Title IV of
ERISA.
k. Retirees. The Company has no obligation or
commitment to provide medical, dental or life insurance benefits to or on behalf
of any of its employees who may retire or any of its former employees who have
retired except as may be required pursuant to the continuation of coverage
provisions of Section 4980B of the Code and Sections 501 through 508 of ERISA.
l. Other Compensation. Except as set forth on
Schedule 3.8(a), 3.8(b), 3.8(c), 3.8(d) and 3.9(a), neither the Company nor the
Shareholder is a party to any compensation or debt arrangement with any person
relating to the provision of healthcare related services other than arrangements
with the Company or the Shareholder.
3.10. Absence of Certain Changes. Except as set forth on
Schedule 3.10 or as contemplated by this Agreement, since the Company Balance
Sheet Date, the Company has not:
16
<PAGE> 25
a. suffered a Material Adverse Effect, whether
or not caused by any deliberate act or omission of the Company or the
Shareholder;
b. contracted for the purpose of acquiring any
capital asset having a cost in excess of $5,000 or made any single expenditure
in excess of $5,000;
c. incurred any indebtedness for borrowed money
(other than short-term borrowings in the ordinary course of business), or issued
or sold any debt securities;
d. incurred or discharged any material
liabilities or obligations except in the ordinary course of business;
e. paid any amount on any indebtedness prior to
the due date, forgiven or cancelled any claims or any debt in excess of $5,000,
or released or waived any rights or claims except in the ordinary course of
business;
f. mortgaged, pledged or subjected to any
security interest, lien, lease or other charge or encumbrance any of its
properties or assets (other than statutory liens arising in the ordinary course
of business or other liens that do not materially detract from the value or
interfere with the use of such properties or assets);
g. suffered any damage or destruction to or
loss of any assets (whether or not covered by insurance) that has, individually
or in the aggregate, resulted in a Material Adverse Effect;
h. acquired or disposed of any assets having an
aggregate value in excess of $5,000, except in the ordinary course of business;
i. written up or written down the carrying
value of any of its assets, other than accounts receivable in the ordinary
course of business;
j. changed the costing system or depreciation
methods of accounting for its assets in any material respect;
k. lost or terminated any employee, patient,
customer or supplier that has, individually or in the aggregate, resulted in a
Material Adverse Effect;
l. increased the compensation of any director,
officer, key employee or consultant, except as disclosed on Schedule 3.8(a);
m. increased the compensation of any employee
(except for increases in the ordinary course of business consistent with past
practice) or hired any new employee who is expected to receive annualized
compensation of at least $15,000;
17
<PAGE> 26
n. made any payments to or loaned any money to
any person or entity referred to in Section 3.22;
o. formed or acquired or disposed of any
interest in any corporation, partnership, joint venture or other entity;
p. redeemed, purchased or otherwise acquired,
or sold, granted or otherwise disposed of, directly or indirectly, any of its
capital stock or securities, or agreed to change the terms and conditions of any
such capital stock, securities or rights;
q. entered into any agreement providing for
total payments in excess of $5,000 in any twelve (12) month period with any
person or group, or modified or amended in any material respect the terms of any
such existing agreement, except in the ordinary course of business;
r. entered into, adopted or amended any
Employee Benefit Plan, except as contemplated hereby or the other agreements
contemplated hereby; or
s. entered into any other commitment or
transaction or experienced any other event that would materially interfere with
its performance under this Agreement or any other agreement or document executed
or to be executed pursuant to this Agreement, or otherwise has, individually or
in the aggregate, resulted in a Material Adverse Effect.
3.11. Title; Leased Assets.
a. Real Property. The Company does not own any
interest (other than leasehold interests referred to on Schedule 3.11(c)) in
real property. The leased real property referred to on Schedule 3.11(c)
constitutes the only real property necessary for the conduct of the Company's
business.
b. Personal Property. Except as set forth on
Schedule 3.11(b), the Company and/or the Shareholder has good, valid and
marketable title to all the personal property constituting the Non-optical
Assets. The personal property constituting the Non-optical Assets constitute the
only personal property necessary for the conduct of the Company's business
(except for the Optical Assets). Upon consummation of the transactions
contemplated hereby, such interest in the Non-optical Assets shall be free and
clear of all security interests, liens, claims and encumbrances, other than
those set forth on Schedule 3.11(b) (the "Permitted Encumbrances") and statutory
liens arising in the ordinary course of business or other liens that do not
materially detract from the value or interfere with the use of such properties
or assets.
c. Leases. A list and brief description of (i)
all leases of real property and (ii) leases of personal property involving
rental payments within any twelve (12) month period in excess of $12,000, in
either case to which the Company is a party, either as
18
<PAGE> 27
lessor or lessee, are set forth on Schedule 3.11(c). All such leases are valid
and, to the knowledge of the Company, enforceable in accordance with their
respective terms except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or the availability of
equitable remedies.
3.12. Commitments.
a. Commitments; Defaults. Except as set forth
on Schedule 3.12 or as otherwise disclosed pursuant to this Agreement, the
Company is not a party to nor bound by, nor are the Non-optical Assets or the
business of the Company bound by, whether or not in writing, any of the
following (collectively, "Commitments"):
i) partnership or joint venture
agreement;
ii) guaranty or suretyship,
indemnification or contribution agreement or performance bond;
iii) debt instrument, loan agreement or
other obligation relating to indebtedness for borrowed money or money lent or to
be lent to another;
iv) contract to purchase real property;
v) agreement with dealers or sales or
commission agents, public relations or advertising agencies, accountants or
attorneys (other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any twelve (12) month
period in excess of $2,000 and which is not terminable on thirty (30) days'
notice or without penalty;
vi) agreement relating to any material
matter or transaction in which an interest is held by a person or entity that is
an Affiliate of the Company or the Shareholder;
vii) agreement for the acquisition of
services, supplies, equipment, inventory, fixtures or other property involving
more than $2,000 in the aggregate;
viii) powers of attorney;
ix) contracts containing
non-competition covenants;
x) agreement providing for the
purchase from a supplier of all substantially all of the requirements of the
Company of a particular product or services;
xi) agreements with Payors and
contracts to provide optical services and products; or
19
<PAGE> 28
xii) any other agreement or commitment
not made in the ordinary course of business or that is material to the business,
operations, condition (financial or otherwise) or results of operations of the
Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Vision 21. Except as set forth on Schedule 3.12
and to the Company's best knowledge, there are no existing or asserted defaults,
events of default or events, occurrences, acts or omissions that, with the
giving of notice or lapse of time or both, would constitute defaults by the
Company or, to the best knowledge of the Company, any other party to a material
Commitment, and no penalties have been incurred nor are amendments pending, with
respect to the material Commitments, except as described on Schedule 3.12. The
Commitments are in full force and effect and are valid and enforceable
obligations of the Company, and to the best knowledge of the Company, are valid
and enforceable obligations of the other parties thereto, in accordance with
their respective terms, and no defenses, off-sets or counterclaims have been
asserted or, to the best knowledge of the Company, may be made by any party
thereto (other than the Company), nor has the Company waived any rights
thereunder, except as described on Schedule 3.12. Except as set forth on
Schedule 3.12, no consents or approvals are required under the terms of any
agreement listed on Schedule 3.12 in connection with the transactions
contemplated herein, including, without limitation, the transfer of any such
agreement pursuant to this Agreement.
b. No Cancellation or Termination of
Commitment. Except as disclosed pursuant to this Agreement or contemplated
hereby and except where such default would not have a Material Adverse Effect
on the Practice, (i) neither the Company nor the Shareholder has received
notice of any plan or intention of any other party to any Commitment to
exercise any right to cancel or terminate any Commitment, and the Company does
not know of any fact that would justify the exercise of such a right; and (ii)
neither the Company nor the Shareholder currently contemplates, or has reason
to believe any other person currently contemplates, any amendment or change to
any Commitment.
3.13. Insurance. The Company carries property, liability,
malpractice, workers' compensation and such other types of insurance pursuant to
the insurance policies listed and briefly described on Section 3.13 (the
"Insurance Policies"). The Insurance Policies are all of the insurance policies
of the Company relating to the business of the Company and the Non-optical
Assets. All of the Insurance Policies are issued by insurers of recognized
responsibility, and, to the best knowledge of the Company, are valid and
enforceable policies, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. Except as set forth in Schedule 3.13, no
consent or approval is required for, and no other impediment or restriction
exists that will prohibit or limit, the transfer of any such Insurance Policies
included within the Non-optical Assets in accordance with the terms of this
Agreement. All Insurance Policies shall be maintained in force without
interruption up to and including the Closing Date. True, complete and correct
copies of all Insurance Policies have been provided or made available to Vision
21.
20
<PAGE> 29
Except as set forth on Schedule 3.13, neither the Company nor the Shareholder
has received any notice or other communication from any issuer of any Insurance
Policy cancelling such policy, materially increasing any deductibles or retained
amounts thereunder, and to the actual knowledge of the Company, no such
cancellation or increase of deductibles, retainages or premiums is threatened.
Except as set forth on Schedule 3.13, the Company does not have any outstanding
claims, settlements or premiums owed against any Insurance Policy, and the
Company has given all notices or has presented all potential or actual claims
under any Insurance Policy in due and timely fashion. Schedule 3.13 also sets
forth a list of all claims under any Insurance Policy in excess of $10,000 per
occurrence filed by the Company since January 1, 1994.
3.14. Proprietary Rights and Information. Set forth on
Schedule 3.14 is a true and correct description of the following ("Proprietary
Rights"):
a. all trademarks, trade-names, service marks
and other trade designations, including common law rights, registrations and
applications therefor, and all patents and applications therefor currently
owned, in whole or in part, by the Company, and all licenses, royalties,
assignments and other similar agreements relating to the foregoing to which the
Company is a party (including the expiration date thereof if applicable); and
b. all agreements relating to technology,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other organizations engaged in Optical Business), or which it licenses or
authorizes others to use.
The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, such ownership or use does not conflict, infringe
or violate the rights of any other person. Except as disclosed on Schedule 3.14,
no consent of any person will be required for the use thereof by Vision 21 upon
consummation of the transactions contemplated hereby and the Proprietary Rights
are freely transferable. No claim has been asserted by any person to the
ownership of or for infringement by the Company of the proprietary right of any
other person, and the Company does not know of any valid basis for any such
claim. To the best knowledge of the Company and the Shareholder, the Company has
the right to use, free and clear of any adverse claims or rights of others, all
trade secrets, customer lists and proprietary information required for the
marketing of all merchandise and services formerly or presently sold or marketed
by it.
3.15. Taxes.
a. Filing of Tax Returns. The Company has duly
and timely filed (in accordance with any extensions duly granted by the
appropriate governmental agency, if applicable) with the appropriate
governmental agencies all federal, state, local or foreign income, excise,
corporate, franchise, property, sales, use, payroll, withholding, provider,
value added and other tax returns and reports (collectively the "Tax Returns")
required to be filed by
21
<PAGE> 30
the United States or any state or any political subdivision thereof or any
foreign jurisdiction. All such Tax Returns or reports are complete and accurate
in all material respects and properly reflect the taxes of the Company for the
periods covered thereby.
b. Payment of Taxes. Except for such items as the
Company may be disputing in good faith by proceedings in compliance with
applicable law, which are described on Schedule 3.15, (i) the Company has paid
all taxes, penalties, assessments and interest that have become due with respect
to any Tax Returns that it has filed and has properly accrued on its books and
records for all of the same that have not yet become due, and (ii) the Company
is not delinquent in the payment of any tax, assessment or governmental charge.
c. No Pending Deficiencies, Delinquencies, Assessments
or Audits. Except as set forth on Schedule 3.15, the Company has not received
any notice that any tax deficiency or delinquency has been asserted against the
Company. There is no unpaid assessment, proposal for additional taxes,
deficiency or delinquency in the payment of any of the taxes of the Company that
could be asserted by any taxing authority. There is no taxing authority audit of
the Company pending, or to the actual knowledge of the Company, threatened, and
the results of any completed audits are properly reflected in the Financial
Statements. The Company has not, to its best knowledge, violated any federal,
state, local or foreign tax law.
d. No Extension of Limitation Period. The Company has
not granted an extension to any taxing authority of the limitation period during
which any tax liability may be assessed or collected.
e. All Withholding Requirements Satisfied. All monies
required to be withheld by the Company and paid to governmental agencies for all
income, social security, unemployment insurance, sales, excise, use, and other
taxes have been collected or withheld and paid to the respective governmental
agencies.
f. Foreign Person. Neither the Company nor the
Shareholder is a foreign person, as such term is referred to in Section
1445(f)(3) of the Code.
3.16. Compliance with Laws. The Company has complied with all
applicable laws, regulations and licensing requirements relating to the
operation of the Company and has filed with the proper authorities all necessary
statements and reports, except where the failure to so comply or file would not,
individually or in the aggregate, result in a Material Adverse Effect. There are
no existing violations by the Company of any federal, state or local law or
regulation that could, individually or in the aggregate, result in a Material
Adverse Effect. The Company possesses all necessary licenses, franchises,
permits and governmental authorizations for the conduct of the Company's
business as now conducted, all of which are listed (with expiration dates, if
applicable) on Schedule 3.16. Except as set forth on Schedule 3.16, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government authorizations,
except for any such default, breach or
22
<PAGE> 31
violation that would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth on Schedule 3.16, since January 1, 1993, the
Company has not received any notice from any federal, state or other
governmental authority or agency having jurisdiction over its properties or
activities, or any insurance or inspection body, that its operations or any of
its properties, facilities, equipment, or business practices fail to comply with
any applicable law, ordinance, regulation, building or zoning law, or
requirement of any public or quasi-public authority or body, except where
failure to so comply would not, individually or in the aggregate, have a
Material Adverse Effect.
3.17. Finder's Fee. Except as set forth on Schedule 3.17, the
Company has not incurred any obligation for any finder's, brokers or agent's fee
in connection with the transactions contemplated hereby.
3.18. Litigation. Except as described on Schedule 3.18 or otherwise
disclosed pursuant to this Agreement, there are no legal actions or
administrative proceedings or investigations instituted, to the actual knowledge
of the Company or the Shareholder, which affect or could affect the Non-optical
Assets or the operation, business, condition (financial or otherwise), or
results of operations of the Company which (i) if successful could, individually
or in the aggregate, have a Material Adverse Effect or (ii) could adversely
affect the ability of the Company or the Shareholder to effect the transactions
contemplated hereby. Neither the Company nor the Shareholder is (a) subject to
any continuing court or administrative order, judgment, writ, injunction or
decree applicable specifically to the Non-optical Assets, the Company or to its
business, assets, operations or employees or (b) in default with respect to any
such order, judgment, writ, injunction or decree. The Company has no knowledge
of any valid basis for any such action, proceeding or investigation. Except as
set forth on Schedule 3.18, all medical malpractice claims asserted, general
liability incidents and incident reports have been submitted to the Company's
insurer therefor. All claims made or threatened against the Company in excess of
its deductible are covered under its Insurance Policies.
3.19. Condition of Fixed Assets. All of the fixtures, structures and
equipment reflected in the Financial Statements and used by the Company in its
business, are in good condition and repair, subject to normal wear and tear, and
conform in all material respects with all applicable ordinances, regulations and
other laws, and the Company has no actual knowledge of any latent defects
therein.
3.20. Distributions and Repurchases. No distribution, payment or
dividend of any kind has been declared or paid by the Company on any of its
capital stock since the Company Balance Sheet Date. No repurchase of any of the
Company's capital stock has been approved, effected or is pending, or is
contemplated by the Board of Directors of the Company.
3.21. Banking Relations. Set forth on Schedule 3.21 is a complete
and accurate list of all borrowing and investing arrangements that the Company
has with any bank or other financial institution, indicating with respect to
each relationship the type of arrangement
23
<PAGE> 32
maintained (such as checking account, borrowing arrangements, safe deposit box,
etc.) and the person or persons authorized in respect thereof.
3.22. Ownership Interests of Interested Persons; Affiliations.
Except as set forth on Schedule 3.22, no officer, supervisory employee or
director of the Company, or their respective spouses, children or Affiliates,
owns directly or indirectly, on an individual or joint basis, any interest in,
has a compensation or other financial arrangement with, or serves as an officer
or director of, any customer or supplier of the Company or any organization that
has a material contract or arrangement with the Company. Except as may be
disclosed pursuant to this Agreement, neither the Company, nor any of its
directors, officers, employees or consultants, nor any Affiliate of such person
is, or within the last three (3) years was, a party to any contract, lease,
agreement or arrangement, including, but not limited to, any joint venture or
consulting agreement with any physician, hospital, pharmacy, home health agency,
organization engaged in Optical Business, or other person which is in a position
to make or influence referrals to, or otherwise generate business for, the
Company.
3.23. Investments in Competitors. Except as disclosed on Schedule
3.23, neither the Company nor the Shareholder owns directly or indirectly any
interests or has any investment in any person that is a Competitor of the
Company.
3.24. Environmental Matters.
a. Environmental Laws. To the best knowledge of the
Company and the Shareholder, neither the Company nor any of the Non-optical
Assets (including the leased real property described on Schedule 3.11(c)) are
currently in violation of, or subject to any existing, pending or, to the actual
knowledge of the Company threatened, investigation or inquiry by any
governmental authority or to any remedial obligations under, any federal, state
or local laws or regulations pertaining to health or the environment
("Environmental Laws"), except for any such violations, investigations or
inquiries that would not, individually or in the aggregate, result in a Material
Adverse Effect.
b. Permits. The Company is not required to obtain, and
has no knowledge of any reason Vision 21 will be required to obtain, any
permits, licenses or similar authorizations to occupy, operate or use any
buildings, improvements, fixtures and equipment owned or leased by the Company
by reason of any Environmental Laws.
c. Superfund List. To the best knowledge of the Company,
none of the Non-optical Assets (including the Company's leased real property
described on Schedule 3.11(c)) are on any federal or state "Superfund" list or
subject to any environmentally related liens, except such liens as would not,
individually or in the aggregate, result in a Material Adverse Effect.
24
<PAGE> 33
3.25. Certain Payments. Neither the Company nor any director,
officer or employee of the Company acting for or on behalf of the Company, has
paid or caused to be paid, directly or indirectly, in connection with the
business of the Company:
a. to any government or agency thereof or any agent of
any supplier or customer any bribe, kick-back or other similar payment; or
b. any contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).
3.26. Medicare and Medicaid Programs. The Company is qualified for
participation in the Medicare and Medicare programs and is party to agreements
for such programs which are in full force and effect with no events of default
having occurred thereunder. The Company has timely filed all claims or other
reports required to be filed prior to the Closing Date with respect to the
purchase of services by third-party payors ("Payors"), including but not limited
to Medicare and Medicaid programs, except where the failure to file would not,
individually or in the aggregate, result in a Material Adverse Effect. All such
claims or reports are complete and accurate in all material respects. The
Company and the Shareholder have paid or have properly recorded on the Financial
Statements all actually known and undisputed refunds, discounts or adjustments
which have become due pursuant to such claims, and neither the Company nor the
Shareholder has any material liability to any Payor with respect thereto, except
as has been reserved for in the Company Balance Sheet. There are no pending
appeals, overpayment determinations, adjustments, challenges, audits,
litigation, or notices of intent to reopen Medicare and/or Medicaid claims
determinations or other reports required to be filed by the Company in order to
be paid by a Payor for optical services rendered or optical products sold.
Neither the Company, nor any of its directors, officers, employees, consultants
or the Shareholder has been convicted of, or pled guilty or nolo contendere to,
patient abuse or neglect, or any other Medicare or Medicaid program-related
offense. Neither the Company, nor its directors, officers, the Shareholder, or
to the best of the Company's knowledge, its employees or consultants, has
committed any offense which may serve as the basis for suspension or exclusion
from the Medicare and Medicaid programs, including but not limited to,
defrauding a government program, loss of a license to provide optical services
and sell optical products, and failure to provide quality care or products.
3.27. Fraud and Abuse. To the best knowledge of the Company and the
Shareholder, the Company, and its officers and directors have not engaged in any
activities which are prohibited under 42 U.S.C. ss.ss. 1320-7, 7a or 7b or 42
U.S.C. ss.1395nn (subject to the exceptions set forth in such legislation), or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following:
a. knowingly and willfully making or causing to be made
a false statement or representation of a material fact in any application for
any benefit or payment;
25
<PAGE> 34
b. knowingly and willfully making or causing to be made
a false statement or representation of a material fact for use in determining
rights to any benefit or payment;
c. failure to disclose knowledge by a Medicare or
Medicaid claimant of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on behalf of
another, with intent to fraudulently secure such benefit or payment;
d. knowingly and willfully offering, paying, soliciting
or receiving any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (i) in return
for referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or (ii) in return for purchasing, leasing, or
ordering, or arranging for or recommending purchasing, leasing, or ordering any
good, facility, service, or item for which payment may be made in whole or in
part by Medicare or Medicaid; and
e. referring a customer for designated optical services
(as defined in 42 U.S.C. ss.1395nn) to or providing designated optical services
to a customer upon a referral from an entity or person with which the
Shareholder or an immediate family member has a financial relationship, and to
which no exception under 42 U.S.C. ss.1395nn applies.
3.28. Payors. Schedule 3.28 sets forth a true, correct and complete
list of the names and addresses of each Payor of the Company's services which
accounted for more than 10% of the revenues of the Company in the three (3)
previous fiscal years. Except as set forth on Schedule 3.28, the Company has
good relations with such Payors and none of such Payors has notified the Company
that it intends to discontinue its relationship with the Company or to deny any
claims submitted to such Payor for payment.
3.29. Acquisition Proposals. Except for the negotiations, offers and
agreements with Vision 21 and its representatives, the Company has not received
during the twelve (12) month period preceding the date of this Agreement any
proposal or offer (including, without limitation, any proposal or offer of its
stockholders) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") nor has the Company
or any of its employees, agents, representatives or stockholders engaged in any
negotiations concerning, or provided any confidential information or data to, or
had any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitated any effort or attempted to make or implement an
Acquisition Proposal.
3.30. Consistent Treatment of Expenses. The Company has, in
presenting information concerning the Company's expenses to Vision 21 for the
purpose of determining the
26
<PAGE> 35
Company's value, separated out those expenses which shall be borne by the
Company in a manner which is consistent with the treatment of expenses which
shall be the responsibility of the Company pursuant to the Business Management
Agreement.
3.31. Accounts Receivable/Payable. The Accounts Receivable of the
Company relating to the ownership and operation of the Practice reflected on the
Company Balance Sheet, to the extent uncollected on the date hereof, are, and
the accounts receivable of the Company relating to the ownership and operation
of the Practice to be reflected on the books of the Company on the Closing Date
will be, valid, existing and collectible within six months from the Closing Date
(taking into consideration the allowance for doubtful accounts set forth in the
Financial Statements) using reasonably diligent collection methods taking into
account the size and nature of the receivable, and represent amounts due for
goods sold and delivered or services performed. There are not, and on the date
of Closing there will not be, any refunds, discounts, set-offs, defenses,
counterclaims or other adjustments payable or assessable with respect to the
Accounts Receivable. The Company has collected Accounts Receivable only in the
ordinary course and has not changed collection procedures or methods nor
accelerated the pace of such collection efforts in anticipation of the
transactions contemplated in this Agreement. The Company has paid accounts
payable in the ordinary course and has not changed payment procedures or methods
nor delayed the timing of such payments in anticipation of the transactions
contemplated in this Agreement.
3.32. Projections. There is no fact, development or threatened
development with respect to the markets, products, services, clients, patients,
facilities, personnel, vendors, suppliers, operations, assets or prospects of
the Practice which are known to the Company or the Shareholder which would
materially adversely affect the projected fiscal year 1997 earnings of the
Company disclosed to Vision 21 by Shareholder, other than such conditions as may
affect as a whole the economy or the optical industry generally.
3.33. Tangible Personal Property. Except as set forth on Schedule
3.33, the Company's Tangible Personal Property is in good operating condition,
working order and repair (normal wear and tear excepted) and is fully suitable
for the uses for which it is employed in the conduct of the Practice.
3.34. Leases. With respect to each of the Real Property Leases and
Personal Property Leases, except as set forth on Schedule 3.34:
(a) such lease is legal, valid, binding, enforceable and in full
force and effect;
(b) such lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing;
27
<PAGE> 36
(c) no party to such lease is in material breach or
default, and no event has occurred that, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification or
acceleration thereunder;
(d) no party to such lease has repudiated in writing any
provision thereof;
(e) there are no disputes, oral agreements or forbearance
programs in effect as to such lease; and
(f) The Company has performed and satisfied in full each
material obligation to be performed by the Company under such lease.
3.35. Contract Rights. Except as set forth on Schedule
3.35, each of the Assumed Contracts is valid and enforceable and is in full
force and effect, and there is no material default or existing condition that,
with the giving of notice or the passage of time, would constitute such a
default by any parties thereto. The Company has performed and satisfied in full
each material obligation required to be performed by the Company under each
Assumed Contracts. If services are to be provided to the Company under any of
such Assumed Contracts, such services have been and are being performed
satisfactorily and in a timely manner, substantially in accordance with the
terms of such Assumed Contract.
3.36. Prepaid Items. Each of the Prepaid Items may be
transferred to Vision 21 without the necessity of obtaining any consent or
approval.
3.37. Completeness of Assets. The Non-optical Assets
together with the Optical Assets, include all the properties used to conduct the
business of the Company as presently conducted.
3.38. Disclosure. To the best of the Company's and the
Shareholder's knowledge, no representation, warranty or statement made by the
Company or the Shareholder in this Agreement or any of the exhibits or schedules
hereto, or any agreements, certificates, documents or instruments delivered or
to be delivered to Vision 21 in accordance with this Agreement or the other
documents contemplated herein, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company and the Shareholder do not
know of any fact or condition (other than general economic conditions or
legislative or administrative changes in health-care delivery) which materially
adversely affects, or in the future may materially affect, the condition,
properties, assets, liabilities, business, operations or prospects of the
Company which has not been set forth herein or in the Schedules provided
herewith.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder represents and warrants to Vision 21 that the following are true and
correct as of the date hereof, and shall be true and correct through the Closing
Date as if made on that date:
28
<PAGE> 37
4.1. Validity; Shareholder Capacity. This Agreement and
each other agreement contemplated hereby or thereby have been, or will be as of
the Closing Date, duly executed and delivered by the Shareholder and constitute
or will constitute legal, valid and binding obligations of the Shareholder,
enforceable against the Shareholder in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable remedies.
The Shareholder has legal capacity to enter into and perform this Agreement.
4.2. No Violation. Except as set forth on Schedule 4.2,
neither the execution, delivery or performance of this Agreement, other
agreements of the Shareholder contemplated hereby or thereby, nor the
consummation of the transactions contemplated hereby or thereby, will (a)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, indenture or other
instrument under which the Shareholder is bound or to which any of his property
or the shares of common stock of the Company are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon any of his property or the shares of common stock of the Company or (b) to
the best knowledge of the Shareholder, violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body.
4.3. Consents. Except as may be required under the
Exchange Act, the Securities Act, the Corporation Law and state securities laws,
or otherwise disclosed pursuant to this Agreement, no consent, authorization,
approval, permit or license of, or filing with, any governmental or public body
or authority, or any other person is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of the Shareholder.
4.4. Certain Payments. The Shareholder has not paid or
caused to be paid, directly or indirectly, in connection with the business of
the Company:
a. to any government or agency thereof or any
agent of any supplier or customer any bribe, kick-back or other similar payment;
or
b. any contribution to any political party or
candidate (other than from personal funds not reimbursed by the Company or as
otherwise permitted by applicable law).
4.5. Finder's Fee. Except as set forth on Schedule 4.5,
the Shareholder has not incurred any obligation for any finder's, broker's or
agent's fee in connection with the transactions contemplated hereby.
4.6. Ownership of Interested Persons; Affiliations. Except
as set forth on Schedule 4.6, neither the Shareholder nor his spouse, children
or Affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial
29
<PAGE> 38
arrangement with, or serves as an officer or director of, any customer or
supplier of the Company or any organization that has a material contact or
arrangement with the Company. Neither the Shareholder nor any of his Affiliates
is, or with the last three (3) years was, a party to any contract, lease,
agreement or arrangement, including, but not limited to, any joint venture or
consulting agreement with any physician, hospital, pharmacy, home health agency,
organization engaged in Optical Business or other person which is in a position
to make or influence referrals to, or otherwise generate business for, the
Company.
4.7. Investments in Competitors. Except as disclosed on
Schedule 4.7, the Shareholder does not own directly or indirectly any interests
or have any investment in any person that is a Competitor of the Company.
5. REPRESENTATIONS AND WARRANTIES OF VISION 21. Vision 21
represents and warrants to the Company and the Shareholder that the following
are true and correct as of the date hereof and shall be true and correct as of
the Closing Date; when used in this Section 5, the term "best knowledge" shall
mean the best knowledge of those individuals listed on Schedule 5:
5.1. Organization and Good Standing. Vision 21 is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, with all requisite corporation power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. At or prior to Closing, Vision 21 will be qualified to do
business as a foreign corporation in the jurisdictions listed on Schedule 5.1.
5.2. Capitalization. The authorized capital stock of
Vision 21 consists of 50,000,000 shares of Vision 21 Common Stock, of which
5,465,673 shares are issued and outstanding. Immediately prior to the Closing,
the authorized capital stock of Vision 21 will consist of 50,000,000 shares of
Vision 21 Common Stock, of which 5,465,673 shares will be issued and
outstanding.
5.3. Corporate Records. The copies of the Articles of
Incorporation and Bylaws, and all amendments thereto, of Vision 21 that have
been delivered or made available to the Company and the Shareholder are true,
correct and complete copies thereof, as in effect on the date hereof. The minute
books of Vision 21, copies of which have been delivered or made available to the
Company and the Shareholder, contain accurate minutes of all meetings of, and
accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the stockholders of Vision 21, since
its formation.
5.4. Authorization and Validity. The execution, delivery
and performance by Vision 21 of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Vision 21. This Agreement and
each other agreement contemplated hereby to be executed by Vision 21 have been
or will be as of the Closing Date duly executed and delivered by Vision
30
<PAGE> 39
21 and constitute or will constitute legal, valid and binding obligations of
Vision 21, enforceable against Vision 21 in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
5.5. Compliance. The execution and delivery of the
documents contemplated hereunder and the consummation of the transactions
contemplated thereby by Vision 21 shall not (i) violate any provision of Vision
21's organizational documents, (ii) violate any material provision of or result
in the breach of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any material obligation under, any mortgage,
lien, lease, contract, license, instrument or any other agreement to which
Vision 21 is a party, (iii) result in the creation or imposition of any material
lien, charge, pledge, security interest or other material encumbrance upon any
property of Vision 21 or (iv) violate or conflict with any order, award,
judgment or decree or other material restriction or to the best of Vision 21's
knowledge violate or conflict with any law, ordinance or regulation to which
Vision 21 or its property is subject.
5.6. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by Vision 21 or the consummation
by such party of the transactions contemplated thereby, except for those
consents or approvals set forth on Schedule 5.6.
5.7. Finder's Fee. Except as disclosed on Schedule 5.7,
Vision 21 has not incurred any obligation for any finder's, broker's or agent's
fee in connection with the transactions contemplated hereby.
5.8. Capital Stock. The issuance and delivery by Vision 21
of shares of Vision 21 Common Stock in connection with the Note have been duly
and validly authorized by all necessary corporate action on the part of Vision
21. The shares of Vision 21 Common Stock to be issued in connection with the
Note, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable and will not have been issued in
violation of any preemptive rights, rights of first refusal or similar rights of
any of Vision 21's stockholders, or any federal or state law, including, without
limitation, the registration requirements of applicable federal and state
securities laws.
5.9. Vision 21 Financial Statements; Confidential
Information Memorandum. The balance sheet of Vision 21 as of September 30, 1996
and the related statements of income of Vision 21 for the first nine (9) months
of Vision 21's 1996 fiscal year, without giving effect to the Related
Acquisitions, including the costs incurred during such fiscal year associated
with any Registration Statement, shall be contained in the Confidential
Information Memorandum to be provided to the Shareholder and the Company by
Vision 21 prior to the Closing (collectively, with the related notes thereto,
the "Vision 21 Financial Statements"). The Vision 21 Financial Statements (a)
fairly present the financial condition and
31
<PAGE> 40
results of operations of Vision 21, without giving effect to the Related
Acquisitions, as of the dates and for the periods indicated; and (b) have been
prepared in conformity with GAAP (subject to normal year-end adjustments and the
absence of notes for any unaudited interim financial statement), except as
otherwise indicated in the Vision 21 Financial Statements. Subject to the
foregoing and the other qualifications contained elsewhere in this Agreement, to
the best knowledge of Vision 21, the Confidential Information Memorandum, as
amended on December 17, 1996, is true and correct in all material respects.
5.10. Liabilities and Obligations. Except as disclosed on
Schedule 5.10, the Vision 21 Financial Statements shall reflect all material
liabilities of Vision 21, accrued, contingent or otherwise, that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with GAAP. Except as set forth on Schedule 5.10 or in the Vision
21 Financial Statements, Vision 21 is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
Vision 21 does not know of any valid basis for the assertion of any other claims
or liabilities of any nature or in any amount.
5.11. Compliance with Laws. Vision 21 has not failed to
comply with any applicable laws, regulations and licensing requirements or
failed to file with the proper authorities any necessary statements and reports
except where the failure to so comply or file would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no existing violations
by Vision 21 of any federal, state or local law or regulation that could,
individually or in the aggregate, result in a Material Adverse Effect. Vision 21
possesses all necessary licenses, franchises, permits and governmental
authorizations for the conduct of Vision 21's business as now conducted and
after the Closing, as contemplated in this Agreement. The transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded by any such
licenses, franchises, permits or government authorizations, except for any such
default, breach or violation that would not, individually or in the aggregate,
have a Material Adverse Effect. Since January 1, 1993, Vision 21 has not
received any notice from any federal, state or other governmental authority or
agency having jurisdiction over its properties or activities, or any insurance
or inspection body, that its operations or any of its properties, facilities,
equipment, or business practices fail to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public or
quasi-public authority or body, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
5.12. Insolvency Proceedings. Vision 21 is not currently
under the jurisdiction of a Federal or state court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
5.13. Employment of Company's Employees. Vision 21 does not
currently intend to change the existing composition or employment terms of any
of the non-professional personnel which have employment arrangements with the
Company on the effective date of this
32
<PAGE> 41
Agreement (except as is necessary for Vision 21 to employ such individuals
pursuant to the Business Management Agreement). Vision 21 reserves the right,
however, to change the number, composition or employment terms of such
non-professional personnel in the future.
6. SECURITIES LAW MATTERS.
6.1. Investment Representations and Covenants of
Shareholder.
a. Shareholder understands that the Securities
will not be registered under the Securities Act or any state securities laws on
the grounds that the issuance of the Securities is exempt from registration
pursuant to Section 4(2) of the Securities Act under the Securities Act and
applicable state securities laws, and that the reliance of Vision 21 on such
exemptions is predicated in part on the Shareholder's representations,
warranties, covenants and acknowledgements set forth in this Section.
b. Except as disclosed on Schedule 6.1(b)
attached hereto, Shareholder represents and warrants that Shareholder is an
"accredited investor" or "sophisticated investor" as defined under the
Securities Act and state "Blue Sky" laws, or that Shareholder has utilized, to
the extent necessary to be deemed a sophisticated investor under the Securities
Act and State "Blue Sky" laws, the assistance of a professional advisor.
c. Shareholder represents and warrants that the
Securities to be acquired by Shareholder upon consummation of the transactions
described in this Agreement will be acquired by Shareholder for Shareholder's
own account, not as a nominee or agent, and without a view to resale or other
distribution within the meaning of the Securities Act and the rules and
regulations thereunder, except as contemplated in this Agreement, and that
Shareholder will not distribute any of the Securities in violation of the
Securities Act. All Securities shall bear a restrictive legend in substantially
the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAWS."
In addition, the Securities shall bear any legend required by the
securities or "Blue Sky" laws of any state where Shareholder resides as well as
any other legend deemed appropriate by Vision 21 or its counsel.
d. Shareholder represents and warrants that the
address set forth below Shareholder's name on Schedule 6.1(d) is Shareholder's
principal residence.
e. Shareholder (i) acknowledges that the
Securities issued to Shareholder at the Closing must be held indefinitely by
Shareholder unless subsequently
33
<PAGE> 42
registered under the Securities Act or an exemption from registration is
available, (ii) is aware that any routine sales of Securities made pursuant to
Rule 144 under the Securities Act may be made only in limited amounts and in
accordance with the terms and conditions of that Rule and that in such cases
where the Rule is not applicable, compliance with some other registration
exemption will be required, (iii) is aware that Rule 144 is not currently
available for use by Shareholder for resale of any of the Securities to be
acquired by Shareholder upon consummation of the transactions described in this
Agreement, and (iv) acknowledges and agrees that the transfer of the Securities
shall be further restricted by the "lock-up" provisions contained in the
Registration Rights Agreement in the form of Exhibit 14(e), whereby Shareholder
shall be treated as an "affiliate" of Vision 21 under Rule 144.
f. Shareholder represents and warrants to
Vision 21 that Shareholder, either alone or together with the assistance of
Shareholder's own professional advisor, has such knowledge and experience in
financial and business matters such that Shareholder is capable of evaluating
the merits and risks of Shareholder's investment in any of the Securities to be
acquired by Shareholder upon consummation of the transactions described in this
Agreement.
g. Shareholder confirms that Shareholder has
received and read the Confidential Information Memorandum of Vision 21 dated
September 27, 1996 and the December 17, 1996 Supplement thereto. Shareholder
also confirms that Shareholder has had the opportunity to ask questions of and
receive answers from Vision 21 concerning the terms and conditions of
Shareholder's investment in the Securities, and the Shareholder has received to
Shareholder's satisfaction, such additional information, in addition to that set
forth herein, about Vision 21's operations and the terms and conditions of the
offering as Shareholder has requested.
h. In order to ensure compliance with the
provisions of paragraph (c) hereof, Shareholder agrees that after the Closing
Shareholder will not sell or otherwise transfer or dispose of Securities or any
interest therein (unless such shares have been registered under the Securities
Act) without first complying with either of the following conditions, the
expenses and costs of satisfaction of which shall be fully borne and paid for by
Shareholder:
i) Vision 21 shall have received a
written legal opinion from legal counsel, which opinion and counsel shall be
satisfactory to Vision 21 in the exercise of its reasonable judgment, or a copy
of a "no-action" or interpretive letter of the Securities and Exchange
Commission specifying the nature and circumstances of the proposed transfer and
indicating that the proposed transfer will not be in violation of any of the
registration provisions of the Securities Act and the rules and regulations
promulgated thereunder; or
ii) Vision 21 shall have received an
opinion from its own counsel to the effect that the proposed transfer will not
be in violation of any of the registration provisions of the Securities Act and
the rules and regulations promulgated thereunder.
34
<PAGE> 43
Shareholder also agrees that the certificates or instruments representing the
Securities to be issued to Shareholder pursuant to this Agreement may contain a
restrictive legend noting the restrictions on transfer described in this Section
and required by federal and applicable state securities laws, and that
appropriate "stop-transfer" instructions will be given to Vision 21's transfer
agent, if any, provided that this Section 6.1(h) shall no longer be applicable
to any Securities following their transfer pursuant to a registration statement
effective under the Securities Act or in compliance with Rule 144 or if the
opinion of counsel referred to above is to the further effect that transfer
restrictions and the legend referred to herein are no longer required in order
to establish compliance with any provisions of the Securities Act.
i. Shareholder understands that although an
Initial Public Offering is contemplated by Vision 21, there are no assurances
that an Initial Public Offering will occur or if it does occur that it will be
successful.
j. Shareholder agrees that he shall be
considered an "affiliate" of Vision 21 for purposes of Rule 144 and agrees to
the restrictions and limitations imposed by Rule 144 on affiliates. Shareholder
further agrees that he shall be considered an affiliate of Vision 21 for Rule
144 purposes even if he does not meet the technical definition of "affiliate"
under Rule 144.
6.2. Current Public Information. At all times following
the registration of any of Vision 21's securities under the Securities Act or
Exchange Act pursuant to which Vision 21 becomes subject to the reporting
requirements of the Exchange Act, Vision 21 shall use commercially reasonable
efforts to comply with the requirements of Rule 144 under the Securities Act, as
such Rule may be amended from time to time (or any similar rule or regulation
hereafter adopted by the SEC) regarding the availability of current public
information to the extent required to enable any holder of shares of Common
Stock to sell such shares without registration under the Securities Act pursuant
to Rule 144 (or any similar rule or regulation).
7. COVENANTS OF THE COMPANY, THE SHAREHOLDER AND NEW P.C. The
Company, the Shareholder, and New P.C., jointly and severally, agree that
between the date hereof and the Closing (with respect to the Company's and New
P.C.'s covenants, the Shareholder agrees to use his best efforts to cause the
Company and New P.C. to perform):
7.1. Consummation of Agreement. The Company, the
Shareholder and New P.C. shall use their best efforts to cause the consummation
of the transactions contemplated hereby in accordance with their terms and
conditions; provided, however, that this covenant shall not require the Company,
the Shareholder or New P.C. to make any expenditures that are not expressly set
forth in this Agreement or otherwise contemplated herein.
7.2. Business Operations. The Company shall operate its
business in the ordinary course. The Company and the Shareholder shall use their
best efforts to preserve the
35
<PAGE> 44
business of the Company intact. None of the Company, the Shareholder or New P.C.
shall take any action that would, individually or in the aggregate, result in a
Material Adverse Effect.
7.3. Access. The Company and the Shareholder shall, at
reasonable times during normal business hours and on reasonable notice, permit
Vision 21 and its authorized representatives, including without limitation, the
Accountants, reasonable access to, and make available for inspection, all of the
assets and business of the Company, including its employees, customers and
suppliers, and permit Vision 21 and its authorized representatives to inspect
and, at Vision 21's sole cost and expense, make copies of all documents, records
and information with respect to the affairs of the Company, including, without
limitation, the Financial Statements, as Vision 21 and its representatives may
request, all for the sole purpose of permitting Vision 21 to become familiar
with the business and assets and liabilities of the Company.
7.4. Notification of Certain Matters. The Company, the
Shareholder and New P.C. shall promptly inform Vision 21 in writing of (a) any
notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default, received by the
Company, the Shareholder or New P.C. subsequent to the date of this Agreement
and prior to the Closing Date under any Commitment material to the Company's
condition (financial or otherwise), operations, assets, liabilities or business
and to which it is subject; or (b) any material adverse change in the Company's
condition (financial or otherwise), operations, assets, liabilities or business.
7.5. Approvals of Third Parties. As soon as practicable
after the date hereof, the Company, the Shareholder and New P.C. shall secure
all necessary approvals and consents of landlords with respect to the real
property described on Schedule 2.2(d) to the consummation of the transactions
contemplated hereby and shall use their best efforts to secure all necessary
approvals and consents of other third parties to the consummation of the
transactions contemplated hereby; provided, however, that this covenant shall
not require the Company, the Shareholder or New P.C. to make any material
expenditures that are not expressly set forth in this Agreement or otherwise
contemplated herein.
7.6. Employee Matters. Except as set forth in Schedule
3.8(a) or as otherwise contemplated by this Agreement, the Company shall not,
without the prior written approval of Vision 21, except as required by law:
a. increase the cash compensation of the
Shareholder or any other employees of the Company (other than in the ordinary
course of business and consistent with past practice);
b. adopt, amend or terminate any Compensation
Plan;
c. adopt, amend or terminate any Employment
Agreement;
36
<PAGE> 45
d. adopt, amend or terminate any Employee
Policies and Procedures;
e. adopt, amend or terminate any Employee
Benefit Plan;
f. take any action that could deplete the
assets of any Employee Benefit Plan, other than payment of benefits in the
ordinary course to participants and beneficiaries;
g. fail to pay any premium or contribution due
or with respect to any Employee Benefit Plan;
h. fail to file any return or report with
respect to any Employee Benefit Plan;
i. institute, settle or dismiss any employment
litigation except as could not, individually or in the aggregate, result in a
Material Adverse Effect;
j. enter into, modify, amend or terminate any
agreement with any union, labor organization or collective bargaining unit; or
k. take or fail to take any action with respect
to any past or present employee of the Company that would, individually or in
the aggregate, result in a Material Adverse Effect.
7.7. Contracts. Except with Vision 21's prior written
consent, the Company shall not assume or enter into any contract, lease,
license, obligation, indebtedness, commitment, purchase or sale except in the
ordinary course of business that is material to the Company's business, nor will
it waive any material right or cancel any material contract, debt or claim.
7.8. Capital Assets; Payments of Liabilities. The Company
shall not, without the prior written approval of Vision 21 (a) acquire or
dispose of any capital asset having a fair market value of $5,000 or more, or
acquire or dispose of any capital asset outside of the ordinary course of
business or (b) discharge or satisfy any lien or encumbrance or pay or perform
any obligation or liability other than (i) liabilities and obligations reflected
in the Financial Statements or (ii) current liabilities and obligations incurred
in the usual and ordinary course of business since the Company Balance Sheet
Date and, in either case (i) or (ii) above, only as required by the express
terms of the agreement or other instrument pursuant to which the liability or
obligation was incurred.
7.9. Mortgages, Liens and Guaranties. The Company shall
not, without the prior written approval of Vision 21, enter into or assume any
mortgage, pledge, conditional sale or other title retention agreement, permit
any security interest, lien, encumbrance or claim
37
<PAGE> 46
of any kind to attach to any of its assets (other than statutory liens arising
in the ordinary course of business and other liens that do not materially
detract from the value or interfere with the use of such assets), whether now
owned or hereafter acquired, or guarantee or otherwise become contingently
liable for any obligation of another, except obligations arising by reason of
endorsement for collection and other similar transactions in the ordinary course
of business, or make any capital contribution or investment in any person.
7.10. Acquisition Proposals. The Company, the Shareholder
and New P.C. agree that from the date of this Agreement through the earlier of
the Closing Date or January 1, 1997, (a) none of the Shareholder, New P.C. or
the Company nor any of their respective officers and directors shall, and the
Shareholder, New P.C. and the Company shall direct and use their best efforts to
cause the Company's and New P.C.'s respective employees, agents, and
representatives not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any Acquisition Proposal or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) the Shareholder, New P.C. and the Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and each will take the necessary steps to inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.10; and (c) the Shareholder, New P.C.
and the Company will notify Vision 21 immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company, New P.C. or the Shareholder.
7.11. Distributions and Repurchases. No distribution,
payment or dividend of any kind will be declared or paid by the Company with
respect of its capital stock, nor will any repurchase of any of the Company's
capital stock be approved or effected.
7.12. Requirements to Effect the Transaction. The Company,
New P.C. and the Shareholder shall use their best efforts to take, or cause to
be taken, all actions necessary to effect the Transaction under applicable law.
7.13. Shareholder Retained Equity. Except as contemplated
herein, the Company shall not, and the Shareholder shall not permit the Company
to, make payment of all or any portion of any retained equity of the Company at
any time prior to Closing.
7.14. Termination of Retirement Plans. Prior to Closing,
the Shareholder shall cause the Company to take all steps necessary to
discontinue benefits accruals under any Employee Benefit Plan that is intended
to be a qualified employee retirement plan under Section 401(a) of the Code (a
"Retirement Plan") effective as of Closing or as soon thereafter as may be
practical. Effective at the time of closing, the company shall cause New P.C. to
assume all of the obligations of the Company as the sponsoring employer and/or
plan administrator of the Retirement Plan in compliance with applicable law.
38
<PAGE> 47
Subsequent to Closing, the Company and Vision 21 shall review
the extent to which New P.C can resume contributions to the Retirement Plan
without violating the qualification requirements of Sections 410(b) and
401(a)(4) of the Code, taking into account any employees of Vision 21 who would
be "leased employees" of New P.C. under Section 414(n) of the Code. If Vision 21
and New P.C. mutually agree that such qualification requirements can be
satisfied, New P.C. may elect to continue the Retirement Plan and make
contributions in accordance with its terms, provided that New P.C. shall agree
to cover at its own expense any Vision 21 employees who are leased employees if
such coverage is required to maintain the tax-qualified status of the Retirement
Plan.
7.15. Delivery of Schedules. The Company, New P.C. and the
Shareholder shall deliver to Vision 21 all Schedules required to be delivered by
them prior to the Closing.
8. COVENANTS OF VISION 21. Vision 21 agrees that between the date
hereof and the Closing:
8.1. Consummation of Agreement. Vision 21 shall use its
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and conditions and take all corporate and other
actions necessary to approve the Transaction; provided, however, that this
covenant shall not require Vision 21 to make any expenditures that are not
expressly set forth in this Agreement or otherwise contemplated herein.
8.2. Notification of Certain Matters. Vision 21 shall
promptly inform the Company and the Shareholder in writing of (a) any notice of,
or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by Vision 21 subsequent
to the date of this Agreement and prior to the Closing Date under any Vision 21
Commitment material to Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business and to which it is subject; or (b)
any material adverse change in Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business.
8.3. Licenses and Permits. Vision 21 shall use its best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, statute, rule, regulation or ordinance, or otherwise
necessary or desirable to consummate the Transaction and to conduct the intended
business of Vision 21.
8.4. Release of Shareholder From Practice Liabilities.
Vision 21 shall use its best efforts to obtain from third party creditors the
release of Shareholder from any personal liabilities relating to the Practice
which are identified on Schedule 8.4 and assumed by Vision 21 pursuant to the
terms of this Agreement.
9. COVENANTS OF VISION 21, THE COMPANY, NEW P.C. AND THE
SHAREHOLDER. Vision 21, the Company, New P.C. and the Shareholder agree as
follows:
39
<PAGE> 48
9.1. Filings; Other Action.
a. Vision 21, the Company, New P.C. and the
Shareholder shall cooperate to promptly prepare and file at Vision 21's expense
with the SEC, a Registration Statement on Form S-1 (or other appropriate form)
to be filed by Vision 21 in connection with any Initial Public Offering of
Vision 21 (including the prospectus constituting a part thereof, the
"Registration Statement"). Vision 21 shall obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and the Company, New P.C. and the Shareholder
shall furnish all information concerning the Company, New P.C. and the
Shareholder as may be reasonably requested in connection with any such action.
b. Each of the Company, New P.C., the
Shareholder and Vision 21 represents and warrants that none of the information
or documents supplied or to be supplied by it specifically for inclusion in a
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment and supplement thereof, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company, New P.C., the
Shareholder, and Vision 21 shall agree as to the information and documents
supplied by the Company, New P.C. and the Shareholder for inclusion in the
Registration Statement and shall indicate such information and documents in a
letter to be delivered at least ten (10) days prior to the initial filing of the
Registration Statement with the SEC. The Company, New P.C. and the Shareholder
shall be entitled to review the Registration Statement and each amendment
thereto, if any, prior to the time each becomes effective under the Securities
Act.
c. The Shareholder, New P.C. and the Company
shall, upon request, furnish Vision 21 with all information concerning himself,
itself, their respective partners, the Company's or New P.C.'s respective
subsidiaries, directors, officers, and stockholders, and including financial
statements with respect to the same, any consents (and information necessary to
obtain such consents) and such other matters as may be reasonably requested by
Vision 21 in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of the Company's or
New P.C.'s respective subsidiaries to any governmental entity in connection with
the Transaction, any Initial Public Offering and the other transactions
contemplated by this Agreement.
9.2. Amendment of Schedules. Each party hereto agrees
that, with respect to the representations and warranties of such party contained
in this Agreement, such party shall have the continuing obligation until the
Closing to attach, supplement or amend promptly the Schedules with respect to
any matter that would have been or would be required to be set forth or
described in the Schedules in order to not materially breach any representation,
warranty or covenant of such party contained herein; provided that no amendment
or supplement to a
40
<PAGE> 49
Schedule that constitutes or reflects a material adverse change to the Company
or the Non-optical Assets may be made unless Vision 21 consents to such
amendment or supplement, and no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to Vision 21 may be made
unless the Company and the Shareholder consent to such amendment or supplement.
For all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 10.1 and 11.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 9.2. In the event that the Company is
required to amend or supplement a Schedule in accordance with this Section 9.2
and Vision 21 does not consent to such amendment or supplement, or Vision 21 is
required to amend or supplement a Schedule in accordance with this Section 9.2
and the Company and the Shareholder do not consent, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 15.1(d) or Section
15.1(e) as appropriate.
9.3. Fees and Expenses.
a. Vision 21 shall pay all costs of the Audit
of the Company's Financial Statements and financial records by Vision 21's
auditors (or auditors designated by Vision 21's auditors). All items prepared by
Vision 21's auditors in connection with the Audit ("Prepared Audit Materials")
shall be for use solely by Vision 21; provided, however, that the Company may
utilize the Prepared Audit Materials solely in connection with its review of
Vision 21's calculation of the Purchase Price. The Prepared Audit Materials
shall not be deemed to include those items which customarily remain the property
of auditors such as their working papers and memos.
b. In the event the Transaction is not
consummated, the Company and Shareholder shall not be entitled to copies or
originals of the Prepared Audit Materials unless the Company or Shareholder pays
for or reimburses Vision 21 for all expenses of the auditor in connection with
the Audit in advance of receiving the Prepared Audit Materials (either from
Vision 21 or its auditor). For purposes of this Agreement, Audit expenses shall
include all expenses related to the Audit as well as expenses incurred to
present the financial statements in accordance with GAAP and all schedules
related thereto.
c. Each of the Company and Vision 21 shall pay
the costs and expenses of their own legal counsel with respect to legal services
rendered in connection with the preparation and negotiation of this Agreement
and the transactions contemplated hereby.
d. In the event that an Initial Public Offering
does not take place for any reason whatsoever, Vision 21 (but not the Company,
New P.C. or the Shareholder) shall have sole responsibility for the payment of
all legal fees (except as set forth in Section 9.3(c)), accounting fees (except
as set forth in Section 9.3(c)), underwriters' expenses and other fees, costs
and expenses associated solely in connection with the preparation of any
Registration Statement relating to such Initial Public Offering.
41
<PAGE> 50
e. If any Initial Public Offering is
consummated as contemplated by this Agreement, all legal fees, audit fees,
printing costs, filing fees, blue sky fees and underwriters' discounts and fees
associated solely with the Initial Public Offering shall be paid by Vision 21
from the proceeds of the Initial Public Offering, except for those expenses,
fees and underwriters' discounts related to any shares sold by the Shareholder.
10. CONDITIONS PRECEDENT OF VISION 21. Except as may be waived in
writing by Vision 21, the obligations of Vision 21 hereunder are subject to the
fulfillment at or prior to the Closing Date of each of the following conditions
precedent:
10.1. Representations and Warranties. The representations
and warranties of the Company, New P.C. and the Shareholder contained herein
shall have been true and correct in all material respects when initially made
and shall be true and correct in all material respects as of the Closing Date.
10.2. Covenants. The Company, New P.C. and the Shareholder
shall have performed and complied in all material respects with all covenants
required by this Agreement to be performed and complied with by the Company, New
P.C. or the Shareholder prior to the Closing Date.
10.3. Legal Opinion. Counsel to the Company, New P.C. and
the Shareholder shall have delivered to Vision 21 their opinions, dated as of
the Closing Date, in form and substance substantially similar to Exhibit 10.3
which Vision 21, Vision 21's counsel, the underwriters of the Initial Public
Offering and their counsel shall be permitted to rely upon.
10.4. Proceedings. No action, proceeding or order by any
court or governmental body or agency shall have been threatened orally or in
writing, asserted, instituted or entered to restrain or prohibit the carrying
out of the transactions contemplated hereby.
10.5. No Material Adverse Change. No material adverse
change in the condition (financial or otherwise), operations, assets,
liabilities or business of the Company shall have occurred since the Company
Balance Sheet Date, whether or not such change shall have been caused by the
deliberate act or omission of the Company, New P.C. or the Shareholder.
10.6. Government Approvals and Required Consents. The
Company, New P.C., the Shareholder and Vision 21 shall have obtained all
necessary government and other third-party approvals and consents (other than
consents technically required as a result of the transactions contemplated
hereby under the terms of managed care contracts to which the Company or any of
its employees are a party).
10.7. Closing Deliveries. Vision 21 shall have received all
documents and agreements, duly executed and delivered in form reasonably
satisfactory to Vision 21, referred to in Section 12.1.
42
<PAGE> 51
10.8. Due Diligence. Vision 21 shall have completed to its
satisfaction a due diligence review of the Company, New P.C. and the
Shareholder.
10.9. Financial Audit. Vision 21 shall have approved in
Vision 21's sole discretion an audit of the Company and the Practice which audit
shall have been performed by an accounting firm designated by Vision 21 at the
sole expense of Vision 21.
10.10. Compliance Audit. At the option of Vision 21, Vision
21 shall have approved in Vision 21's sole discretion an audit of the Company
for regulatory compliance which audit shall be at the sole expense of Vision 21.
10.11. Exemption Under State Securities Laws. The transfer
of Vision 21's Securities to the Shareholder as contemplated in this Agreement
shall qualify for one or more exemptions from registration under the State's
securities laws. Vision 21 shall pay all filing fees in connection with any
filing required to qualify the transfer of the Securities for such exemption(s).
11. CONDITIONS PRECEDENT OF THE COMPANY, NEW P.C. AND THE
SHAREHOLDER. Except as may be waived in writing by the Company, New P.C. and the
Shareholder, the obligations of the Company, New P.C. and the Shareholder
hereunder are subject to fulfillment at or prior to the Closing Date of each of
the following conditions precedent:
11.1. Representations and Warranties. The representations
and warranties of Vision 21 contained herein shall be true and correct in all
respects when initially made and shall be true and correct in all material
respects as of the Closing Date.
11.2. Covenants. Vision 21 shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by it prior to the Closing
Date.
11.3. Legal Opinions. Counsel to Vision 21 shall have
delivered to the Company, New P.C. and the Shareholder their opinion, dated as
of the Closing Date, in form and substance substantially similar to Exhibit
11.3.
11.4. Proceedings. No action, proceeding or order by any
court or governmental body or agency shall have been threatened in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
11.5. Government Approvals and Required Consents. The
Company, New P.C., the Shareholder and Vision 21 shall have obtained all
necessary government and other third-party approvals and consents (other than
consents technically required as a result of the transactions contemplated
hereby under the terms of managed care contracts to which the Company or any of
its employees are a party).
43
<PAGE> 52
11.6. Closing Deliveries. The Company, New P.C. and the
Shareholder shall have received all documents, instruments and agreements, duly
executed and delivered in form reasonably satisfactory to the Company and New
P.C., referred to in Section 12.2.
11.7. No Change in Voting or Ownership Control. There shall
have been no changes in the voting or ownership control of Vision 21 from the
date first above written to the Closing Date.
11.8. No Material Adverse Change; Delivery of Amended
Confidential Information Memorandum. No material adverse change in the condition
(financial or otherwise), operations, assets, liabilities or business of Vision
21 shall have occurred since the end of the last fiscal period reported in the
Vision 21 Financial Statements, whether or not such change shall have been
caused by the deliberate act or omission of Vision 21. Vision 21 shall deliver
an amended Confidential Information Memorandum updating the information
contained in the initial Confidential Information Memorandum on or before
December 17, 1996, and the Company, New P.C. and the Shareholder shall have the
right not to close the transactions contemplated in this Agreement if they
determine, based upon their review of the amended Confidential Information
Memorandum, that a material adverse change has occurred with respect to the
condition (financial or otherwise), operations, assets, liabilities or business
of Vision 21.
12. CLOSING DELIVERIES; ESCROW OF DOCUMENTS.
12.1. Deliveries of the Company, New P.C. and the
Shareholder. At or prior to December 24, 1996, the Company, New P.C. and the
Shareholder shall deliver to Vision 21, c/o Shumaker, Loop & Kendrick, LLP,
counsel to Vision 21, the following, all of which shall be in a form reasonably
satisfactory to Vision 21 and shall be held by Shumaker, Loop & Kendrick, LLP in
escrow pending Closing, pursuant to an escrow agreement or letter in form and
substance mutually acceptable to the parties hereto:
a. copies of resolutions of the Boards of
Directors of the Company and New P.C. authorizing (i) the execution, delivery
and performance of this Agreement and all related documents and agreements, and
(ii) the consummation of the Transaction, certified by the Secretaries of the
Company and New P.C. as being true and correct copies of the originals thereof
subject to no modifications or amendments;
b. a certificate of the President of the
Company, the President of New P.C., and of the Shareholder, dated the Closing
Date, as to the truth and correctness of the representations and warranties of
the Company, New P.C. and the Shareholder contained herein, on and as of the
Closing Date;
c. a certificate of the President of the
Company, the President of New P.C., and of the Shareholder, dated the Closing
Date, (i) as to the performance of and compliance in all material respects by
the Company, New P.C. and the Shareholder with all
44
<PAGE> 53
covenants contained herein on and as of the Closing Date and (ii) certifying
that all conditions precedent of the Company, New P.C. and the Shareholder to
the Closing have been satisfied;
d. a certificate of the Secretaries of the
Company and New P.C. certifying as to the incumbency of the directors and
officers of each such corporation and as to the signatures of such directors and
officers who have executed documents delivered pursuant to the Agreement on
behalf of each such corporation;
e. a certificate, dated within ten (10) days
prior to the Closing Date, of the Secretary of State of the state of
incorporation for the Company and New P.C. establishing that each of the Company
and New P.C. is in existence, has paid all franchise or similar taxes, if any,
and, if applicable, otherwise is in good standing to transact business in its
state of organization;
f. certificates, dated within ten (10) days
prior to the Closing Date, of the Secretary of State of the states in which the
Company and New P.C. are qualified to do business, to the effect that the
Company and New P.C. are qualified to do business and, if applicable, are in
good standing as a foreign corporation in each of such states;
g. an opinion of counsel to the Company, New
P.C. and Shareholder dated as of the Closing Date, in form and substance
satisfactory to Vision 21, which Vision 21, Vision 21's counsel and the
underwriters of any Initial Public Offering and their counsel are permitted to
rely upon and which shall include an opinion, subject to normal and customary
exceptions that to the best of their knowledge the transactions and arrangements
contemplated by this Agreement are in conformity with State laws, rules and
regulations governing the practice of medicine.
h. such appropriate documents of transfer,
including bills of sale, endorsements, assignments, drafts, checks or other
instruments, as to all of the Non-optical Assets and Optical Assets, and any
other appropriate instruments in such reasonable or customary form as shall be
requested by Vision 21 and its counsel;
i. such instruments satisfactory to Vision 21
that all liens, claims, pledges, security interests and other encumbrances on
all of the Non-optical Assets have been released;
j. all authorizations, consents, permits and
licenses referenced in Section 3.5;
k. an executed Registration Rights Agreement
between Vision 21 and the Shareholder in substantially the form attached hereto
as Exhibit 12.1 (k) (the "Registration Rights Agreement");
45
<PAGE> 54
l. a non-foreign affidavit, as such affidavit
is referred to in Section 1445 (b) (2) of the Code, of the Shareholder, signed
under a penalty of perjury and dated as of the Closing Date, to the effect that
the Shareholder is a United States citizen or a resident alien (and thus not a
foreign person) and providing the Shareholder's United States taxpayer
identification number;
m. an assignment to Vision 21 of each lease for
real property described on Schedule 2.1(c) (the "Lease Assignments"), or if
desired by Vision 21, a new lease or leases between the landlords under such
leases and Vision 21 in form and substance reasonably satisfactory to Vision 21;
and
n. such other instrument or instruments of
transfer prepared by Vision 21 as shall be necessary or appropriate, as Vision
21 or its counsel shall reasonably request, to carry out and effect the purpose
and intent of this Agreement.
12.2. Deliveries of Vision 21. At or prior to December 24,
1996, Vision 21 shall deliver to the Company, New P.C. and the Shareholder, c/o
Shumaker, Loop & Kendrick, LLP, counsel to Vision 21, the following, all of
which shall be in a form reasonably satisfactory to the Company, New P.C. and
the Shareholder and shall be held by Shumaker, Loop & Kendrick, LLP in escrow
pending Closing, pursuant to an escrow agreement or letter in form and substance
mutually acceptable to the parties hereto:
a. a copy of the resolutions of the Board of
Directors of Vision 21 authorizing (i) the execution, delivery and performance
of this Agreement, and all related documents and agreements, and (ii) the
consummation of the Transaction, certified by Vision 21's Secretary as being
true and correct copies of the originals thereof subject to no modifications or
amendments;
b. a certificate of an officer of Vision 21
dated the Closing Date as to the truth and correctness of the representations
and warranties of Vision 21 contained herein, on and as of the Closing Date;
c. a certificate of an officer of Vision 21
dated the Closing Date, (i) as to the performance and compliance of Vision 21
with all covenants contained herein on and as of the Closing Date and (ii)
certifying that all conditions precedent of Vision 21 to the Closing have been
satisfied;
d. a certificate, dated within ten (10) days
prior to the Closing Date, of the Secretary of State of the State of Florida
establishing that Vision 21 is in existence, has paid all franchise or similar
taxes, if any, and, if applicable, otherwise is in good standing to transact
business in such state;
e. certificates (or photocopies thereof), dated
within ten (10) days prior to the Closing Date, of the Secretary of State of
each state in which Vision 21 is
46
<PAGE> 55
qualified to do business, to the effect that Vision 21 is qualified to do
business and, if applicable, is in good standing as a foreign corporation in
each of such states;
f. an opinion of Shumaker, Loop & Kendrick,
LLP, counsel to Vision 21, dated as of the Closing Date, pursuant to Section
11.3;
g. the executed Registration Rights Agreement;
h. the executed Lease Assignments;
i. the Note in the original principal amount
set forth in this Agreement; and
j. such other instrument or instruments of
transfer, prepared by the Company, New P.C. or the Shareholder as shall be
necessary or appropriate, as the Company, New P.C. the Shareholder or their
counsel shall reasonable request, to carry out and effect the purpose and intent
of this Agreement.
12.3. Release of Escrow Materials. Shumaker, Loop &
Kendrick, LLP shall release the agreements, certificates, instruments, documents
and other materials described in Sections 12.1 and 12.2 to the appropriate
parties to effectuate the transactions contemplated in this Agreement only after
all such materials have been delivered by all applicable parties (or the parties
receiving such documents have waived in writing such delivery requirement) and
after counsel for the Shareholder, New P.C. and the Company have sent written
notice to Shumaker, Loop & Kendrick, LLP stating that the Shareholder, New P.C.
and the Company have reviewed the amended Confidential Information Memorandum
and have decided, based upon such review, to consummate the transactions
contemplated in this Agreement. In the event that the Shareholder, New P.C. and
the Company elect not to consummate the transactions contemplated in this
Agreement based upon their review of the amended Confidential Information
Memorandum, and counsel for the Shareholder, New P.C. and the Company informs
Shumaker, Loop & Kendrick, LLP in writing as to such decision, Shumaker, Loop &
Kendrick, LLP shall promptly return the foregoing materials to the parties
sending such materials.
13. POST CLOSING MATTERS.
13.1. Further Instruments of Transfer. From and after the
Closing Date, at the request of Vision 21 and at Vision 21's sole cost and
expense, the Shareholder, New P.C. and the Company shall deliver any further
instruments of transfer and take all reasonable action as may be necessary or
appropriate to carry out the purpose and intent of this Agreement.
47
<PAGE> 56
14. REMEDIES.
14.1. Indemnification by the Company, New P.C. and
Shareholder. Subject to the terms and conditions of this Agreement, the Company,
New P.C. and the Shareholder, jointly and severally, agree to indemnify, defend
and hold Vision 21 and its directors, officers, members, managers, employees,
agents, attorneys and affiliates harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
reasonable attorneys' fees and expenses (collectively, "Damages") asserted
against or incurred by such entities and individuals (including, but not limited
to, any reduction in payments to or revenues of the Company) arising out of or
resulting from:
a. a breach of any representation, warranty or
covenant of the Company, New P.C. or the Shareholder contained herein or in any
schedule or certificate delivered hereunder;
b. any liability under the Securities Act, the
Exchange Act or any other federal or state "Blue Sky" or securities law or
regulation, at common law or otherwise, (i) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to the
Shareholder, New P.C. or the Company (including its subsidiaries, if any), and
provided to Vision 21 or its counsel by the Company, New P.C. or the
Shareholder, specifically for inclusion in a Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, (ii) arising out of or based upon any omission or alleged omission to
state therein a material fact relating to the Shareholder, New P.C. or the
Company (including its subsidiaries, if any) required to be stated therein or
necessary to make the statements therein not misleading, and not provided to
Vision 21 or its counsel by the Company, New P.C. or the Shareholder, provided,
however, that such indemnity shall not inure to the benefit of Vision 21 to the
extent that such untrue statement (or alleged untrue statement) was made, in, or
omission (or alleged omission) occurred in, any preliminary prospectus, and such
information was not so included by Vision 21 and properly delivered to
shareholders of Vision 21 who acquire Vision 21 Common Stock in any Initial
Public Offering;
c. any filings, reports or disclosures made
pursuant to the IRS Voluntary Compliance Resolution Program, if applicable; and
d. any liability arising from any alleged
unlawful sale or offer to sell or transfer any of the Common Stock by
Shareholder.
14.2. Indemnification by Vision 21. Subject to the terms
and conditions of this Agreement, Vision 21 hereby agrees to indemnify, defend
and hold the Company, New P.C. and the Shareholder harmless from and against all
damages asserted against or incurred by it or him arising out of or resulting
from:
a. a breach by Vision 21 of any representation,
warranty or covenant of Vision 21 contained therein or in any schedule or
certificate delivered hereunder;
48
<PAGE> 57
b. any liability under the Securities Act, the
Exchange Act or any other federal or state "Blue Sky" or securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to Vision 21,
contained in any preliminary prospectus, Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to Vision 21 (including its subsidiaries),
required to be stated therein or necessary to make the statements therein not
misleading; and
c. any filings, reports or disclosures made
pursuant to the IRS Voluntary Compliance Resolution Program, if applicable.
Notwithstanding anything in this Section 14.2, Vision 21 shall not be
liable for any Damages resulting from any matter not disclosed to Vision 21 by
any of the third parties to be acquired by Vision 21 in connection with the
Related Acquisitions.
14.3. Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
a. A party claiming indemnification under this
Agreement (an "Indemnified Party") shall promptly (and, in any event, at least
ten (10) days prior to the due date for any responsive pleadings, filings or
other documents) (i) notify the party from whom indemnification is sought (the
"Indemnifying Party") of any third-party claim or claims asserted against the
Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying Party
a written notice ("Claim Notice") describing in reasonable detail the nature of
the Third Party Claim, a copy of all papers served with respect to such claim
(if any), an estimate of the amount of damages attributable to the Third Party
Claim and the basis of the Indemnified Party's request for indemnification under
this Agreement. Except as set forth in Section 14.6, the failure to promptly
deliver a Claim Notice shall not relieve the Indemnifying Party of its
obligations to the Indemnified Party with respect to the related Third Party
Claim except to the extent that the resulting delay is materially prejudicial to
the defense of such claim. Within thirty (30) days after receipt of any Claim
Notice (the "Election Period"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Article 14 with respect to such
Third Party Claim and (ii) whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim.
b. If the Indemnifying Party notifies the
Indemnified Party within the Election Period that the Indemnifying Party elects
to assume the defense of the Third Party Claim, then the Indemnifying Party
shall have the right to defend, at its sole cost and expense, such Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or settled at the
discretion of the Indemnifying Party in accordance with this Section 14.3(b).
The Indemnifying Party shall
49
<PAGE> 58
have full control of such defense and proceedings, including any compromise or
settlement thereof. The Indemnified Party is hereby authorized, at the sole cost
and expense of the Indemnifying Party (but only if the Indemnified Party is
entitled to indemnification hereunder), to file, during the Election Period, any
motion, answer or other pleadings that the Indemnified Party shall deem
necessary or appropriate to protect its interests or those of the Indemnifying
Party and not prejudicial to the Indemnifying Party (it being understood and
agreed that if an Indemnified Party takes any such action that is prejudicial
and causes a final adjudication that is adverse to the Indemnifying Party, the
Indemnifying Party shall be relieved of its obligations hereunder with respect
to such Third Party Claim). If requested by the Indemnifying Party, the
Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to
Section 14.3(b) and shall bear its own costs and expenses with respect to such
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and
upon written notification thereof, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of the Indemnified Party;
provided further that the Indemnifying Party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party.
c. If the Indemnifying Party fails to notify
the Indemnified Party within the Election Period that the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 14.3(b), or if the
Indemnifying Party elects to defend the Indemnified Party pursuant to Section
14.3(b) but fails diligently and promptly to prosecute or settle the Third Party
Claim, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party (if the Indemnified Party is entitled
to indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article 14 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnifying Party's defense pursuant to this Section
or of the Indemnifying
50
<PAGE> 59
Party's participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all costs
and expenses of such litigation. The Indemnifying Party may participate in, but
not control any defense or settlement controlled by the Indemnified Party
pursuant to this Section 14.3(c), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation; provided, however, that
if the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party, and the
Indemnifying Party has been advised by counsel that there may be one or more
legal defenses available to the Indemnified Party, then the Indemnifying Party
may employ separate counsel and upon written notification thereof, the
Indemnified Party shall not have the right to assume the defense of such action
on behalf of the Indemnifying Party.
d. In the event any Indemnified Party should
have a claim against any Indemnifying Party hereunder that does not involve a
Third Party Claim, the Indemnified Party shall transmit to the Indemnifying
Party a written notice (the "Indemnity Notice") describing in reasonable detail
the nature of the claim, an estimate of the amount of damages attributable to
such claim and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within sixty (60) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by mediation or arbitration as
provided in Section 17.1 if the parties do not reach a settlement of such
dispute within thirty (30) days after notice of a dispute is given.
e. Payments of all amounts owing by an
Indemnifying Party pursuant to this Article 14 relating to a Third Party Claim
shall be made within thirty (30) days after the latest of (i) the settlement of
such Third Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of such Third Party Claim or (iii) the expiration of the period for
appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 14.3(d) shall be made within thirty (30)
days after the later of (i) the expiration of the sixty (60) day Indemnity
Notice period or (ii) the expiration of the period for appeal, if any, of a
final adjudication or arbitration of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
14.4. Remedies Not Exclusive. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity. This Article 14
regarding indemnification shall survive Closing.
14.5. Costs, Expenses and Legal Fees. Each party hereto
agrees to pay the costs and expenses (including attorneys' fees and expenses)
incurred by the other parties in successfully (a) enforcing any of the terms of
this Agreement, or (b) proving that another party breached any of the terms of
this Agreement.
51
<PAGE> 60
14.6. Indemnification Limitations. Notwithstanding the
provisions of Sections 14.1 and 14.2, (a) no party shall be required to
indemnify another party with respect to a breach of a representation, warranty
or covenant unless the claim for indemnification is brought within two (2) years
after the Closing Date, except that a claim for indemnification for a breach of
the representations and warranties contained in Sections 3.1, 3.2., 3.3, 3.11,
3.14, 3.20, 4.3, 4.5, 4.8, 5.1, 5.2, 5.3, 5.4 and 6.1 may be made at any time,
and a claim for indemnification for a breach of the representations and
warranties contained in Sections 3.9, 3.15, 3.17, 3.18, 3.24, 3.25, 3.26, 3.27,
4.1, 4.4, 4.6, 5.6 and 5.7 may be made at any time within the applicable statute
of limitations; (b) indemnification based upon Sections 14.1(b) through (d) and
14.2(b) may be made at any time within the applicable statute of limitations;
and (c) the Shareholder shall not be required to indemnify Vision 21 pursuant to
Section 16.1 unless, and to the extent that, the aggregate amount of Damages
incurred by Vision 21 shall exceed an amount equal to two percent (2%) of the
total Purchase Price; and (c) the Shareholder shall not be required to indemnify
Vision 21 with respect to a breach of a representation, warranty or covenant for
Damages in excess of the aggregate Purchase Price received by the Shareholder
(other than pursuant to a requirement to indemnify Vision 21 under Sections 3.26
or 3.27, or unless the breach involves an intentional breach or fraud by the
Shareholder or the Company which shall be unlimited).
14.7. Tax Benefits; Insurance Proceeds. The total amount
of any indemnity payments owed by one party to another party to this Agreement
shall be reduced by any correlative tax benefit received by the party to be
indemnified or the net proceeds received by the party to be indemnified with
respect to recovery from third parties or insurance proceeds and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
14.8. Payment of Indemnification Obligation. In the event
that the Shareholder has an indemnification obligation to Vision 21 hereunder,
subject to Vision 21's approval as set forth below, the Shareholder may satisfy
such obligation by transferring to Vision 21 such number of shares of Vision 21
Common Stock owned by the Shareholder having an aggregate fair market value
(which is prior to any Initial Public Offering based upon the valuation given at
Closing hereof or after an Initial Public Offering the fair market value at such
time based on the last reported sale price of Vision 21 Common Stock on a
principal national securities exchange or other exchange on which the Vision 21
Common Stock is then listed or the last quoted ask price on any over-the-counter
market through which the Vision 21 Common Stock is then quoted on the last
trading day immediately preceding the day on which the Shareholder transfers
shares of Vision 21 Common Stock to Vision 21 hereunder) equal to the
indemnification obligation, provided that each of the following conditions are
satisfied:
a. The Shareholder shall transfer to Vision 21
good, valid and marketable title to the shares of Vision 21 Common Stock, free
and clear of all adverse claims, security interests, liens, claims, proxies,
options, stockholders' agreements and encumbrances;
52
<PAGE> 61
b. The Shareholder shall make such
representation and warranties as to title to the stock, absences of security
interests, liens, claims, proxies, stockholders' agreements and other
encumbrances and other matters as reasonably requested by Vision 21; and
c. The other terms and conditions of any
transaction contemplated pursuant to this Section and the effects thereof,
including any legal or tax consequences, shall be reasonably satisfactory to
Vision 21.
15. TERMINATION.
15.1. Termination. This Agreement may be terminated and the
Transaction may be abandoned:
a. at any time prior to the Closing Date by
mutual agreement of all parties;
b. at any time prior to the Closing Date by
Vision 21 if any representation or warranty of the Company, New P.C. or the
Shareholder contained in this Agreement or in any certificate or other document
executed and delivered by the Company, New P.C. or the Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
the Company, New P.C. or the Shareholder fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
c. at any time prior to the Closing Date by the
Company or New P.C. if any representation or warranty of Vision 21 contained in
this Agreement is or becomes untrue in any material respect or if Vision 21
fails to comply in any material respect with any covenant or agreement contained
herein, and any such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt or written notice
thereof;
d. at any time prior to the Closing Date by the
Company or New P.C. in the event of the failure of any of the conditions
precedent set forth in Article 13 of this Agreement;
e. at any time prior to the Closing Date by
Vision 21 in the event of the failure of any of the conditions precedent set
forth in Article 12 of this Agreement;
f. by Vision 21 if at any time prior to the
Closing Date, Vision 21 deems termination to be advisable, provided, however,
that if Vision 21 exercises its right to terminate this Agreement under this
subsection, Vision 21 shall reimburse the Company, New P.C. and the Shareholder
for all reasonable attorneys' and accountants' fees incurred by the
53
<PAGE> 62
Company, New P.C. and the Shareholder in connection with this Agreement;
provided that Vision 21 shall only reimburse the Company, New P.C. and the
Shareholder up to an aggregate maximum amount of One Hundred Thousand and No/100
Dollars ($100,000.00) for such fees; or
g. by Vision 21 or the Company if the
Transaction shall not have been consummated by December 24, 1996.
15.2. Effect of Termination. In the event this Agreement is
terminated pursuant to Section 15.1, Vision 21, New P.C., the Company and the
Shareholder, shall each be entitled to pursue, exercise and enforce any and all
remedies, rights, powers and privileges available at law or in equity, subject
to the limitations set forth in Section 15.1. In the event of a termination of
this Agreement under the provisions of this Article 15, a party not then in
material breach of this Agreement shall stand fully released and discharged of
any and all obligations under this Agreement.
16. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.
16.1. Shareholder, New P.C. and Company Non-Competition
Covenant.
a. The Shareholder, New P.C. and the Company
recognize that the covenants of the Shareholder, New P.C. and the Company
contained in this Section 16.1 are an essential part of this Agreement and that,
but for the agreement of the Shareholder, New P.C. and the Company to comply
with such covenants, Vision 21 would not have entered into this Agreement. The
Shareholder, New P.C. and the Company acknowledge and agree that the
Shareholder's, New P.C.'s and the Company's covenants not to compete are
necessary to ensure the continuation of the Management Business (as defined
below) and are necessary to protect the reputation of Vision 21, and that
irreparable and irrevocable harm and damage will be done to Vision 21 if the
Shareholder, New P.C. or the Company compete with the Management Business or
Vision 21. The Shareholder, New P.C. and the Company accordingly agree that for
the periods set forth in the Business Management Agreement the Shareholder, New
P.C. and the Company shall not:
i) directly or indirectly, either as
principal, agent, independent contractor, consultant, director, officer,
employee, employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for the Shareholder's, New P.C.'s or
the Company's own benefit or for the benefit of any other person or entity
knowingly (A) hire, attempt to hire, contact or solicit with respect to hiring
any employee of Vision 21 (or of any of its direct or indirect subsidiaries) or
(B) induce or otherwise counsel, advise or encourage any employee of Vision 21
(or of any of its direct or indirect subsidiaries) to leave the employment of
Vision 21;
ii) act or serve, directly or
indirectly, as a principal, agent, independent contractor, consultant, director,
officer, employee, employer or advisor or
54
<PAGE> 63
in any other position or capacity with or for, or acquire a direct or indirect
ownership interest in or otherwise conduct (whether as stockholder, partner,
investor, joint venturer, or as owner of any other type of interest), any
Competing Management Business as such term is defined herein; provided, however,
that this clause (ii) shall not prohibit the Shareholder, New P.C. or the
Company from being the owner of up to 1% of any class of outstanding securities
of any company or entity if such class of securities is publicly traded; or
iii) directly or indirectly, either as
principal, agent, independent, contractor, consultant, director, officer,
employee, employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for the Shareholder's, New P.C.'s or
the Company's own benefit or for the benefit of any other person or entity, call
upon or solicit any customers or clients of the Management Business; provided
however, that the Shareholder may send out a general notice to the customers or
clients of the Management Business announcing the termination of his arrangement
with Vision 21 and may advertise in a general manner without violating this
covenant.
b. For the purposes of this Section 16.1, the
following terms shall have the meaning set forth below:
i) "Management Business" shall mean
management and administration of the non-medical aspects of medical,
ophthalmology and optometry practices, and Optical Business.
ii) "Competing Management Business"
shall mean an individual, business, corporation, association, firm, undertaking,
company, partnership, joint venture, organization or other entity that either
(A) conducts a business substantially similar to the Management Business within
the State, or (B) provides or sells a service which is the same or substantially
similar to, or otherwise competitive with the services provided by the
Management Business within the State; provided, however, that "Competing
Management Business" shall not include Vision 21, or the Shareholder's internal
management and administration of the Shareholder's medical practice or
participation in the management and administration of a physician group in which
the Shareholder devotes a significant amount of time to the practice of
medicine.
c. Should any portion of this Section 16.1 be
deemed unenforceable because of the scope, duration or territory encompassed by
the undertakings of the Shareholder, New P.C. or the Company hereunder, and only
in such event, then the Shareholder, New P.C. the Company and Vision 21 consent
and agree to such limitation on scope, duration or territory as may be finally
adjudicated as enforceable by a court of competent jurisdiction after the
exhaustion of all appeals.
d. This covenant shall be construed as an
agreement ancillary to the other provisions of this Agreement, and the existence
of any claim or cause of action of the Shareholder, New P.C. or the Company
against Vision 21, whether predicated on this
55
<PAGE> 64
Agreement or otherwise, shall not constitute a defense to the enforcement by
Vision 21 of this covenant; provided, however, that the Shareholder, New P.C.
and the Company shall not be bound by this covenant and shall not be obligated
to pay the liquidated damages contemplated in this Section 16.1 if at the time
of a breach of this covenant the Business Management Agreement has already been
terminated pursuant to Section 6.2(a) thereof. Without limiting other possible
remedies to Vision 21 for breach of this covenant, the Shareholder, New P.C. and
the Company agree that injunctive or other equitable relief will be available to
enforce the covenants of this provision, such relief to be without the necessity
of posting a bond, cash or otherwise. The Shareholder, New P.C., the Company and
Vision 21 further expressly acknowledge that the damages that would result from
a violation of this non-competition covenant would be impossible to predict with
any degree of certainty, and agree that liquidated damages in the aggregate
amount of the aggregate consideration received by the Company pursuant to this
Agreement is reasonable in light of the severe harm to the Management Business
and Vision 21 which would result in the event that a violation of this
non-competition covenant were to occur. If the Shareholder or the Company
violates this non-competition covenant, Vision 21 shall, in addition to all
other rights and remedies available at law or equity, be entitled to (a) cancel
the number of shares of Common Stock held by the Shareholder or the Company or,
with respect to shares of Common Stock entitled to be received by the
Shareholder or the Company, terminate its obligation to deliver such number of
shares of Common Stock, valued as set forth in Section 6.6(a) of the Business
Management Agreement, (b) set off all or any of such liquidated damages sum
against amounts payable under the Note held by the Shareholder or the Company,
and (c) repayment by Shareholder to Vision 21 of the fair market value as
described above, of Vision 21 Common Stock sold by Shareholder; but in no event
shall Vision 21 be entitled to offset amounts in excess of the liquidated
damages sum pursuant to this Section 16.1. The Shareholder and the Company agree
to deliver to Vision 21 the certificates representing any such shares canceled
by Vision 21 or the Note. Payment and satisfaction by Shareholder shall be made
within sixty (60) days of notification to Shareholder by Vision 21 that
Shareholder has violated this non-competition covenant.
16.2. Shareholder, New P.C. and Company Confidentiality
Covenant. From the date hereof, the Shareholder, New P.C. and the Company shall
not, directly or indirectly, use for any purpose, other than in connection with
the performance of the Shareholder's duties under the Shareholder's employment
agreement with the Company, or disclose to any third party, any information of
Vision 21, New P.C. or the Company, as appropriate (whether written or oral),
including any business management or economic studies, patient lists,
proprietary forms, proprietary business or management methods, marketing data,
fee schedules, or trade secrets of Vision 21 or of the Company, as applicable,
and including the terms and provisions of this Agreement and any transaction or
document executed by the parties pursuant to this Agreement. Notwithstanding the
foregoing, the Shareholder, New P.C. and the Company may disclose information
that the Shareholder, New P.C. or the Company can establish (a) is or becomes
generally available to and known by the public or optical community (other than
as a result of an unpermitted disclosure directly or indirectly by the
Shareholder, New P.C. or the Company or their respective Affiliates, advisors,
or representatives); (b) is or becomes available to the Shareholder, New P.C. or
the Company on a nonconfidential basis from a source other
56
<PAGE> 65
than Vision 21 or its Affiliates, advisors or representatives, provided that
such source is not and was not bound by a confidentiality agreement with or
other obligation of secrecy to Vision 21 or its Affiliates, advisors or
representatives of which the Shareholder, New P.C. or the Company has knowledge;
or (c) has already been or is hereafter independently acquired or developed by
the Shareholder, New P.C. or the Company without violating any confidentiality
agreement with or other obligation of secrecy to Vision 21, the Company or their
respective Affiliates, advisors or representatives. Without limiting the other
possible remedies to Vision 21 for the breach of this covenant, the Shareholder,
New P.C. and the Company agree that injunctive or other equitable relief shall
be available to enforce this covenant, such relief to be without the necessity
of posting a bond, cash or otherwise. The Shareholder, New P.C. and the Company
further agree that if any restriction contained in this Section 16.2 is held by
any court to be unenforceable or unreasonable, a lesser restriction shall be
enforced in its place and the remaining restrictions contained herein shall be
enforced independently of each other.
16.3. Survival. The parties acknowledge and agree that this
Article 16 shall survive the Closing of the transactions contemplated herein.
17. DISPUTES.
17.1. Mediation and Arbitration. Any dispute, controversy
or claim (excluding claims arising out of an alleged breach of Article 16 of
this Agreement) arising out of this Agreement, or the breach thereof, that
cannot be settled through negotiation shall be settled (a) first, by the parties
trying in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the AAA (such mediation session to be held in Tampa, Florida,
if the amount in dispute is equal to or in excess of $200,000 or if the dispute
is solely of a non-monetary nature, and in Scottsdale, Arizona if the amount in
dispute is lower than $200,000, and in either case to commence within 15 days of
the appointment of the mediator by the AAA), and (b) if the controversy, claim
or dispute cannot be settled by mediation, then by arbitration administered by
the AAA under its Commercial Arbitration Rules (such arbitration to be held in
Tampa, Florida, if the amount in dispute is equal to or in excess of $200,000 or
if the dispute is solely of a non-monetary nature, and in Scottsdale, Arizona if
the amount in dispute is lower than $200,000, and in either case before a single
arbitrator and to commence within 15 days of the appointment of the arbitrator
by the AAA), and judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof.
18. MISCELLANEOUS
18.1. Taxes. Shareholder, New P.C. and the Company shall
pay all transfer taxes, sales and other taxes and charges, imposed by the
State, if any, which may become payable in connection with the transactions and
documents contemplated hereunder. Vision 21 shall pay all transfer taxes, sales
and other taxes and charges imposed by the State of Florida, if any, which may
become payable in connection with the transactions and documents contemplated
hereunder.
57
<PAGE> 66
18.2. Remedies Not Exclusive. No remedy conferred by any of
the specific provisions of this Agreement or any document contemplated by this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
18.3. Parties Bound. Except to the extent otherwise
expressly provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
18.4. Notices. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to Vision 21 addressed to:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34777
Attn: Richard T. Welch, Chief Financial Officer
With copies to:
Shumaker, Loop & Kendrick
Post Office Box 172609
101 E. Kennedy Boulevard, Suite 2800
Tampa, Florida 33672-0609
Facsimile No. (813) 229-1660
Attn: Darrell C. Smith, Esquire
If to the Company, New P.C. and the Shareholder addressed to:
Sharona Optical Inc.
4845 Thunderbird Road
Scottsdale, Arizona 85254
Attn: Daniel B. Feller, M.D.
58
<PAGE> 67
With copies to:
Stephen M. Goldstein, Esquire
Sacks Tierney, P.A.
2929 North Central Avenue
Fourteenth Floor
Phoenix, Arizona 85012-2742
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 18.4. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery or
refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
18.5. Choice of Law. This Agreement shall be construed,
interpreted, and the rights of the parties determined in accordance with, the
laws of the State of Florida except with respect to matters of law concerning
the internal affairs of any corporate or partnership entity which is a party to
or the subject of this Agreement, and as to those matters the law of the state
of incorporation or organization of the respective entity shall govern.
18.6. Entire Agreement; Amendments and Waivers. This
Agreement, together with the documents contemplated by this Agreement and all
Exhibits and Schedules hereto and thereto, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof. No supplement, modification or waiver
of any of the provisions of this Agreement shall be binding unless it shall be
specifically designated to be a supplement, modification or waiver of this
Agreement and shall be executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
18.7. Confidentiality Agreements. The provisions of any
prior confidentiality agreements and letters of intent between or among Vision
21, the Company and the Shareholder, as amended, shall terminate and cease to be
of any force or effect at and upon the Closing.
18.8. Reformation Clause. It is the intention of the
parties hereto to conform strictly to applicable laws regarding the practice and
regulation of medicine, whether such laws are now or hereafter in effect,
including the laws of the United States of America, the State or any other
applicable jurisdiction, and including any subsequent revisions to, or judicial
interpretations of, those laws, in each case to the extent they are applicable
to this Agreement (the "Applicable Laws"). Accordingly, if the ownership of any
Non-optical Asset by Vision 21 violates any Applicable Law, then the parties
hereto agree as follows: (a) the provisions of this
59
<PAGE> 68
Section 18.8 shall govern and control; (b) if none of the parties hereto are
materially economically disadvantaged, then any Non-optical Asset, the ownership
of which violates any Applicable Law, shall be deemed to have never been owned
by Vision 21; (c) if one or more of the parties hereto is materially
economically disadvantaged, then the parties hereto agree to negotiate in good
faith such changes to the structure and terms of the transactions provided for
in this Agreement as may be necessary to make these transactions, as
restructured, lawful under applicable laws and regulations, without materially
disadvantaging either party; (d) this Agreement shall be deemed reformed; and
(e) the parties to this Agreement shall execute and deliver all documents or
instruments necessary to effect or evidence the provisions of this Section 18.8.
18.9. Assignment. The Agreement may not be assigned by
operation of law or otherwise except that Vision 21 shall have the right to
assign this Agreement, at any time, to any Affiliate or direct or indirect
wholly-owned subsidiary. In the event of such assignment, Vision 21 shall remain
liable hereunder.
18.10. Attorneys' Fees. Except as otherwise specifically
provided herein, if any action or proceeding is brought by any party with
respect to this Agreement or the other documents contemplated with respect to
the interpretation, enforcement or breach hereof, the prevailing party in such
action shall be entitled to an award of all reasonable costs of litigation or
arbitration, including, without limitation, attorneys' fees, to be paid by the
losing party, in such amounts as may be determined by the court having
jurisdiction of such action or proceeding or by the arbitrators deciding such
action or proceeding.
18.11. Further Assurances. From time to time hereafter and
without further consideration, each of the parties hereto shall execute and
deliver such additional or further instruments of conveyance, assignment and
transfer and take such other actions as any of the other parties hereto may
reasonably request in order to more effectively consummate the transactions
contemplated hereunder or as shall be reasonably necessary or appropriate in
connection with the carrying out of the parties' respective obligations
hereunder for the purposes of this Agreement.
18.12. Announcements and Press Releases. Any press releases
or any other public announcements concerning this Agreement or the transactions
contemplated hereunder shall be approved in advance by Vision 21 and the
Company; provided, however, that such approval shall not be unreasonably
withheld and if any party reasonably believes that it has a legal obligation to
make a press release and the consent of the other party cannot be obtained, then
the release may be made without such approval.
18.13. No Tax Representations. Each party acknowledges that
it is relying solely on its advisors to determine the tax consequences of the
transactions contemplated hereunder and that no representation or warranty has
been made by any party as to the tax consequences of such transactions except as
otherwise specifically set forth in this Agreement.
60
<PAGE> 69
18.14. No Rights as Stockholder. The Company and the
Shareholder shall have no rights as a stockholder with respect to any shares of
Common Stock until the issuance of a stock certificate evidencing such shares.
Except as otherwise provided in the Agreement, no adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
such date any stock certificate is issued.
18.15. Multiple 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.
18.16. Headings. The headings of the several articles and
sections herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
18.17. Severability. Each article, section and subsection of
this Agreement constitutes a separate and distinct undertaking, covenant or
provision of this Agreement. If any such provision shall finally be determined
to be unlawful, such provision shall be deemed severed from this Agreement, but
every other provision of this Agreement shall remain in full force and effect.
18.18. Form of Transaction. If after the execution hereof,
Vision 21 determines that the sale of the Non-optical Assets of the Company can
be better achieved through a different form of transaction without economic
injury to the Company, New P.C. or the Shareholder, or delay of the consummation
of the transaction, the Company, New P.C. and the Shareholder shall cooperate in
revising the structure of the transaction and shall negotiate in good faith to
so amend this Agreement; provided, that Vision 21 shall reimburse the Company,
New P.c. and the Shareholder at Closing for all reasonable additional expenses
incurred by the Company, New P.C. and the Shareholder as a result of such change
in form.
61
<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
"COMPANY"
SHARONA OPTICAL, INC.
/s/ By: /s/ Daniel B. Feller
- ---------------------------------- ---------------------------------
Witness Daniel B. Feller, M.D., President
/s/
- ----------------------------------
Witness
"NEW P.C."
/s/ By: /s/ Daniel B. Fellerller
- ---------------------------------- ---------------------------------
Witness Daniel B. Feller, M.D., President
/s/
- ----------------------------------
Witness "SHAREHOLDER"
/s/ /s/ Daniel B. Feller
- ---------------------------------- ------------------------------------
Witness Daniel B. Feller, M.D.
/s/
- ----------------------------------
Witness
/s/ /s/ Sharona Feller
- ---------------------------------- ------------------------------------
Witness Sharona Feller
/s/
- ----------------------------------
Witness
"VISION 21"
VISION 21, INC.
By: /s/ Theodore N. Gillette
- ---------------------------------- ---------------------------------
Witness Theodore N. Gillette, President
- ----------------------------------
Witness
62
<PAGE> 71
Schedule 1.52
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Optical Assets
The following constitute the Optical Assets:
Optical records,
Patient lists;
Third-party payer contracts (except for rights to purchased
accounts receivable);
Eyeglasses, lenses and other eyewear;
Licenses, certificates of need, Medicare/Medicaid
certifications and other governmental authorizations necessary
to provide Professional Eye Care Services and to be paid
therefor by applicable third-party payers; and
Any other asset that legally cannot be owned by a party that
is not optical-owned.
<PAGE> 72
Schedule 2.2(b)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Personal Property Leases
None.
<PAGE> 73
Schedule 2.2(c)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Real Property Leases
None.
<PAGE> 74
Schedule 2.2(d)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Assumed Contracts
None.
<PAGE> 75
Schedule 2.2(e)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Tangible Personal Property
Please see attached list.
[LIST OF TANGIBLE PERSONAL PROPERTY OMITTED]
<PAGE> 76
Schedule 2.2(g)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Franchises, Licenses, Permits, Certificates and Authorizations
City of Phoenix Business License No. 89002711.
<PAGE> 77
Schedule 2.3
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Excluded Assets
None.
<PAGE> 78
Schedule 2.4
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Assumed Obligations
None.
<PAGE> 79
Schedule 2.5A
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Purchase Price
$61,837 in cash and 95,975 shares of Vision 21 common stock.
<PAGE> 80
Schedule 2.9
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Purchase Price Allocation
To be completed after Purchase Price Adjustment.
<PAGE> 81
Schedule 3
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Individuals - Best knowledge
Representations and Warranties of the Company
1. Daniel B. Feller, M.D., Medical Director
2. Office Manager
<PAGE> 82
Schedule 3.1
to Optical Asset Purchase Agreement among Sharona Optical, Inc.
(the "Company"), Daniel B. Feller, M.D. (the "Shareholder")
and Vision 21, Inc. ("Vision 21")
Capital Stock or Other Interest Owned by the Company,
the Shareholder or Any Professional Employee in Any Competitor
None.
<PAGE> 83
Schedule 3.2
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Sale, Distribution, or Spin-Off of Significant Assets
of the Company or Its Affiliates within the Last Two Years
None.
<PAGE> 84
Schedule 3.4
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Violations or Conflicts Resulting from Execution,
Delivery and Consummation of Transaction By the Company
None.
<PAGE> 85
Schedule 3.5
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Consents Required for Company from
Governmental Authority or Any Other Persons
None.
<PAGE> 86
Schedule 3.7
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Liabilities of the Company
Not Reflected in Financial Statements
None.
<PAGE> 87
Schedule 3.8(a)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Compensation of All Employees of the Company
See attached schedule.
* * *
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THE
SCHEDULE CALLED FOR BY THIS SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED
SEPARATELY WITH THE SECURITIES EXCHANGE COMMISSION.]
<PAGE> 88
Schedule 3.8(b)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Compensation Plans, Arrangements or Practices Sponsored by the
Company or to which the Company Contributes on Behalf of Its
Employees (Other than Employment Agreements and Employee Benefit Plans)
Medical
Dental
Life
Prescriptions
3 pr Rx's yearly
<PAGE> 89
Schedule 3.8(c)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employment Agreements
None.
<PAGE> 90
Schedule 3.8(d)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employee Policies and Procedures
See attached.
Policy & Procedures manual.
[EMPLOYEE POLICIES AND/OR PROCEDURE MANUALS OMITTED]
<PAGE> 91
Schedule 3.8(f)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Exceptions to Labor Compliance
None.
<PAGE> 92
Schedule 3.8(g)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Union Participation of Company Employees
None.
<PAGE> 93
Schedule 3.9(a)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plans Sponsored by the Company or to which the
Company Contributes on Behalf of Its Employees in the Past Three Years
Group medical and life insurance plans:
Dental
Prescriptions
Principal Mutual
Paid through PVES
<PAGE> 94
Schedule 3.9(b)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Exceptions to Employee Benefit Plan Compliance
None.
<PAGE> 95
Schedule 3.9(c)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Audits, Investigations or Enforcement Actions
None.
<PAGE> 96
Schedule 3.9(d)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Prohibited Transactions
None.
<PAGE> 97
Schedule 3.9(f)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Determination Letter or IRS Ruling
None.
<PAGE> 98
Schedule 3.9(g)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Accumulated Funding Deficiency
Not applicable.
<PAGE> 99
Schedule 3.9(h)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Employee Benefit Plan Excise Taxes
None.
<PAGE> 100
Schedule 3.10
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Changes to Company since Balance Sheet Date
None.
<PAGE> 101
Schedule 3.11(b)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Permitted Encumbrances on Personal Property
None.
<PAGE> 102
Schedule 3.11(c)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Real Property Leases and Personal Property Leases
See Schedules 2.1(c) and 2.1(d).
<PAGE> 103
Schedule 3.12
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Commitments of the Company
None.
<PAGE> 104
Schedule 3.13
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Insurance Policies; Cancellations; Outstanding Claims,
Settlements or Premiums Owed; Professional Liability Insurance
Denials since January 1, 1994; and All Claims since January 1, 1994
See chart attached hereto and made a part hereof.
Paid through PVES.
<PAGE> 105
PARADISE VALLEY EYE - Schedule 3.13: Insurance
<TABLE>
<S> <C> <C> <C> <C>
Insured Daniel B. Feller, M.D. Shirley Jean Lambert, Pamela H. Williams, Paradise Valley Eye
Additional insureds: dba O.D. M.D. Specialists
Paradise Valley Eye
Specialists
Liability limits: $1 million / $3 million $2 million/$4 million $1 million/$3 million NO PROFESSIONAL
Professional liability Professional Liability Professional Liability LIABILITY
INSURANCE
Vicarious liability
endorsement for Shirley
Jean Lambert (not Umbrella:
direct liability coverage for $100,000 / $100,000 $5 million / $5 million
Lambert) (injuries to patients &
third parties; peer Commercial/General:
$100,000 / $100,000 review) $1 million / $2 million
(injuries to patients & third (UNCLEAR - CONFLICTING
parties; peer review) PROVISIONS.)
$10,000 medical expenses
MICA Chicago Insurance Co. MICA per person
EMPLOYER'S LIABILITY:
NOT COVERED
Also: $10,000 self-
insurance retention
Expiration date 11-16-97 8/14/97 12/1/97 1-1-98
Retroactive date 11-16-83 12/1/9/97
Occurrence vs. Claims made (tail offered at
Claims Made time insurance is cancelled)
Claims N/A N/A N/A
</TABLE>
[CERTAIN INSURANCE POLICIES AND OTHER
POLICY DESCRIPTIONS ARE OMITTED]
<PAGE> 106
Schedule 3.14
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Description of Proprietary Rights; Consents
None.
<PAGE> 107
Schedule 3.15
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Good Faith Disputes Over Payment of
Taxes; Tax Deficiency or Delinquency
None.
<PAGE> 108
Schedule 3.16
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
List of Licenses, Franchises, Permits and Governmental
Authorizations for Conduct of the Company's Business; Notices of Noncompliance
City of Phoenix Business License No. 89002711.
<PAGE> 109
Schedule 3.17
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Finder's, Broker's or Agent's Fee Owed By the Company
None.
<PAGE> 110
Schedule 3.18
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Company Litigation
None.
<PAGE> 111
Schedule 3.21
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
List of Company Borrowing and Investing Arrangements
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 112
Schedule 3.22
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Ownership Interests of Interested Persons and
Material Affiliations in the Last Three Years
Paradise Valley Eye Specialists
Eye Specialists of Arizona Network
<PAGE> 113
Schedule 3.23
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Company Investments in Competitors
None.
<PAGE> 114
Schedule 3.28
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Description of and Relationship with Payors
Managed Eye Care Contract with FHP.
<PAGE> 115
Schedule 3.33
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Tangible Personal Property Exceptions
None.
<PAGE> 116
Schedule 3.34
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Real Property Lease and Personal Property Leases Exceptions
None.
<PAGE> 117
Schedule 3.35
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Assumed Contract Exceptions
None.
<PAGE> 118
Schedule 4.2
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Violations or Conflicts Resulting from Execution,
Delivery or Consummation of Transaction By the Shareholder
None.
<PAGE> 119
Schedule 4.5
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Finder's, Broker's or Agent's Fees Owed By the Shareholder
None.
<PAGE> 120
Schedule 4.6
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Shareholder Ownership of Interested Persons and Material Affiliations
Paradise Valley Eye Specialists
Eye Specialists of Arizona Network
<PAGE> 121
Schedule 4.7
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Shareholder Investments in Competitors
None.
<PAGE> 122
Schedule 5
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Individuals - Best Knowledge
Representations and Warranties of Vision 21
1. Theodore N. Gillette
2. Richard L. Sanchez
3. Richard T. Welch
4. Nicholas M. Arfaras
<PAGE> 123
Schedule 5.1
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Jurisdictions where Vision 21 is Qualified to Do Business
1. Florida
2. Arizona
3. Minnesota
4. New York
<PAGE> 124
Schedule 5.6
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Consents or Approvals Needed by Vision 21 from Any Governmental Authority
None.
<PAGE> 125
Schedule 5.7
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Finder's, Brokers or Agent's Fees Owed by Vision 21
None.
<PAGE> 126
Schedule 5.10
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Liabilities of Vision 21 Not Reflected in Financial Statements
None.
<PAGE> 127
Schedule 6.1(b)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Exception to Shareholder "Accredited Investor"
or "Sophisticated Investor" Representation
None.
<PAGE> 128
Schedule 6.1(d)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Shareholder's Principal Residence
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 129
Schedule 8.4
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
Personal Liabilities of Shareholder for which
Vision 21 Will Use Best Efforts to Obtain Release
None.
<PAGE> 130
Schedule 12.1(k)
to Optical Asset Purchase Agreement among Sharona Optical,
Inc. (the "Company"), Daniel B. Feller, M.D. (the
"Shareholder") and Vision 21, Inc. ("Vision 21")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement"), dated as of
___________________, 1996, is by and between Vision 21, Inc., a Florida
corporation and any successor ("Vision 21"), and Sharona Optical, Inc., an
Arizona corporation ("Shareholder") located at 4845 East Thunderbird Road,
Scottsdale, Arizona 85254.
1. Registration Rights.
(a) In the event that Vision 21 proposes to file a
registration statement under the Securities Act for purposes of effecting an
underwritten public offering of shares of Vision 21 common stock for cash
(including, but not limited to, a registration statement relating to a
secondary offering of Vision 21 common stock, but excluding registration
statements relating to any employee benefit plan or a corporate
reorganization), Vision 21 shall give written notice of such proposed filing to
the Shareholder at least fifteen (15) days before the anticipated filing date,
and such notice shall offer Shareholder the opportunity to register such number
of the Shareholder's shares of common stock as Shareholder may request in
writing within ten (10) days after receipt of such notice; provided, however,
that the maximum number of shares of common stock that such Shareholder may
request to include in any registration statement shall be limited as provided
in Section 1(c).
(b) In the event that (i) one (1) year has elapsed from
the date of effectiveness of the registration statement filed in connection
with an underwritten initial public offering of shares of Vision 21 common
stock, and (ii) Vision 21 receives a written request from holders holding in
the aggregate a minimum of 300,000 shares of Vision 21 common stock issued to
the founding practices described in Vision 21's Confidential Information
Memorandum dated September 27, 1996, as amended, and issued to certain
professionals owning equity interests in such founding practices (the founding
practices and professionals of such practices holding share's of common stock
of Vision 21 are collectively referred to as the "Founding Shareholders"), that
Vision 21 file a registration statement under the Securities Act effecting an
offering of shares of Vision 21 common stock; then Vision 21 shall as soon as
practicable file a registration statement at its own expense effecting a public
offering of shares of Vision 21 common stock held by Founding Shareholders, as
well as any other Vision 21 shares owned by any other shareholders which Vision
21 wishes to include in the offering (which offering may be an underwritten
offering at Vision 21's sole discretion); provided however that Vision 21 shall
be obligated to effect only one registration statement containing each
Shareholder, and Vision 21 shall be obligated to file only two (2) registration
statements in the aggregate, pursuant to this Section 1(b).
<PAGE> 131
(c) The maximum aggregate number of shares of common
stock that Shareholder may request to be registered under this Agreement shall
be sixty percent (60%) of Shareholder's original shares of Vision 21 common
stock. In no event shall the total number of Shareholder's shares of common
stock that Vision 21 is obligated to register under this Agreement exceed sixty
percent (60%) of Shareholder's original shares of Vision 21 common stock, and
in no event shall Vision 21 be obligated to register more than (i) in an
initial offering, thirty percent (30%) of Shareholder's original shares of
Vision 21 common stock or (ii) in a second offering, sixty percent (60%) of the
Shareholder's original shares minus the percent of the Shareholder's original
shares that the Shareholder registered in the first offering. The "original
shares" of Vision 21 as described herein shall be deemed to be the
_________________ shares of common stock received by the Shareholder on the
date of this Agreement.
(d) Vision 21 shall have the sole and exclusive right to
select the underwriters of any public offering of shares of Vision 21 common
stock, including any public offering conducted pursuant to the demand
registration right set forth in Section 1(b) above. The use of underwriters in
any demand registration right set forth in Section 1(b) above is subject to
Vision 21's ability to engage underwriters under terms and conditions deemed
reasonable by Vision 21.
(e) If the managing underwriter of any offering advises
Vision 21 that the total number of shares of Vision 21's common stock which
Vision 21, the Shareholder and any other persons intend to include in such
offering would adversely affect the success of such offering, then the amount
of shares of common stock to be offered for the account of Shareholder shall be
reduced to the extent necessary to reduce the total number of shares of common
stock to be included in such offering to the amount recommended by such
managing underwriter.
(f) Vision 21 shall not be required to (i) reduce the
amount of shares of common stock to be offered by Vision 21 in such offering
for any reason or (ii) include any shares of common stock of Shareholder in any
public offering for which a registration statement is or is proposed to be
filed if such shares of common stock are, at the time of effectiveness of such
registration statement, eligible to be sold under Rule 144 under the Securities
Act or otherwise eligible for sale to the public without registration.
(g) Vision 21 shall have the right to extend or delay the
effectiveness of any registration statement for a period of up to ninety (90)
days if, upon the advice of counsel, such delay is advisable and in the best
interests of Vision 21 because of the existence of non-public material
information, or to allow Vision 21 to complete any pending audit of its
financial statements or any public financing plan.
(h) Shareholder agrees to cooperate with Vision 21 in all
respects in connection with registration of the common stock, including timely
supplying all information and executing and returning all documents requested
by Vision 21 and its managing underwriter.
Exhibit 12.1(k) - Page 2
<PAGE> 132
(i) Vision 21 shall not be required to include any of
Shareholder's shares of common stock in any registration statement unless
Shareholder accepts the terms of the underwriting as agreed upon between Vision
21 and its underwriters.
(j) Vision 21 shall have the right to defer the filing of
any registration statement if the Board of Directors of Vision 21 determines in
good faith that it would be seriously detrimental to Vision 21 and its
shareholders for such registration statement to be filed.
(k) This Agreement shall expire two (2) years from the
date of an initial public offering of Vision 21 common stock.
2. Covenants of Vision 21. Vision 21 hereby covenants and
agrees:
(a) To take such steps as may be necessary to comply with
the Blue Sky laws of such states as the managing underwriter may reasonably
request; provided that in no event shall Vision 21 be obligated to qualify to
do business in any state where it is not so qualified or to take any action
which would subject it to unlimited service of process in any state where it is
not at such time so subject;
(b) To use reasonable efforts to cause the registration
statement to become effective and to keep the registration statement effective
for such period as may be required under the terms of the underwriting
agreement relating thereto but no longer than for a period of forty-five (45)
days, to file such post-effective amendments as may be necessary to keep any
prospectus contained in such registration statement true and complete during
such period as the registration statement shall be effective, and to furnish
and file such other amendments, supplements, and other documents the managing
underwriter may reasonably request;
(c) To supply such numbers of prospectuses as may be
reasonably required by the managing underwriter;
(d) To pay the reasonable costs and expenses of the
registration statement including without limitation all registration and Blue
Sky filing fees, all fees and expenses of Vision 21's counsel (but not the fees
and expenses of counsel for Shareholder), all accounting costs (including costs
associated with the preparation of interim period financial statements), NASD
fees, printing costs, experts' fees, expenses, costs of post-effective
amendments, and all other usual and customary expenses in connection with the
registration statement, except for Shareholder's pro rata share of underwriting
discounts, fees, and selling commissions (calculated in the manner set forth in
Section 3(a)(ii) of this Agreement); and
(e) With respect to any registration statement filed
pursuant to this Agreement, where underwriters are utilized, to cooperate with
the underwriters to the best of its abilities and to enter into an underwriting
agreement with such underwriters containing such representations,
Exhibit 12.1(k) - Page 3
<PAGE> 133
warranties, and covenants on the part of Vision 21 as are usual and customary
in an underwritten public sale of common stock.
3. Covenants of Shareholder.
(a) Shareholder hereby covenants and agrees:
(i) To cooperate with Vision 21 in its compliance
with all federal and state securities laws, including without limitation
providing such information and signing such documents as are necessary to
effect a registration or reasonably requested by underwriters pursuant to this
Agreement;
(ii) To pay his pro rata portion (calculated on
the basis of the ratio of the aggregate offering price attributable to the
shares of Shareholder being registered and sold in relation to the aggregate
offering price attributable to the total number of securities being registered
and sold, including securities being registered and sold by other selling
stockholders) of the underwriting discounts and selling commissions and to pay
all the fees and disbursements of his counsel; and
(iii) To the entry of stop transfer instructions
with the Company's transfer agent against the transfer of any shares of
Shareholder's Vision 21 common stock except in compliance with the restrictions
as set forth in this Section 3.
(b) Shareholder shall be considered an "affiliate" of
Vision 21 for purposes of Rule 144 under the Securities Act, even in the event
Shareholder is not technically an affiliate of Vision 21 as defined in Rule
144, and the Vision 21 common stock owned by Shareholder shall be subject to
the restrictions and limitations on resale imposed by Rule 144 on affiliates of
Vision 21. Shareholder shall not sell any of his shares of Vision 21 common
stock under Rule 144 unless Shareholder would be eligible to do so under the
provisions applicable to affiliates.
(c) In addition to the transfer restrictions otherwise
provided for herein, Shareholder shall not, whether or not Shareholder elects
to cause the registration of his shares pursuant to this Agreement, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of any shares of Vision 21 common stock
(other than the shares covered by such registration, which may be sold in
accordance with the plan or plans of distribution described in the registration
statement) owned by Shareholder for a period of one hundred eighty (180) days
or such shorter period as negotiated by the Company following the effective
date of such registration statement without the prior written consent of Vision
21. In the event that Shareholder is a corporation, professional corporation
or professional limited liability company, Shareholder may after receiving the
written approval of Vision 21 (which approval shall not be unreasonably
withheld) transfer its shares of Vision 21 Common Stock to any of the
individuals and/or trusts described in Sections 7(a), (b) and (c) hereof. Such
Exhibit 12.1(k) - Page 4
<PAGE> 134
transferee shall, for purposes of the transfer restrictions contained in this
Agreement, be deemed to have held such transferred shares for the same period
as Shareholder.
4. Indemnification of Shareholder.
Whenever registration with respect to any shares of Shareholder's
common stock is effected under the Securities Act pursuant hereto, Vision 21
will indemnify and hold harmless Shareholder, each underwriter, the directors,
officers, employees and agents of each underwriter, and each person, if any,
who controls each underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, (including any securities law
violations) insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or alleged omission to state
in such document a material fact required to be stated in it or necessary to
make the statements in it not misleading, provided that Vision 21 will not be
liable to Shareholder to the extent that such loss, claim, liability, expense
or damage is based on an untrue statement or omission made in reliance on and
in conformity with information furnished to Vision 21 by Shareholder, or by
Shareholder through any attorney-in-fact, expressly for inclusion in the
registration statement or any prospectus included in such registration
statement.
5. Indemnification of Vision 21.
Whenever registration with respect to any shares of Shareholder's
common stock is effected under the Securities Act pursuant hereto, Shareholder
will indemnify and hold harmless Vision 21, each of Vision 21's directors and
officers, each person who controls Vision 21 within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, each underwriter, the
directors, officers, employees and agents of each underwriter, and each person,
if any, who controls each underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, liabilities, expenses and damages (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact required to be stated
in it or necessary to make the statements in it not misleading; provided that
Shareholder will not be liable except to the extent that such loss, claim,
liability, expense or damage arises from or is based upon an untrue statement
or omission or alleged untrue statement or omission made in reliance on and in
conformity with information furnished to Vision 21 by the Shareholder, or by
Exhibit 12.1(k) - Page 5
<PAGE> 135
Shareholder through any attorney-in-fact, expressly for inclusion in the
registration statement or any prospectus included in such registration
statement.
6. Defense of Claim.
Promptly after receipt by an indemnified party of notice of the
commencement of any action, the indemnified party shall notify the indemnifying
party in writing of the commencement thereof if a claim in respect thereof is
to be made against an indemnifying party under this Agreement, but the omission
of such notice shall not relieve the indemnifying party from liability which it
may have to the indemnified party under this Agreement, except to the extent
that the indemnifying party is actually prejudiced by such failure to give
notice, and shall not relieve the indemnifying party from any liability which
it may have to any indemnified party otherwise than under this Agreement. In
case any action is brought against the indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in, and to the extent that it chooses, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party that it so chooses, the indemnifying party shall not be
liable for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof; provided however that (i) if the
indemnifying party fails to take reasonable steps necessary to defend
diligently the claim within twenty (20) days after receiving notice from the
indemnified party that the indemnified party believes the indemnifying party
has failed to diligently defend such claim, or (ii) if the indemnified party
who is a defendant in any action or proceeding which is also brought against
the indemnifying party reasonably shall have concluded that there are legal
defenses available to the indemnified party which conflict with the defense
strategy of the indemnifying party, or (iii) if representation under applicable
standards of professional conduct require separate representation of the
indemnified party and the indemnifying party, then the indemnified party shall
have the right to assume or continue its own defense as set forth above and the
indemnifying party shall reimburse the indemnified party for the costs of such
defense as provided in Section 4 and 5. In no event shall the indemnifying
party be responsible for the fees of more than one firm for all indemnified
parties.
7. Non-Transferability.
The registration rights and benefits set forth herein, including
indemnification by Vision 21 are granted for the sole and personal benefit of
Shareholder and may not be transferred or assigned except for (a) gifts to
his/her family members (b) assignment to a trust controlled by the Shareholder,
(c) transfers to Shareholder's heirs which occur by operation of law as a
result of the death of the Shareholder, or (d) if the Shareholder is a
corporation, professional corporation or professional limited liability
company, transfers or assignments to the individuals who are current equity
holders of Shareholder and by such equity holders to the individuals and/or
trusts described in subsection (i) and (ii) of this Section.
8. Survival of Indemnity.
Exhibit 12.1(k) - Page 6
<PAGE> 136
The indemnifications provided by this Agreement shall be a continuing
right to indemnification and shall survive the registration and sale of any
securities by any person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
9. Delay of Registration.
Shareholder agrees that he shall have no right to obtain or seek an
injunction restraining or otherwise delaying any registration statement filed
by Vision 21.
10. Notices.
(a) All communications under this Agreement shall be in
writing and shall be sufficient in all respects if when personally delivered
or mailed by prepaid certified or registered mail, return receipt requested,
addressed as follows:
(i) If to Vision 21, at:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34647
Attn: Theodore N. Gillette,
Chief Executive Officer
With a copy to:
Darrell C. Smith, Esquire
c/o Shumaker, Loop & Kendrick, LLP
101 E. Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
or at such other address as Vision 21 may have furnished in writing to
Shareholder at the time outstanding, or
(ii) If to Shareholder at:
Sharona Optical, Inc.
4845 E. Thunderbird Rd.
Nos. 1 & 1A
Scottsdale, AZ 85254
Attn: Daniel B. Feller, M.D.
With a copy to
Exhibit 12.1(k) - Page 7
<PAGE> 137
Steven M. Goldstein, Esquire
Sacks Tierney P.A. Lawyers
2929 North Central Avenue
Fourteenth Floor
Phoenix, Arizona 85012-2742
(b) Any notice so addressed, when mailed
by registered or certified mail shall be deemed to be given three days after so
mailed, and when delivered by hand shall be deemed to be given immediately.
11. Counterparts.
One or more counterparts of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
12. Governing Law.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Florida, which shall prevail in all matters
arising under or in connection with this Agreement.
13. Headings.
The headings in this Agreement are for convenience of reference only
and shall not be deemed to alter or affect the meaning or interpretation of any
provisions hereof.
14. Stock Lettering.
The Company shall have the right to provide a legend on the shares of
stock covered hereunder reflecting the restriction described hereunder.
Exhibit 12.1(k) - Page 8
<PAGE> 138
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date and year first above written.
"VISION 21"
VISION 21, INC.
By:_____________________________________
Theodore N. Gillette, Chief
Executive Officer
"SHAREHOLDER"
SHARONA OPTICAL, INC.
________________________________________
Daniel B. Feller, M.D., its President
Exhibit 12.1(k) - Page 9
<PAGE> 1
EXHIBIT 10.40
"CONFIDENTIAL TREATMENT REQUESTED
BY VISION TWENTY-ONE, INC."
AGREEMENT AND PLAN OF REORGANIZATION
DATED: DECEMBER 1, 1996
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated
effective as of December 1, 1996, is by and among DANIEL B. FELLER, M.D., P.C.,
an Arizona professional corporation, d/b/a PARADISE VALLEY EYE SPECIALISTS (the
"Company"), DANIEL B. FELLER, M.D., (the "Physician"), and VISION 21, INC., a
Florida corporation ("Vision 21").
R E C I T A L S
A. Physician is a physician licensed to practice medicine in
the State (as defined herein) and currently conducts an ophthalmology practice
through the Company and through optometrist employees currently conducts an
optometry practice through the Company.
B. Physician owns all of the issued and outstanding shares of
capital stock of the Company.
C. The Company and Vision 21 desire to effect a business
combination and merger of the Company with and into Vision 21 upon the terms
and subject to the satisfaction of the conditions precedent contained herein
(the "Merger").
D. It is intended that for federal income tax purposes the
Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
E. Vision 21 cannot acquire certain of the Company's assets
because of laws prohibiting general business corporations from engaging in the
practice of medicine or optometry, or exercising control over physicians
practicing medicine or optometrists practicing optometry, and accordingly, the
Company and Vision 21 desire that the Company divest itself of such assets
prior to the Merger.
F. Prior to the Merger, the Company intends to form a new
professional corporation ("New P.C.") to which it intends to transfer its
medical and optometry business and all of its Medical Assets (as defined
herein) in exchange for all of New P.C.'s capital stock and to distribute such
stock to Physician in a transaction that will qualify for tax free treatment
under Section 355 of the Code.
G. New P.C. intends to employ the Physician and enter into a
Business Management Agreement (as defined herein) with the Company immediately
prior to the Merger; and
H. As a result of the Merger, the Surviving Corporation (as
defined herein) will acquire the medical and optometry practice management
business and all of the Nonmedical
1
<PAGE> 3
Assets (as herein defined) of the Company associated with such business
to the extent permitted by law and assume all of Company's obligations under
the Business Management Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
1.1. AAA. The term "AAA" shall mean the American
Arbitration Association.
1.2. Accountants. The term "Accountants" shall mean
the accounting firm for Vision 21.
1.3. Accounts Receivable. The term "Accounts
Receivable" shall have the meaning set forth in Section 3.39.
1.4. Acquisition Proposal. The term "Acquisition
Proposal" shall have the meaning set forth in Section 3.34.
1.5. Affiliate. The term "Affiliate" with respect to
any person or entity shall mean a person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by or is under
common control with, such person or entity.
1.6. Applicable Laws. The term "Applicable Laws"
shall have the meaning set forth in Section 21.5.
1.7. Audit. The term "Audit" shall have the meaning
set forth in Section 3.9.
1.8. Business. The term "Business" shall have the
meaning set forth in Section 19.1(b)(i).
1.9. Business Management Agreement. The term
"Business Management Agreement" shall mean the Business Management Agreement
entered into between the Company and New P.C. prior to the Closing.
1.10. Cash Compensation. The term "Cash Compensation"
shall have the meaning set forth in Section 3.11(a).
1.11. Claim Notice. The term "Claim Notice" shall have
the meaning set forth in Section 16.3(a).
2
<PAGE> 4
1.12. Closing. The term "Closing" shall mean the
consummation of the transactions contemplated by this Agreement.
1.13. Closing Date. The term "Closing Date" shall mean
December 1, 1996 or such other date as mutually agreed upon by the parties.
1.14. Code. The term "Code" shall mean the Internal
Revenue Code of 1986, as amended.
1.15. Commitments. The term "Commitments" shall have
the meaning set forth in Section 3.15(a).
1.16. Common Stock. The term "Common Stock" or "Vision
21 Common Stock" shall mean the common stock, par value $.01 per share, of
Vision 21.
1.17. Company Balance Sheet. The term "Company Balance
Sheet" shall have the meaning set forth in Section 3.9.
1.18. Company Balance Sheet Date. The term "Company
Balance Sheet Date" shall have the meaning set forth in Section 3.9.
1.19. Company Common Stock. The term "Company Common
Stock" shall mean the common stock of the Company.
1.20. Compensation Plans. The term "Compensation
Plans" shall have the meaning set forth in Section 3.11(b)(ii).
1.21. Competing Business. The term "Competing
Business" shall have the meaning set forth in Section 19.1(b).
1.22. Competitor. The term "Competitor" shall mean any
person or entity which, individually or jointly with others, whether for its
own account or for that of any other person or entity, owns, or holds any
ownership or voting interest in any person or entity engaged in, the practice
of ophthalmology, the practice of optometry, the operation of out patient eye
surgical facilities, the operation of refractive surgery centers and the
operation of optical shops; provided, however, that such term shall not include
any Affiliate of Vision 21 or any entity with which Vision 21 has an agreement
similar to the Business Management Agreement in effect.
1.23. Confidential Information Memorandum. The term
"Confidential Information Memorandum" shall mean that certain disclosure
memorandum distributed by Vision 21 to the Company and Physician dated as of
September 27, 1996, and any amendments or revisions thereto.
3
<PAGE> 5
1.24. Controlled Group. The term "Controlled Group"
shall have the meaning set forth in Section 3.12(g).
1.25. Corporation Law. The term "Corporation Law"
shall mean the statutes, regulations and laws governing business corporations
and professional corporations in the State.
1.26. Damages. The term "Damages" shall have the
meaning set forth in Section 16.1.
1.27. Effective Time. The term "Effective Time" shall
have the meaning set forth in Section 2.3.
1.28. Election Period. The term "Election Period"
shall have the meaning set forth in Section 16.3(a).
1.29. Employee Benefit Plans. The term "Employee
Benefit Plans" shall have the meaning set forth in Section 3.12(a).
1.30. Employee Policies and Procedures. The term
"Employee Policies and Procedures" shall have the meaning set forth in Section
3.11(d).
1.31. Employment Agreements. The term "Employment
Agreements" shall have the meaning set forth in Section 3.11(c).
1.32. Environmental Laws. The term "Environmental
Laws" shall have the meaning set forth in Section 3.27(a).
1.33. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.34. Exchange Act. The term "Exchange Act" shall mean
the Securities Exchange Act of 1934, as amended.
1.35. FBCA. The term "FBCA" shall mean the Florida
Business Corporation Act.
1.36. Financial Statements. The term "Financial
Statements" shall have the meaning set forth in Section 3.9.
1.37. GAAP. The term "GAAP" shall mean generally
accepted accounting principles, applied on a consistent basis with prior
periods, set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board
4
<PAGE> 6
or in such other statements by such other entity or other practices and
procedures as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of the
determination.
1.38. Governmental Authority. The term "Governmental
Authority" shall mean any national, state, provincial, local or tribunal
governmental, judicial or administrative authority or agency.
1.39. Indemnified Party. The term "Indemnified Party"
shall have the meaning set forth in Section 16.3(a).
1.40. Indemnifying Party. The term "Indemnifying
Party" shall have the meaning set forth in Section 16.3(a).
1.41. Indemnity Notice. The term "Indemnity Notice"
shall have the meaning set forth in Section 16.3(d).
1.42. Initial Public Offering. The term "Initial
Public Offering" shall mean the potential initial underwritten public offering
of Vision 21 Common Stock contemplated by Vision 21.
1.43. Insurance Policies. The term "Insurance
Policies" shall have the meaning set forth in Section 3.16.
1.44. IRS. The term "IRS" shall mean the Internal
Revenue Service.
1.45. Material Adverse Effect. The term "Material
Adverse Effect" shall mean a material adverse effect on the Nonmedical Assets
and the Company's business, operations, condition (financial or otherwise) or
results of operations, taken as a whole, considering all relevant facts and
circumstances.
1.46. Medical Assets. The term "Medical Assets" shall
mean the Company's right, title and interest in any assets as set forth on
Schedule 1.46A which shall also be deemed to include (a) life insurance
policies covering the life of any employee of the Company, and (b) personal
effects listed on Schedule 1.46B; and those assets of which the entire cost of
maintenance are deemed to be "Practice Expenses" in the Business Management
Agreement.
1.47. Merger . The term "Merger" shall have the
meaning set forth in the Recitals hereto.
1.48. Merger Consideration. The term "Merger
Consideration" shall mean the consideration set forth in Sections 2.8, 2.9 and
2.11 of this Agreement.
5
<PAGE> 7
1.49. Merger Consideration Adjustment Amount. The term
"Merger Consideration Adjustment Amount" shall have the meaning set forth in
Section 2.12(c).
1.50. Nonmedical Assets. The term "Nonmedical Assets"
shall mean all of the assets of the Company except for the Medical Assets.
1.51. Optometrist Employee. The term "Optometrist
Employee" shall mean those licensed optometrists who are employees of the
Company, but are not shareholders.
1.52. Optometrist Employment Agreement. The term
"Optometrist Employment Agreement" shall mean the Optometrist Employment
Agreement to be executed between any Optometrist Employee and New P.C.
1.53. Payors. The term "Payors" shall have the meaning
set forth in Section 3.30.
1.54. Permitted Encumbrances. The term "Permitted
Encumbrances" shall have the meaning set forth in Section 3.14(b).
1.55. Physician Employee. The term "Physician
Employee" shall mean those licensed physicians who are employees of the
Company, but are not shareholders.
1.55 Physician Employment Agreement. The term
"Physician Employment Agreement" shall mean the Physician Employment Agreement
to be executed between Physician and New P.C., and between any Physician
Employee and New P.C.
1.56. Practice. The term "Practice" shall mean the
ophthalmology, optometry and all other vision related health-care practices
conducted from time to time by the Company prior to and on the Closing Date and
by the New P.C. after the Closing Date.
1.57. Professional Employee. The term "Professional
Employee" shall mean any Physician Employee or Optometrist Employee.
1.58. Proposed Merger Consideration Adjustment. The
term "Proposed Merger Consideration Adjustment" shall have the meaning set
forth in Section 2.11(b).
1.59. Proprietary Rights. The term "Proprietary
Rights" shall have the meaning set forth in Section 3.17.
1.60. Registration Statement. The term "Registration
Statement" shall have the meaning set forth in Section 11.1.
6
<PAGE> 8
1.61. Related Acquisitions. The term "Related
Acquisitions" shall mean the pending acquisitions by Vision 21 with third
parties which are expected to be completed simultaneously with this Merger.
1.62. SEC. The term "SEC" shall mean the Securities
and Exchange Commission.
1.63. Securities. The term "Securities" shall mean the
shares of Vision 21 Common Stock to be delivered to Physician at the Closing.
1.64. Securities Act. The term "Securities Act" shall
mean the Securities Act of 1933, as amended.
1.65. State. The term "State" shall mean the State in
which the Company is incorporated.
1.66. Surviving Corporation. The term "Surviving
Corporation" shall have the meaning set forth in Section 2.1.
1.67. Tax Returns. The term "Tax Returns" shall have
the meaning set forth in Section 3.18(a).
1.68. Third Party Claim. The term "Third Party Claim"
shall have the meaning set forth in Section 16.3(a).
1.69. Vision 21 Financial Statements. The term "Vision
21 Financial Statements" shall have the meaning set forth in Section 5.9.
2. THE MERGER.
2.1. The Merger. Subject to the terms and conditions
of this Agreement, at the Effective Time, the Company shall be merged with and
into Vision 21 in accordance with this Agreement and the separate corporate
existence of the Company shall thereupon cease. Vision 21 shall be the
surviving corporation in the Merger (in such capacity, hereinafter referred to
as the "Surviving Corporation") and shall continue to be governed by the laws
of the State of Florida, and the separate corporate existence of Vision 21 with
all its rights, privileges, powers, immunities, purposes and franchises shall
continue unaffected by the Merger, except as set forth herein. The Merger
shall have the effects specified in the FBCA and the Corporation Law.
2.2. The Closing. The Closing shall take place on the
Closing Date at the offices of Shumaker, Loop & Kendrick, 101 E. Kennedy
Boulevard, Suite 2800, Tampa, Florida 33602 or at such other location in the
State as the parties shall mutually agree.
7
<PAGE> 9
2.3. Effective Time. If all the conditions precedent
to the Merger set forth in this Agreement shall have been fulfilled or waived
in accordance herewith and this Agreement shall not have been terminated in
accordance with the terms set forth herein, the parties hereto shall cause to
be properly executed and filed on the Closing Date, a Certificate of Merger
meeting the requirements of the FBCA and the Corporation Law. The Certificate
of Merger shall be filed with the Secretary of State of the State of Florida
and of the State in accordance with the FBCA and the Corporation Law and the
Merger shall become effective on the Closing Date, to be designated in such
filings as the effective time of the Merger (the "Effective Time").
2.4. Articles of Incorporation of Surviving
Corporation. Effective at the Effective Time, the Articles of Incorporation of
Vision 21 shall be the Articles of Incorporation of the Surviving Corporation
unless and until duly amended in accordance with its terms.
2.5. Bylaws of Surviving Corporation. The Bylaws of
Vision 21 in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation, unless and until duly amended in accordance with
their terms.
2.6. Directors of the Surviving Corporation. The
persons who are directors of Vision 21 immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Articles of Incorporation and Bylaws.
2.7. Officers of the Surviving Corporation. The
persons who are officers of Vision 21 immediately prior to the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation and shall hold their same respective offices until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal.
2.8. Conversion of Company Common Stock. The manner
of converting shares of Company Common Stock in the Merger shall be as follows:
a. As a result of the Merger and without
any action on the part of the holder thereof, all shares of Company Common
Stock issued and outstanding at the Effective Time shall cease to exist, and
each holder of a certificate representing any such shares of Company Common
Stock shall thereafter cease to have any rights with respect to such shares of
Company Common Stock, except the right to receive upon the surrender of such
certificate, on the Closing Date, validly issued, fully paid and nonassessable
shares of Vision 21 Common Stock determined in accordance with the provisions
of Exhibit 2.8(a) attached hereto.
b. Each share of Company Common Stock
held in the Company's treasury at the Effective Time, by virtue of the Merger,
shall cease to be outstanding and shall be cancelled and retired without
payment of any consideration therefor and shall cease to exist.
8
<PAGE> 10
c. At the Effective Time, each share of
Vision 21 Common Stock issued and outstanding as of the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereto, continue unchanged and remain outstanding as a validly issued, fully
paid, nonassessable share of Vision 21 Common Stock.
2.9. Exchange of Certificates Representing Shares of
Company Common Stock.
a. On the Closing Date (i) the Physician,
as the holder of a certificate or certificates representing shares of Company
Common Stock, upon surrender of such certificate or certificates, shall
receive, as part of the Merger Consideration, the number of shares of Vision 21
Common Stock determined in accordance with the provisions of Exhibit 2.8(a)
attached hereto; and (ii) until the certificate or certificates representing
Company Common Stock have been surrendered by the Physician and replaced by a
certificate or certificates representing Vision 21 Common Stock, the
certificate or certificates representing Company Common Stock shall, for all
purposes be deemed to evidence ownership of the number of shares of Vision 21
Common Stock determined in accordance with the provisions of Exhibit 2.8(a)
attached hereto. All shares of Vision 21 Common Stock issuable to the
Physician in the Merger shall be deemed for all purposes to have been issued by
Vision 21 at the Effective Time, although the Merger Consideration shall not
actually be paid by Vision 21 to the Physician until the Closing Date.
b. The Physician shall deliver to Vision
21 at Closing the certificate or certificates representing Company Common Stock
owned by him, duly endorsed in blank by the Physician, or accompanied by duly
endorsed stock powers in blank, and with all necessary transfer tax and other
revenue stamps, acquired at the Physician's expense, affixed and cancelled.
The Physician agrees to cure any deficiencies with respect to the endorsement
of the certificates or other documents of conveyance with respect to such
Company Common Stock or with respect to the stock powers accompanying any
Company Common Stock. Upon such a delivery, the Physician shall receive in
exchange therefor, a certificate representing that number of shares of
Vision 21 Common Stock that the Physician is entitled to receive pursuant to
Section 2.8 hereof.
2.10. Fractional Shares. Notwithstanding any other
provision herein, no fractional shares of Vision 21 Common Stock will be
issued. Fractional shares shall be rounded up to the nearest whole number of
shares.
2.11. Merger Consideration Adjustments. (a) The
Merger Consideration shall be subject to adjustment to the extent that Current
Assets (as defined herein) or Current Liabilities Assumed (as defined herein)
materially differ from the amounts customarily arising in the ordinary course
of business of the Company as of November 30, 1996. The term "Current Assets"
shall mean petty cash, Accounts Receivable, prepaid expenses, Inventory,
supplies and other current assets (excluding cash in banks, certificates of
deposit, other cash equivalents, current portion of capital leases and prepaid
Income Taxes). The term "Current
9
<PAGE> 11
Liabilities Assumed" shall mean the audited balances as of November 30,
1996 of trade accounts payable, accrued payroll, accrued payroll taxes, accrued
benefits, and other current liabilities (excluding notes payable, current
portion of capital leases and long-term debt, income and franchise taxes and
accrued shareholder expenses). The adjustment shall be settled in cash (which
shall be set-off from moneys due New P.C. pursuant to the Business Management
Agreement or Vision 21 Common Stock at Vision 21's option. The parties also
agree that to the extent the adjustments materially impact the goodwill created
by the transaction, there shall be an adjustment for the related impact of net
income created by the change in amortization of such goodwill and the Merger
Consideration shall be increased or reduced to reflect the impact on net income
settled in cash or Vision 21 Common Stock at Vision 21's option.
(b) Within sixty (60) days following the Closing
Date, Vision 21 shall present to the Physician its Merger Consideration
Adjustment (the "Proposed Merger Consideration Adjustment") calculated in
accordance with Section 2.11(a) hereof. The Physician shall, within thirty
(30) days after the delivery by Vision 21 of the Proposed Merger Consideration
Adjustment, complete his review thereof. In the event that the Physician
believes that the Proposed Purchase Price Adjustment has not been prepared on
the basis set forth in Section 2.11(a) or otherwise contests any item set forth
therein, the Physician shall, on or before the last day of such 30 day period,
so object to Vision 21 in writing, setting forth a specific description of the
nature of the objection and the corresponding adjustments the Physician
believes should be made. If no objection is received by Vision 21 on or before
the last day of such 30 day period, then the Proposed Merger Consideration
Adjustment delivered by Vision 21 shall be final. If an objection has been
made and Vision 21 and the Physician are unable to resolve all of their
disagreements with respect to the proposed adjustments within 15 days following
the delivery of the Physician's objection, the dispute shall be submitted to
arbitration as provided in Section 18.1 except that the arbitrator shall be
instructed to deliver his determination of the dispute to the parties no later
than 30 days after the arbitration hearing. Vision 21 shall provide to the
Physician and his accountants full access to all relevant books, records and
work papers utilized in preparing the Proposed Merger Consideration Adjustment.
2.12. Subsequent Actions. If, at any time after the
Effective Time, the Surviving Corporation shall determine or be advised that
any deeds, bills of sale, assignments, assurances or any other actions or
things are necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, and to effect the
cancellation of all outstanding shares of Company Common Stock in return for
the consideration set forth in this Agreement, the officers and directors of
the Surviving Corporation shall, at the sole cost and expense of the Surviving
Corporation, be authorized to execute and deliver, in the name and on behalf of
the Company, such deeds, bills of sale, assignments and assurances, and to take
and do, in the name and on behalf of the Company, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
10
<PAGE> 12
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
PHYSICIAN. The Company and the Physician, jointly and severally, represent and
warrant to Vision 21 that the following are true and correct as of the date
hereof, and shall be true and correct through the Closing Date as if made on
that date; when used in this Section 3, the term "best knowledge" shall mean in
the case of the Company the best knowledge of those individuals listed on
Schedule 3:
3.1. Organization and Good Standing; Qualification.
The Company is a professional corporation duly organized, validly existing and
in good standing under the laws of the State, with all requisite corporate
power and authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, but it is acknowledged and understood by the
Parties that upon consummation of Merger, the Company will no longer be
qualified as a professional corporation under the Corporation Law. The Company
is not duly qualified and licensed to do business in any other jurisdiction.
The Company does not have any assets, employees or offices in any state other
than the State. Except as set forth on Schedule 3.1, neither the Company, the
Physician nor any Professional Employee owns, directly or indirectly, any of
the capital stock of any other corporation or any equity, profit sharing,
participation or other interest in any corporation, partnership, joint venture
or other entity that is engaged in a business that is a Competitor.
3.2. Capitalization. The authorized capital stock of
the Company consists of ___________ shares of Company Common Stock, of which
five hundred (500) shares are issued and outstanding. The Physician owns all
of the issued and outstanding Company Common Stock, free and clear of all
security interests, liens, adverse claims, encumbrances, equities, proxies and
shareholder agreements, except to the extent disclosed on Schedule 3.2. Each
outstanding share of Company Common Stock has been legally and validly issued
and is fully paid and nonassessable. No shares of Company Common Stock are
owned by the Company in treasury. No shares of Company Common Stock have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of the Company's stockholders. The Company
has no bonds, debentures, notes or other obligations the holders of which have
the right to vote (or are convertible into or exercisable for securities having
the right to vote) with the stockholders of the Company on any matter.
3.3. Transactions in Capital Stock. The Company has
not acquired any capital stock of the Company within the two (2) year period
preceding the execution of this Agreement. Except as set forth on Schedule
3.3, there exist no options, warrants, subscriptions or other rights to
purchase, or securities convertible into or exchangeable for, any of the
authorized or outstanding securities of the Company, and no option, warrant,
call, conversion right or commitment of any kind exists which obligates the
Company to issue any of its authorized but unissued capital stock. Except as
set forth on Schedule 3.3, the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Neither the equity structure of the Company
nor the relative ownership of
11
<PAGE> 13
shares among any of its stockholders has been altered or changed within the
two (2) year period preceding the date of this Agreement.
3.4. Continuity of Business Enterprise. Except as set
forth on Schedule 3.4, and except as contemplated by this Agreement, there has
not been any sale, distribution or spin-off of significant assets of the
Company or any of its Affiliates other than in the ordinary course of business
within the two (2) year period preceding the date of this Agreement.
3.5. Corporate Records. The copies of the Articles or
Certificate of Incorporation and Bylaws, and all amendments thereto, of the
Company that have been delivered or made available to Vision 21 are true,
correct and complete copies thereof, as in effect on the date hereof. The
minute books of the Company, copies of which have been delivered or made
available to Vision 21, contain accurate minutes of all meetings of, and
accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the stockholders of the Company in
the three (3) years prior to the Closing Date, and contain all other material
minutes and consents of the directors and stockholders of the Company since its
formation.
3.6. Authorization and Validity. The execution,
delivery and performance by the Company of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby to be performed by the Company, have been duly
authorized by the Company. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
Company has obtained, in accordance with applicable law and its Articles or
Certificate of Incorporation and Bylaws, the approval of its stockholders
necessary for the consummation of the transactions contemplated hereby.
3.7. Compliance. Except as disclosed on Schedule 3.7,
the execution and delivery of the documents contemplated hereunder and the
consummation of the transactions contemplated thereby by the Company will not
(i) violate any provision of the Company's organizational documents, (ii)
violate any material provision of or result in the breach of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under, any mortgage, lien, lease, contract,
license, instrument or any other agreement to which the Company is a party,
(iii) result in the creation or imposition of any material lien, charge,
pledge, security interest or other material encumbrance upon any property of
the Company or (iv) violate or conflict with any order, award, judgment or
decree or other material restriction or to the best of the Company's knowledge
violate or conflict with any law, ordinance or regulation to which the Company
or its property is subject.
3.8. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by the
12
<PAGE> 14
Company or the consummation by such party of the transactions contemplated
thereby, except for those consents or approvals set forth on Schedule 3.8.
3.9. Financial Statements. The Company has furnished
to Vision 21 its unaudited balance sheet and related unaudited statements of
income, retained earnings and cash flows for its prior three (3) full fiscal
years, and its unaudited interim balance sheet for the fiscal period ended
September 30, 1996 (the "Company Balance Sheet", and the date thereof shall be
referred to as the "Company Balance Sheet Date") and related unaudited
statements of income, retained earnings and cash flows for the twelve months
then ended (all collectively, with the related notes thereto, the "Financial
Statements"). The Financial Statements fairly present the financial condition
and results of operations of the Company as of the dates and for the periods
indicated except as otherwise indicated in the Financial Statements. The
Company and the Physician expressly warrant that they will have prior to the
Closing fairly, accurately and completely provided all necessary information
requested in or relevant to the preparation of the audit to be conducted by the
Accountants or their designees prior to Closing (the "Audit"). The cost of the
Audit shall be paid by Vision 21 and all materials prepared by Vision 21's
Accountants in connection with the Audit shall be solely the property of Vision
21.
3.10. Liabilities and Obligations. Except as set forth
on Schedule 3.10, the Financial Statements reflect all liabilities of the
Company, accrued, contingent or otherwise that would be required to be
reflected thereon, or in the notes thereto, prepared in accordance with GAAP,
except for liabilities and obligations incurred in the ordinary course of
business since the Company Balance Sheet Date. Except as set forth in the
Financial Statements or on Schedule 3.10, the Company is not liable upon or
with respect to, or obligated in any other way to provide funds in respect of
or to guarantee or assume in any manner, any debt, obligation or dividend of
any person, corporation, association, partnership, joint venture, trust or
other entity, and the Company does not know of any valid basis for the
assertion of any other claims or liabilities of any nature or in any amount.
3.11. Employee Matters.
a. Cash Compensation. Schedule 3.11(a)
contains a complete and accurate list of the names, titles and annual cash
compensation as of the Closing Date, including without limitation wages,
salaries, bonuses (discretionary and formula) and other cash compensation (the
"Cash Compensation") of all employees of the Company. In addition, Schedule
3.11(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of employees of the Company during the current fiscal year
and the immediately preceding fiscal year and (ii) any promised increases in
Cash Compensation of employees of the Company that have not yet been effected.
b. Compensation Plans. Schedule 3.11(b)
contains a complete and accurate list of all compensation plans, arrangements
or practices (the "Compensation Plans") sponsored by the Company or to which
the Company contributes on behalf of its employees, other than Employment
Agreements listed on Schedule 3.11(c) and Employee Benefit
13
<PAGE> 15
Plans listed on Schedule 3.12(a). The Compensation Plans include without
limitation plans, arrangements or practices that provide for performance
awards, and stock ownership or stock options. The Company has provided or made
available to Vision 21 a copy of each written Compensation Plan and a written
description of each unwritten Compensation Plan. Except as set forth on
Schedule 3.11(b), each of the Compensation Plans can be terminated or amended
at will by the Company.
c. Employment Agreements. Except as set
forth on Schedule 3.11(c), the Company is not a party to any employment
agreement ("Employment Agreements") with respect to any of its employees.
Employment Agreements include without limitation employee leasing agreements,
employee services agreements and non-competition agreements.
d. Employee Policies and Procedures.
Schedule 3.11(d) contains a complete and accurate list of all employee manuals
and all material policies, procedures and work-related rules (the "Employee
Policies and Procedures") that apply to employees of the Company. The Company
has provided or made available to Vision 21 a copy of all written Employee
Policies and Procedures and a written description of all material unwritten
Employee Policies and Procedures.
e. Unwritten Amendments. Except as
described on Schedule 3.11(b), 3.11(c), or 3.11(d), no material unwritten
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans or, Employee Policies and
Procedures.
f. Labor Compliance. The Company has
been and is in compliance with all applicable laws, rules, regulations and
ordinances respecting employment and employment practices, terms and conditions
of employment and wages and hours, except for any such failures to be in
compliance that, individually or in the aggregate, would not result in a
Material Adverse Effect, and the Company is not liable for any arrearages of
wages or penalties for failure to comply with any of the foregoing. The
Company has not engaged in any unfair labor practices or discriminated on the
basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices that would, individually or
in the aggregate, result in a Material Adverse Effect. Except as set forth on
Schedule 3.11(f), there are no (i) unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the actual knowledge of
the Company and the Physician, threatened against the Company before any
federal, state or local court, board, department, commission or agency (nor,
to the knowledge of the Company and the Physician, does any valid basis
therefor exist) or (ii) existing or, to the actual knowledge of the Company
and the Physician, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Company (nor, to the best
knowledge of the Company and the Physician, does any valid basis therefor
exist).
g. Unions. The Company has never been a
party to any agreement with any union, labor organization or collective
bargaining unit. No employees of
14
<PAGE> 16
the Company are represented by any union, labor organization or collective
bargaining unit. Except as set forth on Schedule 3.11(g), to the actual
knowledge of the Company, none of the employees of the Company has threatened
to organize or join a union, labor organization or collective bargaining unit.
h. Aliens. All employees of the Company
are, to the best knowledge of the Company, citizens of, or are authorized in
accordance with federal immigration laws to be employed in, the United States.
3.12. Employee Benefit Plans.
a. Identification. Schedule 3.12(a)
contains a complete and accurate list of all employee benefit plans (within the
meaning of Section 3(3) of ERISA sponsored by the Company or to which the
Company contributes on behalf of its employees and all employee benefit plans
previously sponsored or contributed to on behalf of its employees within the
three (3) years preceding the date hereof (the "Employee Benefit Plans"). The
Company has provided or made available to Vision 21 copies of all plan
documents, determination letters, pending determination letter applications,
trust instruments, insurance contracts, administrative services contracts,
annual reports, actuarial valuations, summary plan descriptions, summaries of
material modifications, administrative forms and other documents that
constitute a part of or are incident to the administration of the Employee
Benefit Plans. In addition, the Company has provided or made available to
Vision 21 a written description of all existing practices engaged in by the
Company that constitute Employee Benefit Plans. Except as set forth on
Schedule 3.12(a) and subject to the requirements of the Code and ERISA, each of
the Employee Benefit Plans can be terminated or amended at will by the Company.
Except as set forth on Schedule 3.12(a), no unwritten amendment exists with
respect to any Employee Benefit Plan. Except as set forth on Schedule
3.12(b)-(l), each of the following paragraphs is true and correct.
b. Administration. Each Employee Benefit
Plan has been administered and maintained in compliance with all applicable
laws, rules and regulations, except where the failure to be in compliance would
not, individually or in the aggregate, result in a Material Adverse Effect.
The Company and the Physician have (i) made all necessary filings with respect
to such Employee Benefit Plans, including the timely filing of Form 5500 if
applicable, and (ii) made all necessary filings, reports and disclosures
pursuant to and have complied with all requirements of the IRS Voluntary
Compliance Resolution Program, if applicable, with respect to all profit
sharing retirement plans and pension plans in which employees of the Company
participate.
c. Examinations. Except as set forth on
Schedule 3.12(c), the Company has not received any notice that any Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency.
15
<PAGE> 17
d. Prohibited Transactions. No
prohibited transactions (within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA) have occurred with respect to any Employee
Benefit Plans.
e. Claims and Litigation. No pending or,
to the actual knowledge of the Company and the Physician, threatened claims,
suits, or other proceedings exist with respect to any Employee Benefit Plan
other than normal benefit claims filed by participants or beneficiaries.
f. Qualification. As set forth in more
detail on Schedule 3.12(f), the Company has received a favorable determination
letter or ruling from the IRS for each of the Employee Benefit Plans intended
to be qualified within the meaning of Section 401(a) of the Code and/or
tax-exempt within the meaning of Section 501(a) of the Code. Except as set
forth on Schedule 3.12(f), no proceedings exist or, to the actual knowledge of
the Company have been threatened that could result in the revocation of any
such favorable determination letter or ruling.
g. Funding Status. No accumulated
funding deficiency (within the meaning of Section 412 of the Code), whether or
not waived, exists with respect to any Employee Benefit Plan or any plan
sponsored by any member of a controlled group (within the meaning of Section
412(n)(6)(B) of the Code) in which the Company is a member ("Controlled
Group"). With respect to each Employee Benefit Plan subject to Title IV of
ERISA, the assets of each such plan are at least equal in value to the present
value of accrued benefits determined on an ongoing basis as of the date hereof.
The Company does not sponsor any Employee Benefit Plan described in Section
501(c)(9) of the Code. None of the Employee Benefit Plans are subject to
actuarial assumptions.
h. Excise Taxes. Neither the Company nor
any member of a Controlled Group has any liability to pay excise taxes with
respect to any Employee Benefit Plan under applicable provisions of the Code or
ERISA.
i. Multiemployer Plans. Neither the
Company nor any member of a Controlled Group is or ever has been obligated to
contribute to a multiemployer plan within the meaning of Section 3(37) of
ERISA.
j. Pension Benefit Guaranty Corporation.
None of the Employee Benefit Plans are subject to the requirements of Title IV
of ERISA.
k. Retirees. The Company has no
obligation or commitment to provide medical, dental or life insurance benefits
to or on behalf of any of its employees who may retire or any of its former
employees who have retired except as may be required pursuant to the
continuation of coverage provisions of Section 4980B of the Code and Sections
501 through 508 of ERISA.
16
<PAGE> 18
l. Other Compensation. Except as set
forth on Schedule 3.11(a), 3.11(b), 3.11(c), 3.11(d) and 3.12(a), neither the
Company, the Physician nor any Professional Employee is a party to any
compensation or debt arrangement with any person relating to the provision of
healthcare related services other than arrangements with the Company or the
Physician.
3.13. Absence of Certain Changes. Except as set forth
on Schedule 3.13 or as contemplated in this Agreement, since the Company
Balance Sheet Date, the Company has not:
a. suffered a Material Adverse Effect,
whether or not caused by any deliberate act or omission of the Company or the
Physician;
b. contracted for the purpose of
acquiring any capital asset having a cost in excess of $5,000 or made any
single expenditure in excess of $5,000;
c. incurred any indebtedness for borrowed
money (other than short-term borrowings in the ordinary course of business), or
issued or sold any debt securities;
d. incurred or discharged any material
liabilities or obligations except in the ordinary course of business;
e. paid any amount on any indebtedness
prior to the due date, forgiven or cancelled any claims or any debt in excess
of $5,000, or released or waived any rights or claims except in the ordinary
course of business;
f. mortgaged, pledged or subjected to any
security interest, lien, lease or other charge or encumbrance any of its
properties or assets (other than statutory liens arising in the ordinary course
of business or other liens that do not materially detract from the value or
interfere with the use of such properties or assets);
g. suffered any damage or destruction to
or loss of any assets (whether or not covered by insurance) that has,
individually or in the aggregate, resulted in a Material Adverse Effect;
h. acquired or disposed of any assets
having an aggregate value in excess of $5,000, except in the ordinary course of
business;
i. written up or written down the
carrying value of any of its assets, other than accounts receivable in the
ordinary course of business;
j. changed the costing system or
depreciation methods of accounting for its assets in any material respect;
17
<PAGE> 19
k. lost or terminated any employee,
patient, customer or supplier that has, individually or in the aggregate,
resulted in a Material Adverse Effect;
l. increased the compensation of any
director, officer, key employee or consultant, except as disclosed on Schedule
3.11(a);
m. increased the compensation of any
employee (except for increases in the ordinary course of business consistent
with past practice) or hired any new employee who is expected to receive
annualized compensation of at least $15,000;
n. made any payments to or loaned any
money to any person or entity referred to in Section 3.25;
o. formed or acquired or disposed of any
interest in any corporation, partnership, joint venture or other entity;
p. redeemed, purchased or otherwise
acquired, or sold, granted or otherwise disposed of, directly or indirectly,
any of its capital stock or securities, or agreed to change the terms and
conditions of any such capital stock, securities or rights;
q. entered into any agreement providing
for total payments in excess of $5,000 in any twelve (12) month period with any
person or group, or modified or amended in any material respect the terms of
any such existing agreement, except in the ordinary course of business;
r. entered into, adopted or amended any
Employee Benefit Plan, except as contemplated hereby or the other agreements
contemplated hereby; or
s. entered into any other commitment or
transaction or experienced any other event that would materially interfere with
its performance under this Agreement or any other agreement or document
executed or to be executed pursuant to this Agreement, or otherwise has,
individually or in the aggregate, resulted in a Material Adverse Effect.
3.14. Title; Leased Assets.
a. Real Property. The Company does not
own any interest (other than leasehold interests referred to on Schedule
3.14(c)) in real property. The leased real property referred to on Schedule
3.14(c) constitutes the only real property necessary for the conduct of the
Company's business.
b. Personal Property. Except as set
forth on Schedule 3.14(b), the Company and/or the Physician has good, valid and
marketable title to all the personal property constituting the Nonmedical
Assets. The personal property constituting the Nonmedical
18
<PAGE> 20
Assets constitute the only personal property necessary for the conduct of
the Company's business (except for the Medical Assets). Upon consummation of
the transactions contemplated hereby, such interest in the Nonmedical Assets
shall be free and clear of all security interests, liens, claims and
encumbrances, other than those set forth on Schedule 3.14(b) (the "Permitted
Encumbrances") and statutory liens arising in the ordinary course of business
or other liens that do not materially detract from the value or interfere with
the use of such properties or assets.
c. Leases. A list and brief description
of (i) all leases of real property and (ii) leases of personal property
involving rental payments within any twelve (12) month period in excess of
$12,000, in either case to which the Company is a party, either as lessor or
lessee, are set forth on Schedule 3.14(c). All such leases are valid and, to
the knowledge of the Company, enforceable in accordance with their respective
terms except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
3.15. Commitments.
a. Commitments; Defaults. Except as set
forth on Schedule 3.15 or as otherwise disclosed pursuant to this Agreement,
the Company is not a party to nor bound by, nor are any of the shares of
Company Common Stock subject to, nor are the Nonmedical Assets or the assets or
the business of the Company bound by, whether or not in writing, any of the
following (collectively, "Commitments"):
i) partnership or joint
venture agreement;
ii) guaranty or suretyship,
indemnification or contribution agreement or performance bond;
iii) debt instrument, loan
agreement or other obligation relating to indebtedness for borrowed money or
money lent or to be lent to another;
iv) contract to purchase real
property;
v) agreement with dealers or
sales or commission agents, public relations or advertising agencies,
accountants or attorneys (other than in connection with this Agreement and the
transactions contemplated hereby) involving total payments within any twelve
(12) month period in excess of $2,000 and which is not terminable on thirty
(30) days' notice or without penalty;
vi) agreement relating to any
material matter or transaction in which an interest is held by a person or
entity that is an Affiliate of the Company or the Physician;
19
<PAGE> 21
vii) agreement for the
acquisition of services, supplies, equipment, inventory, fixtures or other
property involving more than $2,000 in the aggregate;
viii) powers of attorney;
ix) contracts containing
non-competition covenants;
x) agreement providing for the
purchase from a supplier of all or substantially all of the requirements of the
Company of a particular product or services;
xi) agreements regarding
clinical research;
xii) agreements with Payors and
contracts to provide medical or health care services; or
xiii) any other agreement or
commitment not made in the ordinary course of business or that is material to
the business, operations, condition (financial or otherwise) or results of
operations of the Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Vision 21. Except as set forth on Schedule 3.15
and to the Company's best knowledge, there are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that,
with the giving of notice or lapse of time or both, would constitute defaults
by the Company or, to the best knowledge of the Company, any other party to a
material Commitment, and no penalties have been incurred nor are amendments
pending, with respect to the material Commitments, except as described on
Schedule 3.15. The Commitments are in full force and effect and are valid and
enforceable obligations of the Company, and to the best knowledge of the
Company, are valid and enforceable obligations of the other parties thereto, in
accordance with their respective terms, and no defenses, off-sets or
counterclaims have been asserted or, to the best knowledge of the Company, may
be made by any party thereto (other than the Company), nor has the Company
waived any rights thereunder, except as described on Schedule 3.15. Except as
set forth on Schedule 3.15, no consents or approvals are required under the
terms of any agreement listed on Schedule 3.15 in connection with the
transactions contemplated herein; including without limitation the Merger.
b. No Cancellation or Termination of
Commitment. Except as disclosed pursuant to this Agreement or contemplated
hereby, and except where such default would not have a Material Adverse Effect
on the business, (i) neither the Company nor the Physician has received notice
of any plan or intention of any other party to any Commitment to exercise any
right to cancel or terminate any Commitment, and the Company does not know of
any fact that would justify the exercise of such a right; and (ii) neither the
Company nor the Physician currently contemplates, or has reason to believe any
other person currently contemplates, any amendment or change to any Commitment.
20
<PAGE> 22
3.16. Insurance. The Company, the Physician and each
Professional Employee carries property, liability, malpractice, workers'
compensation and such other types of insurance pursuant to the insurance
policies listed and briefly described on Section 3.16 (the "Insurance
Policies"). The Insurance Policies are all of the insurance policies of the
Company, the Physician and each Professional Employee relating to the business
of the Company and the Nonmedical Assets. All of the Insurance Policies are
issued by insurers of recognized responsibility, and, to the best knowledge of
the Company, are valid and enforceable policies, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. All Insurance Policies
shall be maintained in force without interruption up to and including the
Closing Date. True, complete and correct copies of all Insurance Policies have
been provided or made available to Vision 21. Except as set forth on Schedule
3.16, neither the Company nor the Physician has received any notice or other
communication from any issuer of any Insurance Policy cancelling such policy,
materially increasing any deductibles or retained amounts thereunder, and to
the actual knowledge of the Company, no such cancellation or increase of
deductibles, retainages or premiums is threatened. Except as set forth on
Schedule 3.16, neither the Company, the Physician nor any Professional Employee
has any outstanding claims, settlements or premiums owed against any Insurance
Policy, and the Company, the Physician and each Professional Employee has given
all notices or has presented all potential or actual claims under any Insurance
Policy in due and timely fashion. Except as set forth on Schedule 3.16, since
January 1, 1994, neither the Company, the Physician nor any Professional
Employee has filed a written application for any professional liability
insurance coverage which has been denied by an insurance agency or carrier, and
the Company, the Physician and each Professional Employee has been continuously
insured for professional malpractice claims for at least the past seven (7)
years (or such shorter periods of time that any Professional Employee has been
licensed to practice medicine). Schedule 3.16 also sets forth a list of all
claims under any Insurance Policy in excess of $10,000 per occurrence filed by
the Company, the Physician and each Professional Employee since January 1,
1994.
3.17. Proprietary Rights and Information. Set forth on
Schedule 3.17 is a true and correct description of the following ("Proprietary
Rights"):
a. all trademarks, trade-names, service
marks and other trade designations, including common law rights, registrations
and applications therefor, and all patents and applications therefor currently
owned, in whole or in part, by the Company, and all licenses, royalties,
assignments and other similar agreements relating to the foregoing to which the
Company is a party (including the expiration date thereof if applicable); and
b. all agreements relating to technology,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other healthcare providers), or which it licenses or authorizes others to use.
21
<PAGE> 23
The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, such ownership or use does not conflict,
infringe or violate the rights of any other person. Except as disclosed on
Schedule 3.17, no consent of any person will be required for the use thereof by
Vision 21 upon consummation of the transactions contemplated hereby and the
Proprietary Rights are freely transferable. No claim has been asserted by any
person to the ownership of or for infringement by the Company of the
proprietary right of any other person, and the Company does not know of any
valid basis for any such claim. To the best knowledge of the Company and the
Physician, the Company has the right to use, free and clear of any adverse
claims or rights of others, all trade secrets, customer lists and proprietary
information required for the marketing of all merchandise and services formerly
or presently sold or marketed by it.
3.18. Taxes.
a. Filing of Tax Returns. The Company
has duly and timely filed (in accordance with any extensions duly granted by
the appropriate governmental agency, if applicable) with the appropriate
governmental agencies all federal, state, local or foreign income, excise,
corporate, franchise, property, sales, use, payroll, withholding, provider,
value added and other tax returns and reports (collectively the "Tax Returns")
required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns or
reports are complete and accurate in all material respects and properly reflect
the taxes of the Company for the periods covered thereby.
b. Payment of Taxes. Except for such
items as the Company may be disputing in good faith by proceedings in
compliance with applicable law, which are described on Schedule 3.18, (i) the
Company has paid all taxes, penalties, assessments and interest that have
become due with respect to any Tax Returns that it has filed and has properly
accrued on its books and records for all of the same that have not yet become
due, and (ii) the Company is not delinquent in the payment of any tax,
assessment or governmental charge.
c. No Pending Deficiencies,
Delinquencies, Assessments or
<PAGE> 24
Audits. Except as set forth on Schedule 3.18, the Company has not received
any notice that any tax deficiency or delinquency has been asserted against the
Company. There is no unpaid assessment, proposal for additional taxes,
deficiency or delinquency in the payment of any of the taxes of the Company
that could be asserted by any taxing authority. There is no taxing authority
audit of the Company pending, or to the actual knowledge of the Company,
threatened, and the results of any completed audits are properly reflected in
the Financial Statements. The Company has not, to its best knowledge, violated
any federal, state, local or foreign tax law.
d. No Extension of Limitation Period.
The Company has not granted an extension to any taxing authority of the
limitation period during which any tax liability may be assessed or collected.
22
<PAGE> 25
e. All Withholding Requirements
Satisfied. All monies required to be withheld by the Company and paid to
governmental agencies for all income, social security, unemployment insurance,
sales, excise, use, and other taxes have been collected or withheld and paid to
the respective governmental agencies.
f. Foreign Person. Neither the Company
nor the Physician is a foreign person, as such term is referred to in Section
1445(f)(3) of the Code.
g. Safe Harbor Lease. None of the
Nonmedical Assets constitutes property that the Company, Vision 21, or any
Affiliate of Vision 21, will be required to treat as being owned by another
person pursuant to the "Safe Harbor Lease" provisions of Section 168(f)(8) of
the Code prior to repeal by the Tax Equity and Fiscal Responsibility Act of
1982.
h. Tax Exempt Entity. None of the assets
of the Company and none of the Nonmedical Assets are subject to a lease to a
"tax exempt entity" as such term is defined in Section 168(h)(2) of the Code.
i. Collapsible Corporation. The Company
has not at any time consented, and the Physician will not permit the Company to
elect, to have the provisions of Section 341(f)(2) of the Code apply to it.
j. Boycotts. The Company has not at any
time participated in or cooperated with any international boycott as defined in
Section 999 of the Code.
k. Parachute Payments. No payment
required or contemplated to be made by the Company will be characterized as an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code.
l. S Corporation. The Company has not
made an election to be taxed as an "S" corporation under Section 1362(a) of the
Code.
m. Personal Service Corporation. The
Company is not a personal service corporation subject to the provisions of
Section 269A of the Code.
n. Personal Holding Company. The Company
is not or has not been a personal holding company within the meaning of Section
542 of the Code.
3.19. Compliance with Laws. The Company has not
failed, and neither the Company nor the Physician is aware of any failure by
the Physician or any Professional Employee to comply with all applicable laws,
regulations and licensing requirements relating to the operation of the
Practice or failure to file with the proper authorities all necessary
statements and reports except where the failure to so comply or file would not,
individually or in the aggregate, result in a Material Adverse Effect. There
are no existing violations by the
23
<PAGE> 26
Company, and neither the Company nor the Physician is aware of any
existing violations by the Physician or any Professional Employee of any
federal, state or local law or regulation that could, individually or in the
aggregate, result in a Material Adverse Effect. The Company, the Physician and
each Professional Employee possesses all necessary licenses, franchises,
permits and governmental authorizations for the conduct of the Company's
business as now conducted, all of which are listed (with expiration dates, if
applicable) on Schedule 3.19. Except as set forth on Schedule 3.19, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government
authorizations, except for any such default, breach or violation that would
not, individually or in the aggregate, have a Material Adverse Effect. Except
as set forth on Schedule 3.19, since January 1, 1993, neither the Company, the
Physician nor, to the knowledge of the Company based on a certificate in
writing obtained from each Professional Employee, any Professional Employee has
received any notice from any federal, state or other governmental authority or
agency having jurisdiction over its, his or her properties or activities, or
any insurance or inspection body, that its, his or her operations or any of
its, his or her properties, facilities, equipment, or business practices fail
to comply with any applicable law, ordinance, regulation, building or zoning
law, or requirement of any public or quasi-public authority or body, except
where failure to so comply would not, individually or in the aggregate, have a
Material Adverse Effect.
3.20. Finder's Fee. Except as set forth on Schedule
3.20, the Company has not incurred any obligation for any finder's, brokers or
agent's fee in connection with the transactions contemplated hereby.
3.21. Litigation. Except as described on Section 3.21
or otherwise disclosed pursuant to this Agreement, there are no legal actions
or administrative proceedings or investigations instituted, to the actual
knowledge of the Company or the Physician, which affect or could affect the
outstanding shares of Company Common Stock, the Nonmedical Assets or the
operation, business, condition (financial or otherwise), or results of
operations of the Company which (i) if successful could, individually or in the
aggregate, have a Material Adverse Effect or (ii) could adversely affect the
ability of the Company or the Physician to effect the transactions contemplated
hereby. Neither the Company nor the Physician is (a) subject to any continuing
court or administrative order, judgment, writ, injunction or decree applicable
specifically to the Nonmedical Assets, the Company or to its business, assets,
operations or employees or (b) in default with respect to any such order,
judgment, writ, injunction or decree. The Company has no knowledge of any
valid basis for any such action, proceeding or investigation. Except as set
forth on Schedule 3.21, all medical malpractice claims asserted, general
liability incidents and incident reports have been submitted to the Company's
insurer therefor. All claims made or threatened against the Company in excess
of its deductible are covered under its Insurance Policies.
3.22. Condition of Fixed Assets. All of the fixtures,
structures and equipment reflected in the Financial Statements and used by the
Company in its business, are in good condition and repair, subject to normal
wear and tear, and conform in all material
24
<PAGE> 27
respects with all applicable ordinances, regulations and other laws, and the
Company has no actual knowledge of any latent defects therein.
3.23. Distributions and Repurchases. No distribution,
payment or dividend of any kind has been declared or paid by the Company on any
of its capital stock since the Company Balance Sheet Date. No repurchase of
any of the Company's capital stock has been approved, effected or is pending,
or is contemplated by the Board of Directors of the Company.
3.24. Banking Relations. Set forth on Schedule 3.24 is
a complete and accurate list of all borrowing and investing arrangements that
the Company has with any bank or other financial institution, indicating with
respect to each relationship the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the
person or persons authorized in respect thereof.
3.25. Ownership Interests of Interested Persons;
Affiliations. Except as set forth on Schedule 3.25, no officer, supervisory
employee or director of the Company, or their respective spouses, children or
Affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier of the Company or any
organization that has a material contract or arrangement with the Company.
Except as may be disclosed pursuant to this Agreement, neither the Company, nor
any of its directors, officers, employees or consultants, nor any Affiliate of
such person is, or within the last three (3) years was, a party to any
contract, lease, agreement or arrangement, including, but not limited to, any
joint venture or consulting agreement with any physician, hospital, pharmacy,
home health agency or other person which is in a position to make or influence
referrals to, or otherwise generate business for, the Company.
3.26. Investments in Competitors. Except as disclosed
on Schedule 3.26, neither the Company nor the Physician owns directly or
indirectly any interests or has any investment in any person that is a
Competitor of the Company.
3.27. Environmental Matters.
a. Environmental Laws. To the best
knowledge of the Company and the Physician, neither the Company nor any of the
Non-medical assets (including the leased real property described on Schedule
3.14(c)) are currently in violation of, or subject to any existing, pending or,
to the actual knowledge of the Company threatened, investigation or inquiry by
any governmental authority or to any remedial obligations under, any federal,
state or local laws or regulations pertaining to health or the environment
("Environmental Laws"), except for any such violations, investigations or
inquiries that would not, individually or in the aggregate, result in a
Material Adverse Effect.
b. Permits. The Company is not required
to obtain, and has no knowledge of any reason Vision 21 or the Surviving
Corporation will be required to obtain, any
25
<PAGE> 28
permits, licenses or similar authorizations to occupy, operate or use any
buildings, improvements, fixtures and equipment owned or leased by the Company
by reason of any Environmental Laws.
c. Superfund List. To the best knowledge
of the Company, none of the Nonmedical Assets (including the Company's leased
real property described on Schedule 3.14(c)) are on any federal or state
"Superfund" list or subject to any environmentally related liens, except such
liens as would not, individually or in the aggregate, result in a Material
Adverse Effect.
3.28. Certain Payments. Neither the Company nor any
director, officer or employee of the Company acting for or on behalf of the
Company, has paid or caused to be paid, directly or indirectly, in connection
with the business of the Company:
a. to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or
b. any contribution to any political
party or candidate (other than from personal funds of directors, officers or
employees not reimbursed by their respective employers or as otherwise
permitted by applicable law).
3.29. Medical Waste. With respect to the generation,
transportation, treatment, storage, and disposal, or other handling of medical
waste, to the best knowledge of the Company and the Physician, the Company has
complied with all material federal, state or local laws or regulations
pertaining to medical waste.
3.30. Medicare and Medicaid Programs. The Company, the
Physician and each Professional Employee is qualified for participation in the
Medicare and Medicare programs and is party to provider agreements for such
programs which are in full force and effect with no events of default having
occurred thereunder. The Company, the Physician and each Professional Employee
has timely filed all claims or other reports required to be filed prior to the
Closing Date with respect to the purchase of services by third-party payors
("Payors"), including but not limited to Medicare and Medicaid programs, except
where the failure to file would not, individually or in the aggregate, result
in a Material Adverse Effect. All such claims or reports are complete and
accurate in all material respects. The Company, the Physician and each
Professional Employee has paid or has properly recorded on the Financial
Statements all actually known and undisputed refunds, discounts or adjustments
which have become due pursuant to such claims, and neither the Company, the
Physician nor any Professional Employee has any material liability to any Payor
with respect thereto, except as has been reserved for in the Company Balance
Sheet. There are no pending appeals, overpayment determinations, adjustments,
challenges, audits, litigation, or notices of intent to reopen Medicare and/or
Medicaid claims determinations or other reports required to be filed by the
Company, the Physician or any Professional Employee in order to be paid by a
Payor for services rendered. Neither the Company, nor any of its directors,
officers, employees, consultants or the Physician
26
<PAGE> 29
has been convicted of, or pled guilty or nolo contendere to, patient abuse
or neglect, or any other Medicare or Medicaid program-related offense. Neither
the Company, nor its directors, officers, the Physician, or to the best of the
Company's knowledge, its employees or consultants, has committed any offense
which may serve as the basis for suspension or exclusion from the Medicare and
Medicaid programs, including but not limited to, defrauding a government
program, loss of a license to provide health services, and failure to provide
quality care.
3.31. Fraud and Abuse. To the best knowledge of the
Company and the Physician, the Company, its officers and directors, the
Professional Employees, and the other persons and entities providing
professional services for the Company, have not engaged in any activities which
are prohibited under 42 U.S.C. Section Section 1320-7, 7a or 7b or 42 U.S.C.
Section 1395nn (subject to the exceptions set forth in such legislation), or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following:
a. knowingly and willfully making or
causing to be made a false statement or representation of a material fact in
any application for any benefit or payment;
b. knowingly and willfully making or
causing to be made a false statement or representation of a material fact for
use in determining rights to any benefit or payment;
c. failure to disclose knowledge by a
Medicare or Medicaid claimant of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to fraudulently secure such benefit or payment;
d. knowingly and willfully offering,
paying, soliciting or receiving any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind (i) in return for referring an individual to a person for the furnishing
or arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing, or ordering, or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service, or item for which payment may
be made in whole or in part by Medicare or Medicaid; and
e. referring a patient for designated
health services (as defined in 42 U.S.C. Section 1395nn) to or providing
designated health services to a patient upon a referral from an entity or
person with which the Physician or the Professional Employee or an immediate
family member has a financial relationship, and to which no exception under 42
U.S.C. Section 1395nn applies.
3.32. Payors. Schedule 3.32 sets forth a true, correct
and complete list of the names and addresses of each Payor, including any
private pay patient as a single payor, of
27
<PAGE> 30
the Company's services which accounted for more than 10% of the revenues of
the Company in the three (3) previous fiscal years. Except as set forth on
Schedule 3.32, the Company has good relations with such Payors and none of such
Payors has notified the Company that it intends to discontinue its relationship
with the Company or to deny any claims submitted to such Payor for payment.
3.33. Prohibitions on the Corporate Practice of
Medicine. To the best of the Company's and the Physician's knowledge, the
actions, transactions or relationships arising from, and contemplated by this
Agreement, do not violate any law, rule or regulation relating to the corporate
practice of medicine. The Company and the Physician accordingly agree that the
Company, the Physician and New P.C. will not, in an attempt to void or nullify
any document contemplated herein or any relationship involving Vision 21 or the
Company or the Physician or New P.C., sue, claim, aver, allege or assert that
any such document contemplated herein or any such relationship violates any
law, rule or regulation relating to the corporate practice of medicine and
expressly warrant that this Section is valid and enforceable by Vision 21, and
recognize that Vision 21 has relied upon the statements herein in closing the
transaction.
3.34. Acquisition Proposals. Except for the
negotiations, offers and agreements with Vision 21 and its representatives, the
Company has not received during the twelve (12) month period preceding the date
of this Agreement any proposal or offer (including, without limitation, any
proposal or offer of its stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, the Company (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") nor has the Company or any of its employees, agents, representatives
or stockholders engaged in any negotiations concerning, or provided any
confidential information or data to, or had any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitated any effort or
attempted to make or implement an Acquisition Proposal.
3.35. Investment Company Status. The Company is not
currently, nor has it ever been, an "investment company" as that term is
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.36. Equal Exchange; Consistent Treatment of Expenses.
Physician and the Company believe that the fair market value of all the Company
Common Stock shall be approximately equal to the fair market value of the
Merger Consideration at the Effective Time. The Company has, in presenting
information concerning the Company's and New P.C.'s expenses to Vision 21 for
the purpose of determining the Company's value, separated out those expenses
which shall be borne by New P.C. in a manner which is consistent with the
treatment of expenses which shall be the responsibility of New P.C. pursuant to
the Business Management Agreement.
28
<PAGE> 31
3.37. Insolvency Proceedings. The Company is not
currently under the jurisdiction of a Federal or state court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
3.38. Positive Net Worth. On the Closing Date the fair
market value of the assets of the Company will equal or exceed the sum of the
liabilities of the Company plus the amount of any other liabilities to which
the assets of the Company are subject.
3.39. Accounts Receivable/Payable. The accounts
receivable of the Company relating to the ownership and operation of the
Practice reflected on the Company Balance Sheet, to the extent uncollected on
the date hereof, are, and the accounts receivable of the Company relating to
the ownership and operation of the Practice to be reflected on the books of the
Company on the Closing Date (the "Accounts Receivable") will be, valid,
existing and collectible within six months from the Closing Date (taking into
consideration the allowance for doubtful accounts set forth in the Financial
Statements) using reasonably diligent collection methods taking into account
the size and nature of the receivable, and represent amounts due for goods sold
and delivered or services performed. There are not, and on the date of Closing
there will not be, any refunds, discounts, set-offs, defenses, counterclaims or
other adjustments payable or assessable with respect to the Accounts
Receivable. The Company has collected Accounts Receivable only in the ordinary
course and has not changed collection procedures or methods nor accelerated the
pace of such collection efforts in anticipation of the transactions
contemplated in this Agreement. The Company has paid accounts payable in the
ordinary course and has not changed payment procedures or methods nor delayed
the timing of such payments in anticipation of the transactions contemplated in
this Agreement.
3.40. Projections. There is no fact, development or
threatened development with respect to the markets, products, services,
clients, patients, facilities, personnel, vendors, suppliers, operations,
assets or prospects of the Practice which are known to the Company or the
Physician which would materially adversely affect the projected fiscal year
1997 earnings of New P.C. disclosed to Vision 21 by Physician, other than such
conditions as may affect as a whole the economy or the practice of medicine
generally.
3.41. Disclosure. To the best of the Company's and the
Physician's knowledge, no representation, warranty or statement made by the
Company or the Physician in this Agreement or any of the exhibits or schedules
hereto, or any agreements, certificates, documents or instruments delivered or
to be delivered to Vision 21 in accordance with this Agreement or the other
documents contemplated herein, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
under which they were made, not misleading. The Company and the Physician do
not know of any fact or condition (other than general economic conditions or
legislative or administrative changes in health-care delivery) which materially
adversely affects, or in the future may materially affect, the condition,
properties, assets, liabilities, business, operations or prospects of the
Practice which has not been set forth herein or in the Schedules provided
herewith.
29
<PAGE> 32
4. REPRESENTATIONS AND WARRANTIES OF THE PHYSICIAN. The
Physician represents and warrants to Vision 21 that the following are true and
correct as of the date hereof, and shall be true and correct through the
Closing Date as if made on that date:
4.1. Validity; Physician Capacity. This Agreement,
the Physician Employment Agreement, and each other agreement contemplated
hereby or thereby have been, or will be as of the Closing Date, duly executed
and delivered by the Physician and constitute or will constitute legal, valid
and binding obligations of the Physician, enforceable against the Physician in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies. The Physician has legal capacity to
enter into and perform this Agreement and his Physician Employment Agreement.
4.2. No Violation. Except as set forth on Schedule
4.2, neither the execution, delivery or performance of this Agreement, other
agreements of the Physician contemplated hereby or thereby, nor the
consummation of the transactions contemplated hereby or thereby, will (a)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, indenture or other
instrument under which the Physician is bound or to which any of his property
or the shares of Company Common Stock are subject, or result in the creation or
imposition of any security interest, lien, charge or encumbrance upon any of
his property or the shares of Company Common Stock or (b) to the best knowledge
of the Physician, violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
4.3. Personal Holding Company. The Physician does not
own the shares of Company Common Stock, directly or indirectly, beneficially or
of record, through a personal holding company.
4.4. Transfers of the Company Common Stock. Set forth
on Schedule 4.4 is a list of all transfers or other transactions involving
capital stock of the Company since January 1, 1994. All transfers of Company
Common Stock by the Physician have been made for valid business reasons and not
in anticipation or contemplation of the consummation of the transactions
contemplated by this Agreement.
4.5. Consents. Except as may be required under the
Exchange Act, the Securities Act, the Corporation Law and state securities
laws, or otherwise disclosed pursuant to this Agreement, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, or any other person is required to authorize, or
is required in connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of the Physician.
4.6. Certain Payments. The Physician has not paid or
caused to be paid, directly or indirectly, in connection with the business of
the Company:
30
<PAGE> 33
a. to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or
b. any contribution to any political
party or candidate (other than from personal funds not reimbursed by the
Company or as otherwise permitted by applicable law).
4.7. Finder's Fee. Except as set forth on Schedule
4.7, the Physician has not incurred any obligation for any finder's, broker's
or agent's fee in connection with the transactions contemplated hereby.
4.8. Ownership of Interested Persons; Affiliations.
Except as set forth on Schedule 4.8, neither the Physician nor his spouse,
children or Affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial arrangement
with, or serves as an officer or director of, any customer or supplier of the
Company or any organization that has a material contact or arrangement with the
Company. Neither the Physician nor any of his Affiliates is, or with the
last three (3) years was, a party to any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement with any physician, hospital, pharmacy, home health agency or other
person which is in a position to make or influence referrals to, or otherwise
generate business for, the Company.
4.9. Investments in Competitors. Except as disclosed
on Schedule 4.9, the Physician does not own directly or indirectly any
interests or have any investment in any person that is a Competitor of the
Company.
4.10. Litigation. Except as disclosed on Schedule
4.10, there are no claims, actions, suits, proceedings (arbitration or
otherwise) or investigations pending or, to the Physician's knowledge,
threatened against the Physician at law or at equity in any court or before or
by any Governmental Authority, and, to the Physician's knowledge, there are no,
and have not been any, facts, conditions or incidents that may result in any
such actions, suits, proceedings (arbitration or otherwise) or investigations.
Except as set forth on Schedule 4.10, there have been no disciplinary ,
revocation or suspension proceedings or similar types of claims, actions or
proceedings, hearings or investigations against the Physician or the Company.
4.11. Permits. To the best of the Physician's
knowledge, the Physician has all permits, licenses, orders and approvals of all
Governmental Authorities necessary to perform the services performed by the
Physician in connection with the conduct of the Practice. All such permits,
licenses, orders and approvals are in full force and effect and no suspension
or cancellation of any of them is pending or threatened. To the best of the
Physician's knowledge, none of such permits, licenses, orders or approvals will
be adversely affected by the consummation of the transactions contemplated
herein. The Physician is a participating physician, as such term is defined by
the Medicare and Medicaid programs, and the Physician
31
<PAGE> 34
has not been disciplined, sanctioned or excluded from either the Medicare
or Medicaid programs and has not been subject to any plan of correction imposed
by any professional review body.
4.12. Staff Privileges. Schedule 4.12 lists all
hospitals at which the Physician has full staff privileges. Such staff
privileges have not been revoked, surrendered, suspended or terminated, and to
the Physician's knowledge, there are no, and have not been any, facts,
conditions or incidents that may result in any such revocation, surrender,
suspension or termination.
4.13. Intentions. Except as set forth on Schedule
4.13, the Physician intends to continue practicing medicine on a full-time
basis for at least the next five (5) years with the Company and does not know
of any fact or condition that materially adversely affects, or in the future
may materially adversely affect, his ability or intention to practice medicine
on a full-time basis for the next five (5) years with the Company.
5. REPRESENTATIONS AND WARRANTIES OF VISION 21. Vision 21
represents and warrants to the Company and the Physician that the following are
true and correct as of the date hereof and shall be true and correct as of the
Closing Date; when used in this Section 5, the term "best knowledge" shall mean
the best knowledge of those individuals listed on Schedule 5:
5.1. Organization and Good Standing. Vision 21 is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Florida, with all requisite corporation power and
authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. At or prior to Closing, Vision 21 will be
qualified to do business as a foreign corporation in the jurisdictions listed
on Schedule 5.1.
5.2. Capitalization. The authorized capital stock of
Vision 21 consists of 50,000,000 shares of Vision 21 Common Stock, of which
5,465,673 shares are issued and outstanding. Immediately prior to the Closing,
the authorized capital stock of Vision 21 will consist of 50,000,000 shares of
Vision 21 Common Stock, of which 5,465,673 shares will be issued and
outstanding.
5.3. Corporate Records. The copies of the Articles of
Incorporation and Bylaws, and all amendments thereto, of Vision 21 that have
been delivered or made available to the Company and the Physician are true,
correct and complete copies thereof, as in effect on the date hereof. The
minute books of Vision 21, copies of which have been delivered or made
available to the Company and the Physician, contain accurate minutes of all
meetings of, and accurate consents to all actions taken without meetings by,
the Board of Directors (and any committees thereof) and the stockholders of
Vision 21, since its formation.
5.4. Authorization and Validity. The execution,
delivery and performance by Vision 21 of this Agreement and the other
agreements contemplated hereby, and the
32
<PAGE> 35
consummation of the transactions contemplated hereby and thereby, have
been duly authorized by Vision 21. This Agreement and each other agreement
contemplated hereby to be executed by Vision 21 have been or will be as of the
Closing Date duly executed and delivered by Vision 21 and constitute or will
constitute legal, valid and binding obligations of Vision 21, enforceable
against Vision 21 in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
5.5. Compliance. The execution and delivery of the
documents contemplated hereunder and the consummation of the transactions
contemplated thereby by Vision 21 shall not (i) violate any provision of Vision
21's organizational documents, (ii) violate any material provision of or result
in the breach of or entitle any party to accelerate (whether after the giving
of notice or lapse of time or both) any material obligation under, any
mortgage, lien, lease, contract, license, instrument or any other agreement to
which Vision 21 is a party, (iii) result in the creation or imposition of any
material lien, charge, pledge, security interest or other material encumbrance
upon any property of Vision 21 or (iv) violate or conflict with any order,
award, judgment or decree or other material restriction or to the best of
Vision 21's knowledge violate or conflict with any law, ordinance or regulation
to which Vision 21 or its property is subject.
5.6. Consents. No consent, approval, order or
authorization of or registration, declaration, or filing with, any Governmental
Authority or other person is required in connection with the execution and
delivery of the documents contemplated herein by Vision 21 or the consummation
by such party of the transactions contemplated thereby, except for those
consents or approvals set forth on Schedule 5.6.
5.7. Finder's Fee. Except as disclosed on Schedule
5.7, Vision 21 has not incurred any obligation for any finder's, broker's or
agent's fee in connection with the transactions contemplated hereby.
5.8. Capital Stock. The issuance and delivery by
Vision 21 of shares of Vision 21 Common Stock in connection with the Merger
have been duly and validly authorized by all necessary corporate action on the
part of Vision 21. The shares of Vision 21 Common Stock to be issued in
connection with the Merger, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable and will not
have been issued in violation of any preemptive rights, rights of first refusal
or similar rights of any of Vision 21's stockholders, or any federal or state
law, including, without limitation, the registration requirements of applicable
federal and state securities laws.
5.9. Continuity of Business Enterprise. It is the
present intention of Vision 21 to continue at least one significant historic
business line of the Company, or to use at least a significant portion of the
Company's historic business assets in a business, in each case within the
meaning of Treasury Regulation Section 1.368- 1(d).
33
<PAGE> 36
5.10. Vision 21 Financial Statements; Confidential
Information Memorandum. The balance sheet of Vision 21 as of September 30,
1996 and the related statements of income of Vision 21 for the first nine (9)
months of Vision 21's 1996 fiscal year, without giving effect to the Related
Acquisitions, including the costs incurred during such fiscal year associated
with any Registration Statement, shall be contained in the Confidential
Information Memorandum to be provided to the Physician and the Company by
Vision 21 prior to the Closing (collectively, with the related notes thereto,
the "Vision 21 Financial Statements"). The Vision 21 Financial Statements (a)
fairly present the financial condition and results of operations of Vision 21,
without giving effect to the Related Acquisitions, as of the dates and for the
periods indicated; and (b) have been prepared in conformity with GAAP (subject
to normal year-end adjustments and the absence of notes for any unaudited
interim financial statement), except as otherwise indicated in the Vision 21
Financial Statements. Subject to the foregoing and the other qualifications
contained elsewhere in this Agreement, to the best knowledge of Vision 21, the
Confidential Information Memorandum, as amended on December 17, 1996, is true
and correct in all material respects.
5.11. Liabilities and Obligations. Except as disclosed
on Schedule 5.11, the Vision 21 Financial Statements shall reflect all material
liabilities of Vision 21, accrued, contingent or otherwise, that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with GAAP. Except as set forth on Schedule 5.11 or in the Vision
21 Financial Statements, Vision 21 is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity,
and Vision 21 does not know of any valid basis for the assertion of any other
claims or liabilities of any nature or in any amount.
5.12. Compliance with Laws. Vision 21 has not failed
to comply with any applicable laws, regulations and licensing requirements or
failed to file with the proper authorities any necessary statements and reports
except where the failure to so comply or file would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no existing
violations by Vision 21 of any federal, state or local law or regulation that
could, individually or in the aggregate, result in a Material Adverse Effect.
Vision 21 possesses all necessary licenses, franchises, permits and
governmental authorizations for the conduct of Vision 21's business as now
conducted and after the Closing, as contemplated by this Agreement. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government
authorizations, except for any such default, breach or violation that would
not, individually or in the aggregate, have a Material Adverse Effect. Since
January 1, 1993, Vision 21 has not received any notice from any federal, state
or other governmental authority or agency having jurisdiction over its
properties or activities, or any insurance or inspection body, that its
operations or any of its properties, facilities, equipment, or business
practices fail to comply with any applicable law, ordinance, regulation,
building or zoning law, or requirement of any public or quasi-public authority
or body, except where failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect.
34
<PAGE> 37
5.13. Insolvency Proceedings. Vision 21 is not
currently under the jurisdiction of a Federal or state court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
5.14. Equal Exchange. Vision 21 believes that the fair
market value of all the Company Common Stock shall be approximately equal to
the fair market value of the Merger Consideration at the Effective Time.
5.15. Employment of Company's Employees. Vision 21
does not currently intend to change the existing composition or employment
terms of any of the non-professional personnel which have employment
arrangements with the Company on the effective date of this Agreement (except
as is necessary for Vision 21 to employ such individuals pursuant to the
Business Management Agreement). Vision 21 reserves the right, however, to
change the number, composition or employment terms of such non-professional
personnel in the future.
6. {INTENTIONALLY OMITTED}.
7. CLOSING DATE REPRESENTATIONS AND WARRANTIES OF THE
PHYSICIAN. The Physician represents and warrants that, except as disclosed in
the Schedules, the following will be true and correct on the Closing Date as if
made on that date:
7.1. Organization and Good Standing; Qualification.
New P.C. is a professional corporation duly organized, validly existing and in
good standing under the laws of the State, with all requisite corporate power
and authority to carry on the business in which it intends to engage, to own
the properties it intends to own, and to execute and deliver the Business
Management Agreement and the Physician Employment Agreements and consummate the
transactions and perform the services contemplated thereby. New P.C. is duly
qualified and licensed to do business and is in good standing in all
jurisdictions where the nature of its intended business makes such
qualification necessary.
7.2. Capitalization. The authorized capital stock of
New P.C. consists of __________ shares of New P.C. Common Stock, of which
__________ shares are issued and outstanding, and no shares of capital stock of
New P.C. are held in treasury. The Physician owns all of the issued and
outstanding shares of New P.C.'s common stock, free and clear of all security
interests, liens, adverse claims, encumbrances, equities, proxies and
shareholders' agreements. Each outstanding share of New P.C.'s common stock
has been legally and validly issued and is fully paid and nonassessable. There
exists no options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, any of the authorized or
outstanding securities of New P.C. No shares of capital stock of New P.C. have
been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of New P.C.'s stockholders.
7.3. Corporate Records. The copies of the Articles or
Certificate of Incorporation and Bylaws, and all amendments thereto, of New
P.C. that have been delivered
35
<PAGE> 38
or made available to Vision 21 are true, correct and complete copies
thereof, as in effect on the Closing Date. The minute books of New P.C.,
copies of which have been delivered or made available to Vision 21, contain
accurate minutes of all meetings of, and accurate consents to all actions taken
without meetings by, the Board of Directors (and any committees thereof) and
the stockholders of New P.C. since its formation.
7.4. Authorization and Validity. The execution,
delivery and performance by New P.C. of the Business Management Agreement, the
Physician Employment Agreements, the Optometrist Employment Agreements and the
other agreements contemplated thereby, and the consummation of the transactions
and provisions of services contemplated thereby, have been duly authorized by
New P.C. The Business Management Agreement, the Physician Employment
Agreements, the Optometrist Employment Agreements and each other agreement
contemplated thereby will be as of the Closing Date duly executed and delivered
by New P.C. and will constitute legal, valid and binding obligations of New
P.C. enforceable against New P.C. in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies.
7.5. No Violation. Neither the execution, delivery
or performance of the Business Management Agreement, the Physician Employment
Agreements, the Optometrist Employment Agreements or the other agreements
contemplated thereby nor the consummation of the transactions or provision of
services contemplated thereby will (a) conflict with, or result in a violation
or breach of the terms, conditions or provisions of, or constitute a default
under, the Articles or Certificate of Incorporation or Bylaws of New P.C., or
(b) to the actual knowledge of the Physician, violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body.
7.6. No Business, Agreements, Assets or Liabilities.
New P.C. has not commenced business since its incorporation. Other than its
Articles or Certificate of Incorporation and Bylaws, and as of the Closing
Date, the Business Management Agreement, the Physician Employment Agreements,
the Optometrist Employment Agreements, the Employee Benefit Plans and the other
contracts or agreements listed on Schedule 7.6, New P.C. is not a party to or
subject to any agreement, indenture or other instrument. New P.C. does not own
any assets (tangible or intangible) other than the consideration received upon
the issuance of shares of capital stock and New P.C. does not have any
liabilities, accrued, contingent or otherwise (known or unknown and asserted or
unasserted).
7.7. Compliance with Laws. New P.C. has complied with
all applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports, except where
failure to so comply or file would not, individually or in the aggregate, have
a material adverse effect on the business, operations or financial condition of
New P.C.
36
<PAGE> 39
8. SECURITIES LAW MATTERS.
8.1. Investment Representations and Covenants of Physician.
a. Physician understands that the
Securities will not be registered under the Securities Act or any state
securities laws on the grounds that the issuance of the Securities is exempt
from registration pursuant to Section 4(2) of the Securities Act under the
Securities Act and applicable state securities laws, and that the reliance of
Vision 21 on such exemptions is predicated in part on the Physician's
representations, warranties, covenants and acknowledgements set forth in this
Section.
b. Except as disclosed on Schedule 8.1(b)
attached hereto, Physician represents and warrants that Physician is an
"accredited investor" or "sophisticated investor" as defined under the
Securities Act and state "Blue Sky" laws, or that Physician has utilized, to
the extent necessary to be deemed a sophisticated investor under the Securities
Act and State "Blue Sky" laws, the assistance of a professional advisor.
c. Physician represents and warrants that
the Securities to be acquired by Physician upon consummation of the
transactions described in this Agreement will be acquired by Physician for
Physician's own account, not as a nominee or agent, and without a view to
resale or other distribution within the meaning of the Securities Act and the
rules and regulations thereunder, except as contemplated in this Agreement, and
that Physician will not distribute any of the Securities in violation of the
Securities Act. All Securities shall bear a restrictive legend in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAWS."
In addition, the Securities shall bear any legend required by the
securities or "Blue Sky" laws of any state where Physician resides as well as
any other legend deemed appropriate by Vision 21 or its counsel.
d. Physician represents and warrants that
the address set forth below Physician's name on Schedule 8.1(d) is Physician's
principal residence.
e. Physician (i) acknowledges that the
Securities issued to Physician at the Closing must be held indefinitely by
Physician unless subsequently registered under the Securities Act or an
exemption from registration is available, (ii) is aware that any routine sales
of Securities made pursuant to Rule 144 under the Securities Act may be made
only in limited amounts and in accordance with the terms and conditions of that
Rule and that in such cases where the Rule is not applicable, compliance with
some other registration exemption will
37
<PAGE> 40
be required, (iii) is aware that Rule 144 is not currently available for use
by Physician for resale of any of the Securities to be acquired by Physician
upon consummation of the transactions described in this Agreement, and (iv)
acknowledges and agrees that the transfer of the Securities shall be further
restricted by the "lock-up" provisions contained in the Registration Rights
Agreement in the form of Exhibit 14.1(o), whereby Physician shall be treated as
an "affiliate" of Vision 21 under Rule 144.
f. Physician represents and warrants to
Vision 21 that Physician, either alone or together with the assistance of
Physician's own professional advisor, has such knowledge and experience in
financial and business matters such that Physician is capable of evaluating the
merits and risks of Physician's investment in any of the Securities to be
acquired by Physician upon consummation of the transactions described in this
Agreement.
g. Physician confirms that Physician has
received and read the Confidential Information Memorandum of Vision 21 dated
September 27, 1996 and the December 17, 1996 Supplement thereto. Physician
also confirms that Physician has had the opportunity to ask questions of and
receive answers from Vision 21 concerning the terms and conditions of
Physician's investment in the Securities, and the Physician has received to
Physician's satisfaction, such additional information, in addition to that set
forth herein, about Vision 21's operations and the terms and conditions of the
offering as Physician has requested.
h. In order to ensure compliance with the
provisions of paragraph (c) hereof, Physician agrees that after the Closing
Physician will not sell or otherwise transfer or dispose of Securities or any
interest therein (unless such shares have been registered under the Securities
Act) without first complying with either of the following conditions, the
expenses and costs of satisfaction of which shall be fully borne and paid for
by Physician:
i) Vision 21 shall have
received a written legal opinion from legal counsel, which opinion and counsel
shall be satisfactory to Vision 21 in the exercise of its reasonable judgment,
or a copy of a "no-action" or interpretive letter of the Securities and
Exchange Commission specifying the nature and circumstances of the proposed
transfer and indicating that the proposed transfer will not be in violation of
any of the registration provisions of the Securities Act and the rules and
regulations promulgated thereunder; or
ii) Vision 21 shall have
received an opinion from its own counsel to the effect that the proposed
transfer will not be in violation of any of the registration provisions of the
Securities Act and the rules and regulations promulgated thereunder.
Physician also agrees that the certificates or instruments representing the
Securities to be issued to Physician pursuant to this Agreement may contain a
restrictive legend noting the restrictions on transfer described in this
Section and required by federal and applicable state securities laws, and that
appropriate "stop-transfer" instructions will be given to Vision 21's transfer
agent, if any, provided that this Section 8.1(h) shall no longer be applicable
to any Securities following
38
<PAGE> 41
their transfer pursuant to a registration statement effective under the
Securities Act or in compliance with Rule 144 or if the opinion of counsel
referred to above is to the further effect that transfer restrictions and the
legend referred to herein are no longer required in order to establish
compliance with any provisions of the Securities Act.
i. Physician understands that although an
Initial Public Offering is contemplated by Vision 21, there are no assurances
that an Initial Public Offering will occur or if it does occur that it will be
successful.
j. Physician agrees that he shall be
considered an "affiliate" of Vision 21 for purposes of Rule 144 and agrees to
the restrictions and limitations imposed by Rule 144 on affiliates. Physician
further agrees that he shall be considered an affiliate of Vision 21 for Rule
144 purposes even if he does not meet the technical definition of "affiliate"
under Rule 144.
8.2. Current Public Information. At all times
following the registration of any of Vision 21's securities under the
Securities Act or Exchange Act pursuant to which Vision 21 becomes subject to
the reporting requirements of the Exchange Act, Vision 21 shall use
commercially reasonable efforts to comply with the requirements of Rule 144
under the Securities Act, as such Rule may be amended from time to time (or any
similar rule or regulation hereafter adopted by the SEC) regarding the
availability of current public information to the extent required to enable any
holder of shares of Common Stock to sell such shares without registration under
the Securities Act pursuant to Rule 144 (or any similar rule or regulation).
9. COVENANTS OF THE COMPANY AND THE PHYSICIAN. The Company
and the Physician, jointly and severally, agree that between the date hereof
and the Closing (with respect to the Company's covenants, the Physician agrees
to use his best efforts to cause the Company to perform):
9.1. Consummation of Agreement. The Company and the
Physician shall use their best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and conditions;
provided, however, that this covenant shall not require the Company or the
Physician to make any expenditures that are not expressly set forth in this
Agreement or otherwise contemplated herein.
9.2. Business Operations. The Company shall operate
its business in the ordinary course. The Company and the Physician shall use
their best efforts to preserve the business of the Company intact. Neither the
Company nor the Physician shall take any action that would, individually or in
the aggregate, result in a Material Adverse Effect.
9.3. Access. The Company and the Physician shall, at
reasonable times during normal business hours and on reasonable notice, permit
Vision 21 and its authorized representatives, including without limitation, the
Accountants, reasonable access to, and make
39
<PAGE> 42
available for inspection, all of the assets and business of the Company,
including its employees, customers and suppliers, and permit Vision 21 and its
authorized representatives to inspect and, at Vision 21's sole cost and
expense, make copies of all documents, records (other than patient medical
records) and information with respect to the affairs of the Company, including,
without limitation, the Financial Statements, as Vision 21 and its
representatives may request, all for the sole purpose of permitting Vision 21
to become familiar with the business and assets and liabilities of the Company.
9.4. Notification of Certain Matters. The Company and
the Physician shall promptly inform Vision 21 in writing of (a) any notice of,
or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by the Company or the
Physician subsequent to the date of this Agreement and prior to the Effective
Time under any Commitment material to the Company's condition (financial or
otherwise), operations, assets, liabilities or business and to which it is
subject; or (b) any material adverse change in the Company's condition
(financial or otherwise), operations, assets, liabilities or business.
9.5. Approvals of Third Parties. As soon as
practicable after the date hereof, the Company and the Physician shall secure
all necessary approvals and consents of landlords to the consummation of the
transactions contemplated hereby and shall use their best efforts to secure all
necessary approvals and consents of other third parties to the consummation of
the transactions contemplated hereby; provided, however, that this covenant
shall not require the Company or the Physician to make any material
expenditures that are not expressly set forth in this Agreement or otherwise
contemplated herein.
9.6. Employee Matters. Except as set forth in
Schedule 3.13 or as otherwise contemplated by this Agreement, the Company shall
not, without the prior written approval of Vision 21, except as required by
law:
a. increase the cash compensation of the
Physician or any other employees of the Company (other than in the ordinary
course of business and consistent with past practice);
b. adopt, amend or terminate any
Compensation Plan;
c. adopt, amend or terminate any
Employment Agreement;
d. adopt, amend or terminate any
Employee Policies and Procedures;
e. adopt, amend or terminate any
Employee Benefit Plan;
40
<PAGE> 43
f. take any action that could deplete the
assets of any Employee Benefit Plan, other than payment of benefits in the
ordinary course to participants and beneficiaries;
g. fail to pay any premium or
contribution due or with respect to any Employee Benefit Plan;
h. fail to file any return or report with
respect to any Employee Benefit Plan;
i. institute, settle or dismiss any
employment litigation except as could not, individually or in the aggregate,
result in a Material Adverse Effect;
j. enter into, modify, amend or terminate
any agreement with any union, labor organization or collective bargaining unit;
or
k. take or fail to take any action with
respect to any past or present employee of the Company that would, individually
or in the aggregate, result in a Material Adverse Effect.
9.7. Contracts. Except with Vision 21's prior written
consent, the Company shall not assume or enter into any contract, lease,
license, obligation, indebtedness, commitment, purchase or sale except in the
ordinary course of business that is material to the Company's business, nor
will it waive any material right or cancel any material contract, debt or
claim.
9.8. Capital Assets; Payments of Liabilities. The
Company shall not, without the prior written approval of Vision 21 (a) acquire
or dispose of any capital asset having a fair market value of $5,000 or more,
or acquire or dispose of any capital asset outside of the ordinary course of
business or (b) discharge or satisfy any lien or encumbrance or pay or perform
any obligation or liability other than (i) liabilities and obligations
reflected in the Financial Statements or (ii) current liabilities and
obligations incurred in the usual and ordinary course of business since the
Company Balance Sheet Date and, in either case (i) or (ii) above, only as
required by the express terms of the agreement or other instrument pursuant to
which the liability or obligation was incurred.
9.9. Mortgages, Liens and Guaranties. The Company
shall not, without the prior written approval of Vision 21, enter into or
assume any mortgage, pledge, conditional sale or other title retention
agreement, permit any security interest, lien, encumbrance or claim of any
kind to attach to any of its assets (other than statutory liens arising in the
ordinary course of business and other liens that do not materially detract from
the value or interfere with the use of such assets), whether now owned or
hereafter acquired, or guarantee or otherwise become contingently liable for
any obligation of another, except obligations arising by reason of
41
<PAGE> 44
endorsement for collection and other similar transactions in the ordinary
course of business, or make any capital contribution or investment in any
person.
9.10. Acquisition Proposals. The Company and the
Physician agree that from the date of this Agreement through the earlier of the
Closing Date or January 1, 1997, (a) neither the Physician nor the Company nor
any of its officers and directors shall, and the Physician and the Company
shall direct and use their best efforts to cause the Company's employees,
agents, and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any Acquisition
Proposal or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; (b) the Physician and the Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and each will take the necessary steps to inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 9.10; and (c) the Physician and the
Company will notify Vision 21 immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company or the Physician.
9.11. Distributions and Repurchases. Except as
contemplated in this Agreement, no distribution, payment or dividend of any
kind will be declared or paid by the Company with respect of its capital stock,
nor will any repurchase of any of the Company's capital stock be approved or
effected.
9.12. Requirements to Effect the Merger. The Company
and the Physician shall use their best efforts to take, or cause to be taken,
all actions necessary to effect the Merger under applicable law, including
without limitation the filing with the appropriate government officials of all
necessary documents in form approved by counsel for the parties to this
Agreement.
9.13. Physician Accounts Payable and Physician Retained
Equity. The Company shall, and the Physician shall cause the Company, to pay
in a timely manner the accounts payable of the Physician. Except as
contemplated in this Agreement, the Company shall not, and the Physician shall
not permit the Company to, make payment of all or any portion of any retained
equity of the Company at any time prior to Closing.
9.14. New P.C. Spinoff. The Company shall form,
organize and incorporate New P.C. in the State and the Articles or Certificate
of Incorporation and Bylaws of New P.C. shall be in form and substance
reasonably satisfactory to Vision 21. The Company shall not permit New P.C. to
commence business until the Closing Date. On or prior to the Closing, Company
shall take all actions and execute all documents, agreements or instruments
necessary to transfer to New P.C. the Company's medical business and to
transfer good, valuable, and marketable title to all of the Company's Medical
Assets in exchange for the issuance by the New
42
<PAGE> 45
P.C. to the Company of all of the issued and outstanding shares of New P.C.
common stock. Prior to the Closing, the Company shall declare and make a
distribution to Physician of all of the issued and outstanding shares of
New P.C. common stock.
9.15. Licenses and Permits. The Company and the
Physician shall cooperate fully with Vision 21 to obtain all licenses, permits,
approvals or other authorizations required under any law, statute, rule,
regulation or ordinance, or otherwise necessary or desirable to provide the
services of New P.C., the Physician and the Professional Employees contemplated
by the Business Management Agreement and the Physician Employment Agreements,
and to conduct the intended business of New P.C.
9.16. Physician Employment Agreements. The Company and
the Physician shall cause, at or immediately prior to Closing, each Physician
Employee (except for those non-shareholder Physician Employees identified on
Schedule 9.16) who is then an employee of the Company and Physician agrees at
or immediately prior to Closing (i) to terminate his employment agreement, if
any, with the Company by mutual consent without any liability therefor on the
part of the Company and (ii) to enter into a new Physician Employment Agreement
with New P.C. in accordance with the terms of the Business Management
Agreement.
9.17. Optometrist Employment Agreements. The Company
and the Physician shall cause, at or immediately prior to Closing, each
Optometrist Employee (except for those Optometrist Employees identified on
Schedule 9.16) who is then an employee of the Company (i) to terminate his
employment agreement, if any, with the Company by mutual consent without any
liability therefor on the part of the Company and (ii) to enter into a new
Optometrist Employment Agreement with New P.C. in accordance with the Business
Management Agreement.
9.18. Termination of Retirement Plans. Prior to
Closing, the Physician shall cause the Company to take all steps necessary to
discontinue benefits accruals under any Employee Benefit Plan that is intended
to be a qualified employee retirement plan under Section 401(a) of the Code (a
"Retirement Plan") effective as of Closing or as soon thereafter as may be
practical. Effective at the time of Closing, the Company shall cause New P.C.
to assume all of the obligations of the Company as the sponsoring employer
and/or plan administrator of the Retirement Plan in compliance with
applicable law.
Subsequent to Closing, New P.C. and Vision 21 shall review
the extent to which New P.C. can resume contributions to the Retirement Plan
without violating the qualification requirements of Sections 410(b) and
401(a)(4) of the Code taking into account any employees of Vision 21 who would
be "leased employees" of New P.C. under Section 414(n) of the Code. If Vision
21 and New P.C. mutually agree that such qualification requirements can be
satisfied, New P.C. may elect to continue the Retirement Plan and make
contributions in accordance with its terms, provided that New P.C. shall agree
to cover at its own expense any
43
<PAGE> 46
Vision 21 employees who are leased employees if such coverage is required to
maintain the tax-qualified status of the Retirement Plan.
9.19. Delivery of Schedules. The Company and the
Physician shall deliver to Vision 21 all Schedules required to be delivered by
them prior to the Closing.
9.20. Conversion of Company. After the transfer of the
Medical Assets of the Company to New P.C. and prior to Closing, Physician shall
cause the Company to take such action and file such documents or instruments as
may be necessary to convert the Company into a general business corporation in
accordance with applicable law.
9.21. Assignment of Fees for Medical and Optometry
Services. On or prior to the Closing Date, the Company shall obtain an
irrevocable assignment from all Professional Employees of any and all of their
rights to receive payment for the provision of ophthalmology or optometry
services which are part of the Accounts Receivable to the Company existing on
the Closing Date, except for those fees specified and set forth on Schedule
9.21. Each Professional Employee shall undertake to endorse any payments
received on account of such services to the order of the Company and to take
such other action as may be necessary to confirm to the Company the rights to
collect and retain for its own account such Accounts Receivable. The Company
shall cause its Professional Employees to agree that such security interest of
such lender(s) is intended to be a first priority security interest and is
superior to any right, title or interest which may be asserted by such
Professional Employees with respect to the Accounts Receivable or the proceeds
thereof. In the event that the assignment of rights described in this Section
shall be deemed, for any reason, to be ineffective as an outright assignment,
the Company shall cause each Professional Employee to agree that such
Professional Employee shall be deemed, effective as of the Closing Date, to
have granted to the Company a first priority lien on and security interest in
and to any and all interests of such Professional Employee in any of the
Accounts Receivable, and all proceeds with respect thereto, to secure the
collection by the Company of all Accounts Receivable, and this Agreement shall
be deemed to be a security agreement to the extent necessary to give effect to
the foregoing. The Company shall cause each Professional Employee to execute
and deliver, all such financing statements as the Company or Vision 21 may
request in order to perfect such security interest. The Company shall not
suffer any Professional Employee to grant any other lien on or security
interest in or to such Accounts Receivable or any proceeds thereof.
10. COVENANTS OF VISION 21. Vision 21 agrees that between the
date hereof and the Closing:
10.1. Consummation of Agreement. Vision 21 shall use
its best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and conditions and take all corporate and
other actions necessary to approve the Merger; provided, however, that this
covenant shall not require Vision 21 to make any expenditures that are not
expressly set forth in this Agreement or otherwise contemplated herein.
44
<PAGE> 47
10.2. Efforts to Effect. Vision 21 will use its best
efforts to take, or cause to be taken, all actions necessary to effect the
Merger under applicable law, including without limitation the filing with the
appropriate government officials of all necessary documents in form approved by
counsel for the parties to this Agreement.
10.3. Notification of Certain Matters. Vision 21 shall
promptly inform the Company and the Physician in writing of (a) any notice of,
or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by Vision 21 subsequent
to the date of this Agreement and prior to the Effective Time under any Vision
21 Commitment material to Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business and to which it is subject; or (b)
any material adverse change in Vision 21's condition (financial or otherwise),
operations, assets, liabilities or business.
10.4. Approvals of Third Parties. Vision 21 shall use
its best efforts to secure, as soon as practicable after the date hereof, all
necessary approvals and consents of third parties to the consummation of the
transactions contemplated hereby.
10.5. Licenses and Permits. Vision 21 shall use its
best efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, statute, rule, regulation or ordinance, or otherwise
necessary or desirable to consummate the transactions or provide the services
contemplated by the Business Management Agreement and to conduct the intended
business of Vision 21.
10.6. Release of Physician From Practice Liabilities.
Vision 21 shall use its best efforts to obtain from third party creditors the
release of Physician from any personal liabilities relating to the Practice
which are identified on Schedule 10.6 and assumed by Vision 21 pursuant to the
terms of this Agreement.
11. COVENANTS OF VISION 21, THE COMPANY AND THE PHYSICIAN.
Vision 21, the Company and the Physician agree as follows (with respect to New
P.C.'s covenants, the Physician agrees to cause New P.C. to perform):
11.1. Filings; Other Action.
a. Vision 21 and the Physician shall
cooperate to promptly prepare and file at Vision 21's expense with the SEC, a
Registration Statement on Form S-1 (or other appropriate form) to be filed by
Vision 21 in connection with any Initial Public Offering of Vision 21
(including the prospectus constituting a part thereof, the "Registration
Statement"). Vision 21 shall obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and the Company and the Physician shall furnish
all information concerning the Company, the New P.C., the Nonmedical Assets and
the Physician as may be reasonably requested in connection with any such
action.
45
<PAGE> 48
b. Each of the Company, the Physician and
Vision 21 represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in a Registration
Statement, by exhibit or otherwise, will, at the time the Registration
Statement and each amendment and supplement thereof, if any, becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Company, the Physician, and Vision 21 shall
agree as to the information and documents supplied by the Company and the
Physician for inclusion in the Registration Statement and shall indicate such
information and documents in a letter to be delivered at least ten (10) days
prior to the initial filing of the Registration Statement with the SEC. The
Company and the Physician shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act.
c. The Physician and the Company shall,
upon request, furnish Vision 21 with all information concerning himself,
itself, their respective partners, the Company's subsidiaries, directors,
officers, and stockholders, and including financial statements with respect to
the same, any consents (and information necessary to obtain such consents) and
such other matters as may be reasonably requested by Vision 21 in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application made
by or on behalf of each such party or any of the Company's subsidiaries to any
governmental entity in connection with the Merger, any Initial Public Offering
and the other transactions contemplated by this Agreement.
11.2. Amendment of Schedules. Each party hereto agrees
that, with respect to the representations and warranties of such party
contained in this Agreement, such party shall have the continuing obligation
until the Closing to attach, supplement or amend promptly the Schedules with
respect to any matter that would have been or would be required to be set forth
or described in the Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein; provided
that no amendment or supplement to a Schedule that constitutes or reflects a
material adverse change to the Company or the Nonmedical Assets may be made
unless Vision 21 consents to such amendment or supplement, and no amendment or
supplement to a Schedule that constitutes or reflects a material adverse change
to Vision 21 may be made unless the Company and the Physician consent to such
amendment or supplement. For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth in
Sections 12.1 and 13.1 have been fulfilled, the Schedules hereto shall be
deemed to be the Schedules as amended or supplemented pursuant to this Section
11.2. In the event that the Company is required to amend or supplement a
Schedule in accordance with this Section 11.2 and Vision 21 does not consent to
such amendment or supplement, or Vision 21 is required to amend or supplement a
Schedule in accordance with this Section 11.2 and the Company and the Physician
do not consent, this Agreement shall be deemed terminated by mutual consent as
set forth in Section 17.1(d) or Section 17.1(e) as appropriate.
46
<PAGE> 49
11.3. Business Management Agreement. The Company and
the Physician shall use their best efforts to cause the Business Management
Agreement to be executed and delivered by New P.C. on or prior to the Closing
Date, which shall be considered a Nonmedical Asset of the Company and shall be
acquired by Vision 21 in the Merger.
11.4. Fees and Expenses.
a. Vision 21 shall pay all costs of the
Audit of the Company's Financial Statements and financial records by Vision
21's auditors (or auditors designated by Vision 21's auditors). All items
prepared by Vision 21's auditors in connection with the Audit ("Prepared Audit
Materials") shall be for use solely by Vision 21; provided, however, that the
Company may utilize the Prepared Audit Materials solely in connection with its
review of Vision 21's calculation of the Merger Consideration. The Prepared
Audit Materials shall not be deemed to include those items which customarily
remain the property of auditors such as their working papers and memos.
b. In the event the Merger is not
consummated, the Company and Physician shall not be entitled to copies or
originals of the Prepared Audit Materials unless the Company or Physician pays
for or reimburses Vision 21 for all expenses of the auditor in connection with
the Audit in advance of receiving the Prepared Audit Materials (either from
Vision 21 or its auditor). For purposes of this Agreement, Audit expenses
shall include all expenses related to the Audit as well as expenses incurred to
present the financial statements in accordance with GAAP and all schedules
related thereto.
c. Each of the Company and Vision 21
shall pay the costs and expenses of their own legal counsel with respect to
legal services rendered in connection with the preparation and negotiation of
this Agreement and the Merger contemplated hereby.
d. In the event that an Initial Public
Offering does not take place for any reason whatsoever, Vision 21 (but not the
Company or the Physician) shall have sole responsibility for the payment of all
legal fees (except as set forth in Section 11.4(c)), accounting fees (except as
set forth in Section 11.4(a)), underwriters' expenses and other fees, costs and
expenses associated solely in connection with the preparation of any
Registration Statement relating to such Initial Public Offering.
e. If any Initial Public Offering is
consummated as contemplated by this Agreement, all legal fees, audit fees,
printing costs, filing fees, blue sky fees and underwriters' discounts and fees
associated solely with the Initial Public Offering shall be paid by Vision 21
from the proceeds of the Initial Public Offering, except for those expenses,
fees and underwriters' discounts related to any shares sold by the Physician.
11.5. Release of Physician From Practice Liabilities.
Vision 21 shall use its best efforts to obtain the release of the
Physician from any liabilities relating to the Practice
47
<PAGE> 50
of which the Physician and the Company are jointly obligated which are set
forth on Schedule 11.5.
12. CONDITIONS PRECEDENT OF VISION 21. Except as may be waived
in writing by Vision 21, the obligations of Vision 21 hereunder are subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions precedent:
12.1. Representations and Warranties. The
representations and warranties of the Company and the Physician contained
herein shall have been true and correct in all material respects when initially
made and shall be true and correct in all material respects as of the Closing
Date.
12.2. Covenants. The Company and the Physician shall
have performed and complied in all material respects with all covenants
required by this Agreement to be performed and complied with by the Company or
the Physician prior to the Closing Date.
12.3. Legal Opinion. Counsel to the Company and the
Physician shall have delivered to Vision 21 their opinions, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 12.3 which
Vision 21, Vision 21's counsel, the underwriters of the Initial Public Offering
and their counsel shall be permitted to rely upon.
12.4. Proceedings. No action, proceeding or order by
any court or governmental body or agency shall have been threatened orally or
in writing, asserted, instituted or entered to restrain or prohibit the
carrying out of the transactions contemplated hereby.
12.5. No Material Adverse Change. No material adverse
change in the condition (financial or otherwise), operations, assets,
liabilities or business of the Company shall have occurred since the Company
Balance Sheet Date, whether or not such change shall have been caused by the
deliberate act or omission of the Company or the Physician.
12.6. Government Approvals and Required Consents. The
Company, the Physician, New P.C. and Vision 21 shall have obtained all
necessary government and other third-party approvals and consents (other than
consents technically required as a result of the transactions contemplated
hereby under the terms of managed care contracts to which the Company or any of
its employees are a party).
12.7. Certification. None of the Company, the
Physician or New P.C. shall have received any notice of or been made a party to
any judicial or administrative proceeding, or threatened to so be made a party,
in any action or proceeding that seeks to deny the continued use or receipt of
any necessary permit, license, authorization, certification or approval under
the Medicare and Medicaid programs to provide ophthalmology or optometry
services.
48
<PAGE> 51
12.8. Closing Deliveries. Vision 21 shall have
received all documents and agreements, duly executed and delivered in form
reasonably satisfactory to Vision 21, referred to in Section 14.1.
12.9. Due Diligence. Vision 21 shall have completed to
its satisfaction a due diligence review of the Company and the Physician.
12.10. Financial Audit. Vision 21 shall have approved
in Vision 21's sole discretion an audit of the Company and the Practice which
audit shall have been performed by an accounting firm designated by Vision 21
at the sole expense of Vision 21.
12.11. Medicare Audit. Vision 21 shall have approved in
Vision 21's sole discretion a Medicare audit of the Company and the Practice
which audit shall be at the sole expense of Vision 21.
12.12. Exemption Under State Securities Laws. The
transfer of Vision 21's Securities to the Physician as contemplated in this
Agreement shall qualify for one or more exemptions from registration under the
State's securities laws. Vision 21 shall pay all filing fees in connection
with any filing required to qualify the transfer of the Securities for such
exemption(s).
12.13. Assignment of Professional Employees' Rights in
Accounts Receivable. The Company shall have caused the Professional Employees
to assign any and all of their rights with respect to Accounts Receivable to
the Company and shall cause such Professional Employees to execute such other
agreements and instruments as contemplated in Section 9.21.
13. CONDITIONS PRECEDENT OF THE COMPANY AND THE PHYSICIAN.
Except as may be waived in writing by the Company and the Physician, the
obligations of the Company and the Physician hereunder are subject to
fulfillment at or prior to the Closing Date of each of the following conditions
precedent:
13.1. Representations and Warranties. The
representations and warranties of Vision 21 contained herein shall be true and
correct in all respects when initially made and shall be true and correct in
all material respects as of the Closing Date.
13.2. Covenants. Vision 21 shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by it prior to the Closing
Date.
13.3. Legal Opinions. Counsel to Vision 21 shall have
delivered to the Company and the Physician their opinion, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 13.3.
49
<PAGE> 52
13.4. Proceedings. No action, proceeding or order by
any court or governmental body or agency shall have been threatened in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
13.5. Government Approvals and Required Consents. The
Company, the Physician, New P.C. and Vision 21 shall have obtained all
necessary government and other third-party approvals and consents (other than
consents technically required as a result of the transactions contemplated
hereby under the terms of managed care contracts to which the Company or any of
its employees are a party).
13.6. Closing Deliveries. The Company, New P.C. and
the Physician shall have received all documents, instruments and agreements,
duly executed and delivered in form reasonably satisfactory to the Company,
referred to in Section 14.2.
13.7. No Change in Voting or Ownership Control. There
shall have been no changes in the voting or ownership control of Vision 21 from
the date first above written to the Closing Date.
13.8. No Material Adverse Change; Delivery of Amended
Confidential Information Memorandum. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of Vision 21 shall have occurred since the end of the last fiscal period
reported in the Vision 21 Financial Statements, whether or not such change
shall have been caused by the deliberate act or omission of Vision 21. Vision
21 shall deliver an amended Confidential Information Memorandum updating the
information contained in the initial Confidential Information Memorandum on or
before December 17, 1996, and the Company and the Physician shall have the
right not to close the transactions contemplated in this Agreement if they
determine, based upon their review of the amended Confidential Information
Memorandum, that a material adverse change has occurred with respect to the
condition (financial or otherwise), operations, assets, liabilities or business
of Vision 21.
14. CLOSING DELIVERIES; ESCROW OF DOCUMENTS.
14.1. Deliveries of the Company, New P.C. and the
Physician. At or prior to December 24, 1996, the Company, New P.C. and the
Physician shall deliver to Vision 21, c/o Shumaker, Loop & Kendrick, LLP,
counsel to Vision 21, the following, all of which shall be in a form reasonably
satisfactory to Vision 21 and shall be held by Shumaker, Loop & Kendrick, LLP
in escrow pending Closing, pursuant to an escrow agreement or letter in form
and substance mutually acceptable to the parties hereto:
a. a copy of resolutions of the Board of
Directors of the Company authorizing (i) the execution, delivery and
performance of this Agreement and all related documents and agreements, and
(ii) the consummation of the Merger, certified by the Secretary of the Company
as being true and correct copies of the originals thereof subject to no
modifications or amendments;
50
<PAGE> 53
b. a copy of resolutions of the Board of
Directors of New P.C. authorizing the execution, delivery and performance of
the Business Management Agreement, the Physician Employment Agreements, and all
other documents to be executed and delivered by New P.C. as contemplated by
this Agreement, certified by the Secretary of New P.C. as being true and
correct copies of the originals thereof subject to no modifications or
amendments;
c. a certificate of the President of the
Company, and of the Physician, dated the Closing Date, as to the truth and
correctness of the representations and warranties of the Company and the
Physician contained herein, on and as of the Closing Date;
d. a certificate of the President of the
Company, and of the Physician, dated the Closing Date, (i) as to the
performance of and compliance in all material respects by the Company and the
Physician with all covenants contained herein on and as of the Closing Date and
(ii) certifying that all conditions precedent of the Company and the Physician
to the Closing have been satisfied;
e. a certificate of the Secretary of the
Company and the Secretary of New P.C. certifying as to the incumbency of the
directors and officers of each such corporation and as to the signatures of
such directors and officers who have executed documents delivered pursuant to
the Agreement on behalf of each such corporation;
f. a certificate, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the respective
states of incorporation for the Company and New P.C. establishing that each
such corporation is in existence, has paid all franchise or similar taxes, if
any, and, if applicable, otherwise is in good standing to transact
business in its state of organization;
g. certificates, dated within ten (10)
days prior to the Closing Date, of the Secretaries of State of the states in
which the Company and New P.C. are qualified to do business, to the effect that
each such corporation is qualified to do business and, if applicable, is in
good standing as a foreign corporation in each of such states;
h. an opinion of counsel to the Company
and Physicians dated as of the Closing Date, in form and substance satisfactory
to Vision 21, which Vision 21, Vision 21's counsel and the underwriters of any
Initial Public Offering and their counsel are permitted to rely upon and which
shall include an opinion, subject to normal and customary exceptions that to
the best of their knowledge the transactions and arrangements contemplated by
this Agreement are in conformity with State laws, rules and regulations
governing the practice of medicine.
i. all authorizations, consents, permits
and licenses referenced in Section 3.8;
j. the resignations of the directors and
officers of the Company as requested by Vision 21;
51
<PAGE> 54
k. the executed Business Management
Agreement in substantially the form attached hereto as Exhibit 14.1 (k), as
revised in accordance with changes reasonably deemed necessary or advisable by
legal counsel retained by Vision 21 in the State to address regulatory and
compliance issues;
l. an executed Physician Employment
Agreement between New P.C. and the Physician in substantially the form attached
hereto as Exhibit 14.1 (l);
m. an executed Physician Employment
Agreement between New P.C. and each Physician Employee who is then an employee
of the Company in substantially the form attached hereto as Exhibit 14.1 (m);
n. an executed Optometrist Employment
Agreement between New P.C. and each Optometrist Employee who is then an
employee of the Company in substantially the form attached hereto as Exhibit
14.1 (n);
o. an executed Registration Rights
Agreement between Vision 21 and the Physician in substantially the form
attached hereto as Exhibit 14.1 (o) (the "Registration Rights Agreement");
P. an executed Certificate of Merger
necessary to effect the Merger;
q. a non-foreign affidavit, as such
affidavit is referred to in Section 1445 (b) (2) of the Code, of the Physician,
signed under a penalty of perjury and dated as of the Closing Date, to the
effect that the Physician is a United States citizen or a resident alien (and
thus not a foreign person) and providing the Physician's United States taxpayer
identification number;
r. if desired by Vision 21, a new lease
or leases between the landlords under each lease for real property described on
Schedule 3.14(c) and Vision 21 in form and substance reasonably satisfactory to
Vision 21;
s. an executed Agreement to Continue
Practice After Transfer Event and Stock Pledge substantially in the form of
Exhibit 14.1(s);
t. the Shares of Company Common Stock to
be delivered pursuant to Section 2.9(b); and
u. such other instrument or instruments
of transfer prepared by Vision 21 as shall be necessary or appropriate, as
Vision 21 or its counsel shall reasonably request, to carry out and effect the
purpose and intent of this Agreement.
52
<PAGE> 55
14.2. Deliveries of Vision 21. At or prior to December
24, 1996, Vision 21 shall deliver to the Company and the Physician, c/o
Shumaker, Loop & Kendrick, LLP counsel to Vision 21, the following, all of
which shall be in a form reasonably satisfactory to the Company and the
Physician and shall be held by Shumaker, Loop & Kendrick, LLP in escrow pending
Closing, pursuant to an escrow agreement or letter in form and substance
mutually acceptable to the parties hereto:
a. a copy of the resolutions of the Board
of Directors of Vision 21 authorizing (i) the execution, delivery and
performance of this Agreement, and all related documents and agreements, and
(ii) the consummation of the Transaction, certified by Vision 21's Secretary as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
b. a certificate of an officer of Vision
21 dated the Closing Date as to the truth and correctness of the
representations and warranties of Vision 21 contained herein, on and as of the
Closing Date;
c. a certificate of an officer of Vision
21 dated the Closing Date, (i) as to the performance and compliance of Vision
21 with all covenants contained herein on and as of the Closing Date and (ii)
certifying that all conditions precedent of Vision 21 to the Closing have been
satisfied;
d. a certificate, dated within ten (10)
days prior to the Closing Date, of the Secretary of State of the State of
Florida establishing that Vision 21 is in existence, has paid all franchise or
similar taxes, if any, and, if applicable, otherwise is in good standing to
transact business in such state;
e. certificates (or photocopies thereof),
dated within ten (10) days prior to the Closing Date, of the Secretary of State
of each state in which Vision 21 is qualified to do business, to the effect
that Vision 21 is qualified to do business and, if applicable, is in good
standing as a foreign corporation in each of such states;
f. an opinion of Shumaker, Loop &
Kendrick, LLP, counsel to Vision 21, dated as of the Closing Date, pursuant to
Section 13.3;
g. the executed Registration Rights
Agreement;
h. the executed Lease Assignments;
i. the Shares of Vision 21 Common Stock
to be delivered pursuant to Section 2.9(a);
j. the Agreement to Continue Practice
After Transfer Event and Stock Pledge; and
53
<PAGE> 56
k. such other instrument or instruments
of transfer, prepared by the Company or the Physician as shall be necessary or
appropriate, as the Company, the Physician or their counsel shall reasonable
request, to carry out and effect the purpose and intent of this Agreement.
14.3. Release of Escrow Materials. Shumaker, Loop &
Kendrick, LLP shall release the agreements, certificates, instruments,
documents and other materials described in Sections 14.1 and 14.2 to the
appropriate parties to effectuate the transactions contemplated in this
Agreement only after all such materials have been delivered by all applicable
parties (or the parties receiving such documents have waived in writing such
delivery requirement) and after counsel for the Physician and the Company have
sent written notice to Shumaker, Loop & Kendrick, LLP stating that the
Physician and the Company have reviewed the amended Confidential Information
Memorandum and have decided, based upon such review, to consummate the
transactions contemplated in this Agreement. In the event that the Physician
and the Company elect not to consummate the transactions contemplated in this
Agreement based upon their review of the amended Confidential Information
Memorandum, and counsel for the Physician and the Company informs Shumaker,
Loop & Kendrick, LLP in writing as to such decision, Shumaker, Loop & Kendrick,
LLP shall promptly return the foregoing materials to the parties sending
such materials.
15. POST CLOSING MATTERS.
15.1. Further Instruments of Transfer. From and after
the Closing Date, at the request of Vision 21 and at Vision 21's sole cost and
expense, the Physician and the Company shall deliver any further instruments of
transfer and take all reasonable action as may be necessary or appropriate to
carry out the purpose and intent of this Agreement.
15.2. Practice Advisory Council; Local Advisory
Council; National Appeals Council. Vision 21 and New P.A. shall establish a
practice advisory council composed of delegates from Vision 21 and New P.A.
which shall advise Vision 21 and New P.A. and determine certain issues as more
fully described in the Business Management Agreement. Vision 21 shall also
establish a local advisory council composed of delegates from certain practice
groups acquired by Vision 21 in connection with the Related Acquisitions. Such
delegates shall be appointed from practice groups which are located in a market
area to be identified by Vision 21 and in which New P.A. is located. The local
advisory council board shall advise Vision 21 and the practice groups within
the market area as to policy and strategy issues and shall determine certain
types of issues and disputes between Vision 21 and such practice groups which
issues and disputes are identified in the Business Management Agreement and
other management agreements entered into between Vision 21 and practice groups.
New P.A. shall have the right to appoint one (1) member to a local advisory
council who shall serve an initial two (2) year term. After the initial
two-year term, election of members to the local advisory council shall be in
accordance with by-laws which shall be adopted and amended by the local
advisory council. Vision 21 shall also establish a national appeals council
which shall have, among other duties and responsibilities, the power to adopt
and amend its by-laws, to
54
<PAGE> 57
review and approve as limited herein certain decisions of the local advisory
councils, and to resolve deadlocks among the members of such local advisory
councils.
16. REMEDIES.
16.1. Indemnification by the Physician. Subject to the
terms and conditions of this Agreement, the Physician agrees to indemnify,
defend and hold Vision 21, the Surviving Corporation and their respective
directors, officers, members, managers, employees, agents, attorneys and
affiliates harmless from and against all losses, claims, obligations, demands,
assessments, penalties, liabilities, costs, damages, reasonable attorneys' fees
and expenses (collectively, "Damages") asserted against or incurred by such
entities and individuals (including, but not limited to, any reduction in
payments to or revenues of New P.C.), arising out of or resulting from:
a. a breach of any representation,
warranty or covenant of the Company or the Physician contained herein or in any
schedule or certificate delivered hereunder;
b. any liability under the Securities
Act, the Exchange Act or any other federal or state "Blue Sky" or securities
law or regulation, at common law or otherwise, (i) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact relating to
the Physician, the Company (including its subsidiaries, if any) or New P.C.,
and provided to Vision 21 or its counsel by the Company or the Physician,
specifically for inclusion in a Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, (ii)
arising out of or based upon any omission or alleged omission to state therein
a material fact relating to the Physician, the Company (including its
subsidiaries, if any) or New P.C. required to be stated therein or necessary to
make the statements therein not misleading, and not provided to Vision 21 or
its counsel by the Company or the Physician, provided, however, that such
indemnity shall not inure to the benefit of Vision 21 to the extent that such
untrue statement (or alleged untrue statement) was made, in, or omission (or
alleged omission) occurred in, any preliminary prospectus, and such information
was not so included by Vision 21 and properly delivered to shareholders of
Vision 21 who acquire Vision 21 Common Stock in any Initial Public Offering;
c. any filings, reports or disclosures
made pursuant to the IRS Voluntary Compliance Resolution Program, if
applicable;
d. any failure of the Merger to qualify
as a reorganization within the meaning of Section 368(a)(1)(A) of the Code or
any failure of the spin off of Company's medical business and Medical Assets to
qualify as a tax free spin off under Section 355 of the Code; and
e. any liability arising from any alleged
unlawful sale or offer to sell or transfer any of the Common Stock by
Physician.
55
<PAGE> 58
16.2. Indemnification by Vision 21. Subject to the
terms and conditions of this Agreement, Vision 21 hereby agrees to indemnify,
defend and hold the Physician harmless from and against all damages asserted
against or incurred by him arising out of or resulting from:
a. a breach by Vision 21 of any
representation, warranty or covenant of Vision 21 contained therein or in any
schedule or certificate delivered hereunder;
b. any liability under the Securities
Act, the Exchange Act or any other federal or state "Blue Sky" or securities
law or regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
Vision 21, contained in any preliminary prospectus, Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to Vision 21 (including its subsidiaries),
required to be stated therein or necessary to make the statements therein not
misleading; and
c. any filings, reports or disclosures
made pursuant to the IRS Voluntary Compliance Resolution Program, if
applicable.
Notwithstanding anything in this Section 16.2, Vision 21 shall not be
liable for any Damages resulting from any matter not disclosed to Vision 21 by
any of the third parties to be acquired by Vision 21 in connection with the
Related Acquisitions.
16.3. Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
a. A party claiming indemnification under
this Agreement (an "Indemnified Party") shall promptly (and, in any event, at
least ten (10) days prior to the due date for any responsive pleadings, filings
or other documents) (i) notify the party from whom indemnification is sought
(the "Indemnifying Party") of any third-party claim or claims asserted against
the Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement and (ii) transmit to the Indemnifying
Party a written notice ("Claim Notice") describing in reasonable detail the
nature of the Third Party Claim, a copy of all papers served with respect to
such claim (if any), an estimate of the amount of damages attributable to the
Third Party Claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. Except as set forth in Section 16.6, the
failure to promptly deliver a Claim Notice shall not relieve the Indemnifying
Party of its obligations to the Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of such claim. Within thirty (30) days after
receipt of any Claim Notice (the "Election Period"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article 16 with
respect to such Third Party Claim and (ii)
56
<PAGE> 59
whether the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such Third
Party Claim.
If the Indemnifying Party notifies the
Indemnified Party within the Election Period that the Indemnifying Party elects
to assume the defense of the Third Party Claim, then the Indemnifying Party
shall have the right to defend, at its sole cost and expense, such Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or settled at the
discretion of the Indemnifying Party in accordance with this Section 16.3(b).
The Indemnifying Party shall have full control of such defense and proceedings,
including any compromise or settlement thereof. The Indemnified Party is
hereby authorized, at the sole cost and expense of the Indemnifying Party (but
only if the Indemnified Party is entitled to indemnification hereunder), to
file, during the Election Period, any motion, answer or other pleadings that
the Indemnified Party shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party (it being understood and agreed that if an Indemnified Party
takes any such action that is prejudicial and causes a final adjudication that
is adverse to the Indemnifying Party, the Indemnifying Party shall be relieved
of its obligations hereunder with respect to such Third Party Claim). If
requested by the Indemnifying Party, the Indemnified Party agrees, at the sole
cost and expense of the Indemnifying Party, to cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim that the Indemnifying
Party elects to contest, including, without limitation, the making of any
related counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to Section 16.3(b) and shall bear its own
costs and expenses with respect to such participation; provided, however, that
if the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party, and the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it that are different from or additional to those
available to the Indemnifying Party, then the Indemnified Party may employ
separate counsel at the expense of the Indemnifying Party, and upon written
notification thereof, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of the Indemnified Party; provided further
that the Indemnifying Party shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party.
b. If the Indemnifying Party fails to
notify the Indemnified Party within the Election Period that the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 16.3(b), or if
the Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 16.3(b) but fails diligently and promptly to prosecute or settle the
Third Party Claim, then the Indemnified Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party (if the Indemnified
Party is entitled to indemnification hereunder), the Third Party Claim by all
appropriate proceedings, which proceedings shall be
57
<PAGE> 60
promptly and vigorously prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party shall have full control of such
defense and proceedings, provided, however, that the Indemnified Party may not
enter into, without the Indemnifying Party's consent, which shall not be
unreasonably withheld, any compromise or settlement of such Third Party Claim.
Notwithstanding the foregoing, if the Indemnifying Party has delivered a
written notice to the Indemnified Party to the effect that the Indemnifying
Party disputes its potential liability to the Indemnified Party under this
Article 16 and if such dispute is resolved in favor of the Indemnifying Party,
the Indemnifying Party shall not be required to bear the costs and expenses of
the Indemnifying Party's defense pursuant to this Section or of the
Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party shall reimburse the Indemnifying Party in full for
all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control any defense or settlement controlled by the
Indemnified Party pursuant to this Section 16.3(c), and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to the Indemnified Party, then the
Indemnifying Party may employ separate counsel and upon written notification
thereof, the Indemnified Party shall not have the right to assume the defense
of such action on behalf of the Indemnifying Party.
c. In the event any Indemnified Party
should have a claim against any Indemnifying Party hereunder that does not
involve a Third Party Claim, the Indemnified Party shall transmit to the
Indemnifying Party a written notice (the "Indemnity Notice") describing in
reasonable detail the nature of the claim, an estimate of the amount of damages
attributable to such claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not
notify the Indemnified Party within sixty (60) days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim, the claim
specified by the Indemnified Party in the Indemnity Notice shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed such claim, as provided above, such dispute shall be resolved
by mediation or arbitration as provided in Section 20.1 if the parties do not
reach a settlement of such dispute within thirty (30) days after notice of a
dispute is given.
d. Payments of all amounts owing by an
Indemnifying Party pursuant to this Article 16 relating to a Third Party Claim
shall be made within thirty (30) days after the latest of (i) the settlement of
such Third Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of such Third Party Claim or (iii) the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 16.3(d) shall be made within thirty (30)
days after the later of (i) the expiration of the sixty (60) day Indemnity
Notice period or (ii) the expiration of the period for appeal, if any, of a
final adjudication or arbitration of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
58
<PAGE> 61
16.4. Remedies Not Exclusive. The remedies provided in
this Agreement shall not be exclusive of any other rights or remedies available
to one party against the other, either at law or in equity. This Article 16
regarding indemnification shall survive Closing.
16.5. Costs, Expenses and Legal Fees. Each party
hereto agrees to pay the costs and expenses (including attorneys' fees and
expenses) incurred by the other parties in successfully (a) enforcing any of
the terms of this Agreement, or (b) proving that another party breached any of
the terms of this Agreement.
16.6. Indemnification Limitations. Notwithstanding the
provisions of Sections 16.1 and 16.2, (a) no party shall be required to
indemnify another party with respect to a breach of a representation, warranty
or covenant unless the claim for indemnification is brought within two (2)
years after the Closing Date, except that a claim for indemnification for a
breach of the representations and warranties contained in Sections 3.1, 3.2,
3.3., 3.4, 3.5, 3.6, 3.14, 3.17, 3.20, 3.23, 4.1, 4.3, 4.4, 4.8, 5.1, 5.2, 5.3,
5.4, 5.6, 5.7, 7.1, 7.2, 7.3 and 7.4 may be made at any time, and a claim for
indemnification for a breach of the representations and warranties contained in
Sections 3.12, 3.18, 3.21, 3.27, 3.28, 3.29, 3.30, 3.31, 3.33, 4.5, 4.7, 4.11,
5.8 and 8.1 may be made at any time within the applicable statute of
limitations; (b) indemnification based upon Sections 16.1(b) through (e) and
16.2(b) may be made at any time within the applicable statute of limitations;
and (c) the Physician shall not be required to indemnify Vision 21 pursuant to
Section 16.1 unless, and to the extent that, the aggregate amount of Damages
incurred by Vision 21 shall exceed an amount equal to two percent (2%) of the
total Merger Consideration; and (d) the Physician shall not be required to
indemnify Vision 21 with respect to a breach of a representation, warranty or
covenant for Damages in excess of the aggregate Merger Consideration received
by the Physician (other than pursuant to a requirement to indemnify Vision 21
under Sections 3.30 and 3.31, or unless the breach involves an intentional
breach or fraud by the Physician or the Company, which shall be unlimited).
16.7. Tax Benefits; Insurance Proceeds. The total
amount of any indemnity payments owed by one party to another party to this
Agreement shall be reduced by any correlative tax benefit received by the party
to be indemnified or the net proceeds received by the party to be indemnified
with respect to recovery from third parties or insurance proceeds and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
16.8. Payment of Indemnification Obligation. In the
event that the Physician has an indemnification obligation to Vision 21
hereunder, subject to Vision 21's approval as set forth below, the Physician
may satisfy such obligation by transferring to Vision 21 such number of shares
of Vision 21 Common Stock owned by the Physician having an aggregate fair
market value (which is prior to any Initial Public Offering based upon the
valuation given at Closing hereof or after an Initial Public Offering the fair
market value at such time based on the last reported sale price of Vision 21
Common Stock on a principal national securities exchange or other exchange on
which the Vision 21 Common Stock is then listed or the last quoted ask price
59
<PAGE> 62
on any over-the-counter market through which the Vision 21 Common Stock is then
quoted on the last trading day immediately preceding the day on which the
Physician transfers shares of Vision 21 Common Stock to Vision 21 hereunder)
equal to the indemnification obligation, provided that each of the following
conditions are satisfied:
a. The Physician shall transfer to Vision
21 good, valid and marketable title to the shares of Vision 21 Common Stock,
free and clear of all adverse claims, security interests, liens, claims,
proxies, options, stockholders' agreements and encumbrances;
b. The Physician shall make such
representation and warranties as to title to the stock, absences of security
interests, liens, claims, proxies, stockholders' agreements and other
encumbrances and other matters as reasonably requested by Vision 21; and
c. The other terms and conditions of any
transaction contemplated pursuant to this Section and the effects thereof,
including any legal or tax consequences, shall be reasonably satisfactory to
Vision 21.
17. TERMINATION.
17.1. Termination. This Agreement may be terminated
and the Merger may be abandoned:
a. at any time prior to the Closing Date
by mutual agreement of all parties;
b. at any time prior to the Closing Date
by Vision 21 if any representation or warranty of the Company or the Physician
contained in this Agreement or in any certificate or other document executed
and delivered by the Company or the Physician pursuant to this Agreement is or
becomes untrue or breached in any material respect or if the Company or the
Physician fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
c. at any time prior to the Closing Date
by the Company if any representation or warranty of Vision 21 contained in this
Agreement is or becomes untrue in any material respect or if Vision 21 fails to
comply in any material respect with any covenant or agreement contained herein,
and any such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt or written notice thereof;
d. at any time prior to the Closing Date
by the Company in the event of the failure of any of the conditions precedent
set forth in Article 13 of this Agreement;
e. at any time prior to the Closing Date
by Vision 21 in the event of the failure of any of the conditions precedent set
forth in Article 12 of this Agreement;
60
<PAGE> 63
f. by Vision 21 if at any time prior to
the Closing Date, Vision 21 deems termination to be advisable, provided,
however, that if Vision 21 exercises its right to terminate this Agreement
under this subsection, Vision 21 shall reimburse the Company and the Physician
for all reasonable attorneys' and accountants' fees incurred by the Company and
the Physician in connection with this Agreement; provided that Vision 21 shall
only reimburse the Company and the Physician up to an aggregate maximum amount
of One Hundred Thousand and No/100 Dollars ($100,000.00) for such fees; or
g. by Vision 21 or the Company if the
Merger shall not have been consummated by December 5, 1996.
17.2. Effect of Termination. In the event this
Agreement is terminated pursuant to Section 17.1, Vision 21, the Company and
the Physician, shall each be entitled to pursue, exercise and enforce any and
all remedies, rights, powers and privileges available at law or in equity,
subject to the limitations set forth in Section 16.1. In the event of a
termination of this Agreement under the provisions of this Article 17, a party
not then in material breach of this Agreement shall stand fully released and
discharged of any and all obligations under this Agreement.
18. PHYSICIAN EMPLOYMENT AGREEMENT.
18.1. Physician Employment Agreement. The parties
acknowledge that in accordance with the terms of this Agreement, Physician, as
employee, and the Company, as employer, have entered into the Physician
Employment Agreement and that Vision 21 is entitled to enforce such Physician
Employment Agreement as an intended third party beneficiary. Physician and
Vision 21 acknowledge that Vision 21 would suffer severe harm in the event of
Physician's resignation prior to the expiration of the five (5) year term of
such Physician Employment Agreement (without first obtaining the written
consent of Vision 21) or a breach or default of Physician's obligations under
such Physician Employment Agreement, and Physician, the Company and Vision 21
agree that Vision 21 shall be entitled to recover from Physician any and all
damages incurred by Vision 21 caused by such resignation, breach or default.
Notwithstanding the foregoing, Vision 21 shall not be entitled to recover its
damages caused by such resignation, breach or default if such resignation,
breach or default was caused by: (i) the death or disability of Physician,
(ii) circumstances not caused by an act or omission of Physician and which
circumstances are beyond his control, or (iii) loss of Physician's license to
practice as an ophthalmologist, unless such loss of license is due to an act or
omission of Physician. Notwithstanding the foregoing, Physician shall have no
obligation to pay the damages contemplated in this Section 18.1 if (a) the
Business Management Agreement has been terminated pursuant to a material breach
by Vision 21, or (b) Physician cures any such breach or default of the
Physician Employment Agreement within a period of thirty (30) days after notice
from Vision 21 of such breach or default.
18.2. Survival. The parties acknowledge and agree that
this Article 18 shall survive the Closing of the transactions contemplated
herein.
61
<PAGE> 64
19. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.
19.1. Physician Non-Competition Covenant.
a. The Physician recognizes that the
covenants of the Physician contained in this Section 19.1 are an essential part
of this Agreement and that, but for the agreement of the Physician to comply
with such covenants, Vision 21 would not have entered into this Agreement. The
Physician acknowledges and agrees that the Physician's covenant not to compete
is necessary to ensure the continuation of the Management Business (as defined
below) and is necessary to protect the reputation of Vision 21, and that
irreparable and irrevocable harm and damage will be done to Vision 21 if the
Physician competes with the Management Business or Vision 21. The Physician
accordingly agrees that for the periods set forth in the Business Management
Agreement, the Physician shall not:
i) directly or indirectly,
either as principal, agent, independent contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner or in any other
individual or representative capacity whatsoever, either for the Physician's
own benefit or for the benefit of any other person or entity knowingly (A)
hire, attempt to hire, contact or solicit with respect to hiring any employee
of Vision 21 (or of any of its direct or indirect subsidiaries) or (B) induce
or otherwise counsel, advise or encourage any employee of Vision 21 (or of any
of its direct or indirect subsidiaries) to leave the employment of Vision 21;
ii) act or serve, directly or
indirectly, as a principal, agent, independent contractor, consultant,
director, officer, employee, employer or advisor or in any other position or
capacity with or for, or acquire a direct or indirect ownership interest in or
otherwise conduct (whether as stockholder, partner, investor, joint venturer,
or as owner of any other type of interest), any Competing Management Business
as such term is defined herein; provided, however, that this clause (ii) shall
not prohibit the Physician from being the owner of up to 1% of any class of
outstanding securities of any company or entity if such class of securities is
publicly traded; or
iii) directly or indirectly,
either as principal, agent, independent, contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner or in any other
individual or representative capacity whatsoever, either for the Physician's
own benefit or for the benefit of any other person or entity, call upon or
solicit any customers or clients of the Management Business; provided however,
that the Physician may send out a general notice to the customers or clients of
the Management Business announcing the termination of his arrangement with
Vision 21 and may advertise in a general manner without violating this
covenant. The parties hereto acknowledge and agree that for purposes of this
Section, patients which have in the past received medical or optometric care
from the Company and/or shall in the future receive medical or optometric care
from the New P.C. are not deemed to be customers or clients of the Management
Business.
62
<PAGE> 65
b. For the purposes of this Section 19.1,
the following terms shall have the meaning set forth below:
i) "Management Business" shall
mean management and administration of the non-medical aspects of medical,
ophthalmology and optometry practices.
ii) "Competing Management
Business" shall mean an individual, business, corporation, association, firm,
undertaking, company, partnership, joint venture, organization or other entity
that either (A) conducts a business substantially similar to the Management
Business within the State, or (B) provides or sells a service which is the same
or substantially similar to, or otherwise competitive with the services
provided by the Management Business within the State; provided, however, that
"Competing Management Business" shall not include Vision 21, or the Physician's
internal management and administration of the Physician's medical practice or
participation in the management and administration of a physician group in
which the Physician devotes a significant amount of time to the practice of
medicine.
c. Should any portion of this Section
19.1 be deemed unenforceable because of the scope, duration or territory
encompassed by the undertakings of the Physician hereunder, and only in such
event, then the Physician and Vision 21 consent and agree to such limitation on
scope, duration or territory as may be finally adjudicated as enforceable by a
court of competent jurisdiction after the exhaustion of all appeals.
d. This covenant shall be construed as an
agreement ancillary to the other provisions of this Agreement, and the
existence of any claim or cause of action of the Physician against Vision 21,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Vision 21 of this covenant; provided, however,
that the Physician shall not be bound by this covenant and shall not be
obligated to pay the liquidated damages contemplated in this Section 19.1 if at
the time of a breach of this covenant the Business Management Agreement has
already been terminated pursuant to Section 6.2(a) thereof. Without limiting
other possible remedies to Vision 21 for breach of this covenant, the Physician
agrees that injunctive or other equitable relief will be available to enforce
the covenants of this provision, such relief to be without the necessity of
posting a bond, cash or otherwise. The Physician and Vision 21 further
expressly acknowledge that the damages that would result from a violation of
this non-competition covenant would be impossible to predict with any degree of
certainty, and agree that liquidated damages in the amount of the aggregate
consideration received by the Physician pursuant to this Agreement is
reasonable in light of the severe harm to the Management Business and Vision 21
which would result in the event that a violation of this non-competition
covenant were to occur. For purposes of calculation of the liquidated damages
contemplated in this Section and for purposes of calculation of the liquidated
damages contemplated in the Business Management Agreement and the Physician
Employment Agreement between the Physician and New P.C., the aggregate
consideration received by Physician pursuant to this Agreement
shall be in those amounts and in such form as set forth in Schedule 19.1. If
the Physician violates this non-competition covenant, Vision 21 shall, in
63
<PAGE> 66
addition to all other rights and remedies available at law or equity, be
entitled to (a) cancel the number of shares of Common Stock held by the
Physician or, with respect to shares of Common Stock entitled to be received by
the Physician, terminate its obligation to deliver such number of shares of
Common Stock, valued as set forth in Section 6.6(a) of the Business Management
Agreement, and (b) repayment by Physician to Vision 21 of any and all sums
received in connection with any shares of Vision 21 Common Stock sold by
Physician; but in no event shall Vision 21 be entitled to offset amounts in
excess of the liquidated damages sum pursuant to this Section 19.1. The
Physician agrees to deliver to Vision 21 the certificates representing any such
shares canceled by Vision 21. Payment and satisfaction by Physician shall be
made within sixty (60) days of notification to Physician by Vision 21 that
Physician has violated this non-competition covenant.
e. Notwithstanding anything contained
herein, this Section 19.1 shall not be construed to (i) limit the freedom of
any patient of the Physician to choose the facility or physician from whom such
patient shall receive health-care services or (ii) limit or interfere with the
Physician's ability to exercise his professional medical judgment in treating
his patients or his ability to provide medical services to his patients.
19.2. Physician Confidentiality Covenant. From the
date hereof, the Physician shall not, directly or indirectly, use for any
purpose, other than in connection with the performance of the Physician's
duties under the Physician Employment Agreement with New P.C., or disclose to
any third party, any information of Vision 21 or the Company, as appropriate
(whether written or oral), including any business management or economic
studies, patient lists, proprietary forms, proprietary business or management
methods, marketing data, fee schedules, or trade secrets of Vision 21 or of the
Company, as applicable, and including the terms and provisions of this
Agreement and any transaction or document executed by the parties pursuant to
this Agreement. Notwithstanding the foregoing, the Physician may disclose
information that the Physician can establish (a) is or becomes generally
available to and known by the public or medical community (other than as a
result of an unpermitted disclosure directly or indirectly by the Physician or
his Affiliates, advisors, or representatives); (b) is or becomes available to
the Physician on a nonconfidential basis from a source other than Vision 21,
the Company or their respective Affiliates, advisors or representatives,
provided that such source is not and was not bound by a confidentiality
agreement with or other obligation of secrecy to Vision 21, the Company or
their respective Affiliates, advisors or representatives of which the Physician
has knowledge; or (c) has already been or is hereafter independently acquired
or developed by the Physician without violating any confidentiality agreement
with or other obligation of secrecy to Vision 21, the Company or their
respective Affiliates, advisors or representatives. Without limiting the other
possible remedies to Vision 21 for the breach of this covenant, the Physician
agrees that injunctive or other equitable relief shall be available to enforce
this covenant, such relief to be without the necessity of posting a bond, cash
or otherwise. The Physician further agrees that if any restriction contained
in this Section 19.2 is held by any court to be unenforceable or unreasonable,
a lesser restriction shall be enforced in its place and the remaining
restrictions contained herein shall be enforced independently of each other.
64
<PAGE> 67
19.3. Survival. The parties acknowledge and agree that
this Article 19 shall survive the Closing of the transactions contemplated
herein.
20. DISPUTES.
20.1. Mediation and Arbitration. Any dispute,
controversy or claim (excluding claims arising out of an alleged breach of
Article 19 of this Agreement) arising out of this Agreement, or the breach
thereof, that cannot be settled through negotiation shall be settled (a) first,
by the parties trying in good faith to settle the dispute by mediation under
the Commercial Mediation Rules of the AAA (such mediation session to be held in
Tampa, Florida, if the amount in dispute is equal to or in excess of $200,000
or if the dispute is solely of a non-monetary nature, and in Scottsdale,
Arizona if the amount in dispute is lower than $200,000, and in either case to
commence within 15 days of the appointment of the mediator by the AAA), and (b)
if the controversy, claim or dispute cannot be settled by mediation, then by
arbitration administered by the AAA under its Commercial Arbitration Rules
(such arbitration to be held in Tampa, Florida, if the amount in dispute is
equal to or in excess of $200,000 or if the dispute is solely of a non-monetary
nature, and in Scottsdale, Arizona if the amount in dispute is lower than
$200,000, and in either case before a single arbitrator and to commence within
15 days of the appointment of the arbitrator by the AAA), and judgment on the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
21. MISCELLANEOUS
21.1. Taxes. Physician shall pay all transfer taxes,
sales and other taxes and charges imposed by the State, if any, which may
become payable in connection with the transactions and documents contemplated
hereunder (excluding any of such taxes which may be attributable to services to
be provided by Vision 21 under the Business Management Agreement). Vision 21
shall pay all transfer taxes, sales and other taxes and charges imposed by the
State of Florida, if any, which may become payable in connection with the
transactions and documents contemplated hereunder (excluding any of such taxes
which may be attributable to services to be provided by Vision 21 under the
Business Management Agreement).
21.2. Remedies Not Exclusive. No remedy conferred by
any of the specific provisions of this Agreement or any document contemplated
by this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise. The election of any one or more remedies by any party hereto
shall not constitute a waiver of the right to pursue other available remedies.
21.3. Parties Bound. Except to the extent otherwise
expressly provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
65
<PAGE> 68
21.4. Notices. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to Vision 21 addressed to:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34777
Attn: Richard T. Welch, Chief Financial Officer
With copies to:
Shumaker, Loop & Kendrick
Post Office Box 172609
101 E. Kennedy Boulevard, Suite 2800
Tampa, Florida 33672-0609
Facsimile No. (813) 229-1660
Attn: Darrell C. Smith, Esquire
If to the Company and the Physician addressed to:
Paradise Valley Eye Specialists
4845 East Thunderbird Road
Scottsdale, Arizona 85254
Attn: Daniel B. Feller, M.D.
With copies to:
Sacks Tierney, P.A.
2929 North Central Avenue
Fourteenth Floor
Phoenix, Arizona 85012
Attn: Steven M. Goldstein, Esquire
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 21.4. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery
or refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
66
<PAGE> 69
21.5. Choice of Law. This Agreement shall be
construed, interpreted, and the rights of the parties determined in accordance
with, the laws of the State of Florida except with respect to matters of law
concerning the internal affairs of any corporate or partnership entity which is
a party to or the subject of this Agreement, and as to those matters the law of
the state of incorporation or organization of the respective entity shall
govern.
21.6. Entire Agreement; Amendments and Waivers. This
Agreement, together with the documents contemplated by this Agreement and all
Exhibits and Schedules hereto and thereto, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof. No supplement, modification or
waiver of any of the provisions of this Agreement shall be binding unless it
shall be specifically designated to be a supplement, modification or waiver of
this Agreement and shall be executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
21.7. Confidentiality Agreements. The provisions of
any prior confidentiality agreements and letters of intent between or among
Vision 21, the Company and the Physician, as amended, shall terminate and cease
to be of any force or effect at and upon the Closing.
21.8. Reformation Clause. It is the intention of the
parties hereto to conform strictly to applicable laws regarding the practice
and regulation of medicine, whether such laws are now or hereafter in effect,
including the laws of the United States of America, the State or any other
applicable jurisdiction, and including any subsequent revisions to, or judicial
interpretations of, those laws, in each case to the extent they are applicable
to this Agreement (the "Applicable Laws"). Accordingly, if the ownership of
any Nonmedical Asset by Vision 21 violates any Applicable Law, then the parties
hereto agree as follows: (a) the provisions of this section 21.8 shall govern
and control; (b) if none of the parties hereto are materially economically
disadvantaged, then any Nonmedical Asset, the ownership of which violates any
Applicable Law, shall be deemed to have never been owned by Vision 21; (c) if
one or more of the parties hereto is materially economically disadvantaged,
then the parties hereto agree to negotiate in good faith such changes to the
structure and terms of the transactions provided for in this Agreement as may
be necessary to make these transactions, as restructured, lawful under
applicable laws and regulations, without materially disadvantaging either
party; (d) this Agreement shall be deemed reformed; and (e) the parties to this
Agreement shall execute and deliver all documents or instruments necessary to
effect or evidence the provisions of this Section 21.8.
21.9. Assignment. The Agreement may not be assigned by
operation of law or otherwise except that Vision 21 shall have the right to
assign this Agreement, at any time,
67
<PAGE> 70
to any Affiliate or direct or indirect wholly-owned subsidiary. In the event
of such assignment, Vision 21 shall remain liable hereunder.
21.10. Attorneys' Fees. Except as otherwise
specifically provided herein, if any action or proceeding is brought by any
party with respect to this Agreement or the other documents contemplated with
respect to the interpretation, enforcement or breach hereof, the prevailing
party in such action shall be entitled to an award of all reasonable costs of
litigation or arbitration, including, without limitation, attorneys' fees, to
be paid by the losing party, in such amounts as may be determined by the court
having jurisdiction of such action or proceeding or by the arbitrators deciding
such action or proceeding.
21.11. Further Assurances. From time to time hereafter
and without further consideration, each of the parties hereto shall execute and
deliver such additional or further instruments of conveyance, assignment and
transfer and take such other actions as any of the other parties hereto may
reasonably request in order to more effectively consummate the transactions
contemplated hereunder or as shall be reasonably necessary or appropriate in
connection with the carrying out of the parties' respective obligations
hereunder for the purposes of this Agreement.
21.12. Announcements and Press Releases. Any press
releases or any other public announcements concerning this Agreement or the
transactions contemplated hereunder shall be approved in advance by Vision 21,
New P.C. and the Company; provided, however, that such approval shall not be
unreasonably withheld and if any party reasonably believes that it has a legal
obligation to make a press release and the consent of the other party cannot be
obtained, then the release may be made without such approval.
21.13. No Tax Representations. Each party acknowledges
that it is relying solely on its advisors to determine the tax consequences of
the transactions contemplated hereunder and that no representation or warranty
has been made by any party as to the tax consequences of such transactions
except as otherwise specifically set forth in this Agreement.
21.14. No Rights as Stockholder. The Physician shall
have no rights as a stockholder with respect to any shares of Common Stock
until the issuance of a stock certificate evidencing such shares. Except as
otherwise provided in the Agreement, no adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to such
date any stock certificate is issued.
21.15. Multiple 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.
21.16. Headings. The headings of the several articles
and sections herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
68
<PAGE> 71
21.17. Severability. Each article, section and
subsection of this Agreement constitutes a separate and distinct undertaking,
covenant or provision of this Agreement. If any such provision shall finally
be determined to be unlawful, such provision shall be deemed severed from this
Agreement, but every other provision of this Agreement shall remain in full
force and effect.
21.18. Form of Transaction. If after the execution
hereof, Vision 21 determines that the ownership of the Nonmedical Assets of the
Company can be better achieved through a different form of transaction without
economic injury to the Company or the Physician, or delay of the consummation
of the transaction, the Company and the Physician shall cooperate in revising
the structure of the transaction and shall negotiate in good faith to so amend
this Agreement; provided, that Vision 21 shall reimburse the Company and the
Physician at Closing for all reasonable additional expenses incurred by the
Company and the Physician as a result of such change in form.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
69
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
"COMPANY"
DANIEL B. FELLER, M.D., P.C., an
Arizona professional corporation, d/b/a
PARADISE VALLEY EYE SPECIALISTS
/s/ By: /s/ Daniel B. Feller
- ------------------------------ -----------------------------------
Witness Daniel B. Feller, M.D., President
/s/
- -----------------------------
Witness "PHYSICIAN"
/s/ /s/ Daniel B. Feller
- ------------------------------ ---------------------------------------
Witness Daniel B. Feller, M.D.,
/s/
- ------------------------------
Witness
"VISION 21"
VISION 21, INC.
/s/ By: /s/ Theodore N. Gillette
- ------------------------------ --------------------------------------
Witness Theodore N. Gillette, President
/s/
- ------------------------------
Witness
70
<PAGE> 73
Schedule 1.46A
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Medical Assets of the Company
The following constitute the Medical Assets:
Medical records,
Patient lists;
Third-party payer contracts (except for rights to purchased
accounts receivable);
Eyeglasses, lenses and other eyewear;
Licenses, certificates of need, Medicare/Medicaid
certifications and other governmental authorizations necessary
to provide Professional Eye Care Services and to be paid
therefor by applicable third-party payers; and
Any other asset that legally cannot be owned by a party that
is not physician-owned.
<PAGE> 74
Schedule 1.46B
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Personal Effects
Personal Artwork
<PAGE> 75
Schedule 3
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Individuals - Best knowledge
representations and warranties of the Company
1. Daniel B. Feller, M.D.
2. Sarah Nelson, Executive Director
<PAGE> 76
Schedule 3.1
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Capital Stock or other interest owned by the Company,
the Physician or any Professional Employee in any Competitor
None.
<PAGE> 77
Schedule 3.2
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Security interests, liens, adverse claims, encumbrances, equities,
proxies or shareholders agreements affecting Company Common Stock
None.
<PAGE> 78
Schedule 3.3
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Options, warrants, subscriptions or other rights to
purchase stock in the Company or Company's obligation
to purchase, redeem or otherwise acquire any of its
equity securities, pay dividends or make distributions
None.
<PAGE> 79
Schedule 3.4
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Sale, distribution, or spin-off of
significant assets of the Company or
its Affiliates within the last two years
None.
<PAGE> 80
Schedule 3.7
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Violations or conflicts resulting from
execution, delivery and consummation
of transaction by the Company
None.
<PAGE> 81
Schedule 3.8
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Consents required for Company from
Governmental Authority or any other persons
1. FHP under Capitated Ophthalmology Agreement dated July 1, 1995
and under Arizona Region Senior and Commercial Plan,
Participating Physician's Agreement, John C. Lincoln Hospital
and St. Luke's Hospitals
2. Consents of Landlords under real property leases
<PAGE> 82
Schedule 3.10
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Liabilities of the Company not
reflected in Financial Statements
None.
<PAGE> 83
Schedule 3.11(a)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Compensation of All Employees of the
Company
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 84
Schedule 3.11(b)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Compensation plans, arrangements or practices
sponsored by the Company or to which the Company
contributes on behalf of its employees (other
than Employment Agreements and Employee Benefit Plans)
None, except for $225.00 benefit for use of uniform purchase available
to all hourly employees.
<PAGE> 85
Schedule 3.11(c)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Employment Agreements
1. Employment Contract dated November 30, 1993 between the
Company and Daniel B. Feller, M.D.
2. Employment Contract dated September 1, 1996 between the
Company and Pamela H. Williams, M.D., effective 1/5/97.
3. Letter of Agreement dated June 1, 1994, as amended September
1, 1996, between the Company and Shirley J. Lambert, O.D.
4. Letter of Agreement dated August 26, 1993 between the Company
and Sarah J. Nelson (Executive Director).
<PAGE> 86
Schedule 3.11(d)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Employee Policies and Procedures
See attached.
[EMPLOYEE POLICIES AND PROCEDURES OMITTED]
<PAGE> 87
Schedule 3.11(f)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Exceptions to Labor Compliance
None.
<PAGE> 88
Schedule 3.11(g)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Union participation of Company Employees
None.
<PAGE> 89
Schedule 3.12(a)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Employee Benefit Plans sponsored by the
Company or to which the
Company contributes on behalf of its
Employees in the past three years
Principal Mutual Life Ins. Company for medical, dental, prescription,
life (100% paid by employer)
<PAGE> 90
Schedule 3.12(c)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Employee Benefit Plan audits,
investigations or enforcement actions
None.
<PAGE> 91
Schedule 3.12(f)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Employee Benefit Plan
determination letter or IRS ruling
None.
<PAGE> 92
Schedule 3.13
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Changes to Company
since Balance Sheet Date
Purchase of Yag laser 9/1/96
Lease of Lexus on October 4, 1996 - in Dr. Feller's name, but payments
made by Company ($727.88/mo.) under 36 month lease.
<PAGE> 93
Schedule 3.14(b)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Permitted Encumbrances
on Personal Property
1. Advanta Leasing Corp. - UCC-1 Financing Statement filed with
Arizona Secretary of State covering computer and telephone
equipment.
2. Copelco Capital, Inc. - UCC-1 Financing Statement filed with
Arizona Secretary of State on December 16, 1994 covering
microscope system.
3. Citibank (Arizona) - UCC-1 Financing Statement filed with
Arizona Secretary of State on December 19, 1990 covering all
of Company's accounts.
4. Northern Trust Bank of Arizona, N.A., filed with Arizona
Secretary of State on June 1, 1994 and with Maricopa County on
June 2, 1994 covering all of Company's equipment, fixtures and
records.
<PAGE> 94
Schedule 3.14(c)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Real Property Leases and
Personal Property Leases
Real Property Leases: Please see attached list.
Personal Property Leases:
1. Lease between Copelco Capital, Inc. and the Company dated
April 20, 1995. Term of 60 months. Monthly payments of
$452.73 plus $32.37 tax.
2. Lease between Copelco Capital, Inc. and the Company dated
November 30, 1994. Term of 60 months. Monthly payments of
$220.17 plus $15.74 tax.
3. Lease between Communications World International, Inc. dated
July 6, 1994. Term of 60 months. Monthly payments of
$477.32. Add-on of 50 monthly payments of $152.15 for
additional equipment.
<PAGE> 95
PARADISE VALLEY LOCATION
o lease between landlord (Daniel and Sharon Feller) and tenant (Paradise
Valley Eye Specialists) dated (extended) June 1, 1996 through
May 31, 2001.
SOUTH PHOENIX LOCATION
o lease between landlord (South Valley Medical Center Association) and tenant
(Daniel B Feller, MD, PC) dated September 20, 1991 through
September 20, 1997.
CENTRAL PHOENIX LOCATION
o lease between landlord (State Compensation Fund) and tenant (Duane L
Mitzel, MD) dated March 1, 1994 through September 30, 1999.*
<PAGE> 96
Schedule 3.15
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Commitments of the Company
None.
<PAGE> 97
Schedule 3.16
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Insurance Policies; Cancellations;
Outstanding Claims, Settlements or
Premiums Owed; Professional Liability
Insurance Denials since January 1, 1994;
and All Claims since January 1, 1994
SEE CHART ATTACHED WHICH IS MADE A PART HEREOF.
<PAGE> 98
PARADISE VALLEY EYE - Schedule 3.16: Insurance
<TABLE>
<S> <C> <C> <C> <C>
Insured Daniel B. Feller, M.D. Shirley Jean Lambert, Pamela H. Williams, Paradise Valley Eye
Additional insureds: dba O.D. M.D. Specialists
Paradise Valley Eye
Specialists
Liability limits: $1 million / $3 million $2 million/$4 million $1 million/$3 million NO PROFESSIONAL
Professional liability Professional Liability Professional Liability LIABILITY
INSURANCE
Vicarious liability
endorsement for Shirley
Jean Lambert (not Umbrella:
direct liability coverage for $100,000 / $100,000 $5 million / $5 million
Lambert) (injuries to patients &
third parties; peer Commercial/General:
$100,000 / $100,000 review) $1 million / $2 million
(injuries to patients & third (UNCLEAR - CONFLICTING
parties; peer review) PROVISIONS.)
$10,000 medical expenses
MICA Chicago Insurance Co. MICA per person
EMPLOYER'S LIABILITY:
NOT COVERED
Also: $10,000 self-
insurance retention
Expiration date 11-16-97 8/14/97 12/1/97 1-1-98
Retroactive date 11-16-83 12/1/9/97
Occurrence vs. Claims made (tail offered at
Claims Made time insurance is cancelled)
Claims N/A N/A N/A
</TABLE>
[OTHER INSURANCE POLICY ATTACHMENTS AND
DESCRIPTIONS HAVE BEEN OMITTED]
<PAGE> 99
Schedule 3.17
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Description of Proprietary Rights; Consents
None.
<PAGE> 100
Schedule 3.18
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Good faith disputes over payment of
Taxes; Tax deficiency or delinquency
None.
<PAGE> 101
Schedule 3.19
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
List of licenses, franchises, permits and
governmental authorizations for conduct of
the Company's business; Notices of Noncompliance
1. Arizona State Licenses for Daniel B. Feller, M.D. (No. 14206);
Pamela H. Williams (No. ) and Shirley J. Lambert, O.D. (Nos.
716 and 97).
2. DEA Registration for Daniel B. Feller, M.D. (No. AF-2454952).
3. American Board of Ophthalmology Certification for Daniel B.
Feller, M.D.
4. Arizona Corporation Commission, Business Corporation Annual
Report and Certificate of Disclosure.
5. License from Arizona Radiation Regulatory Agency for use of
Yag laser in process.
<PAGE> 102
Schedule 3.20
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Finder's, broker's or
agent's fee owed by the Company
None.
<PAGE> 103
Schedule 3.21
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Company Litigation
None.
<PAGE> 104
Schedule 3.24
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
List of Company borrowing and investing arrangements
1. Promissory Note in the original principal amount of $93,820.63
dated April 28, 1995 to Northern Trust Bank of Arizona, N.A.
Interest Rate: prime plus .50%, monthly principal payment of
$1,563.68 plus interest. Final payment due April 28, 2000.
2. Checking and money market accounts at Northern Trust Bank of
Arizona.
<PAGE> 105
Schedule 3.25
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Ownership Interests of
Interested Persons and Material
Affiliations in the last three years
Eye Specialists of Arizona, P.C.
Sharona Optical, Inc.
Doctors Optical Laboratory (out of business - see attached)
[CORRESPONDENCE AND FEDERAL AND STATE TAX FILINGS
WITH RESPECT TO DOCTORS OPTICAL LABORATORY ARE OMITTED]
<PAGE> 106
Schedule 3.26
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Company Investments in Competitors
None.
<PAGE> 107
Schedule 3.32
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Description of and relationship with Payors
1. Capitated Managed Care Contracts with FHP.
2. Special Provider Services Agreement and Letter of Agreement
with Talbert Medical Group.
3. Medicare (Aetna in Arizona)
<PAGE> 108
Schedule 4.2
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Violations or conflicts
resulting from execution, delivery or
consummation of transaction by the Physician
None.
<PAGE> 109
Schedule 4.4
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
List of transfers or other
transactions involving Company
capital stock since January 1, 1994
None.
<PAGE> 110
Schedule 4.7
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Finder's, broker's or
agent's fees owed by the Physician
None.
<PAGE> 111
Schedule 4.8
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Physician Ownership of Interested
Persons and Material Affiliations
Sharona Optical, Inc.
Eye Specialists of Arizona, P.C.
Doctor's Optical Laboratory
<PAGE> 112
Schedule 4.9
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Physician Investments in Competitors
None.
<PAGE> 113
Schedule 4.10
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Physician Litigation
None.
<PAGE> 114
Schedule 4.12
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
List of hospitals at which
Physician has full staff privileges
1. St. Luke's Hospital
2. Phoenix Memorial
3. John C. Lincoln
4. Good Samaritan
5. Scottsdale North
6. P.V. Hospital
7. Columbia
<PAGE> 115
Schedule 4.13
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Exceptions to continued Physician
intent to practice medicine
None.
<PAGE> 116
Schedule 5
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Individuals - Best knowledge
representations and warranties of Vision 21
1. Theodore N. Gillette
2. Richard L. Sanchez
3. Richard T. Welch
4. Nicholas M. Arfaras
<PAGE> 117
Schedule 5.1
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Jurisdictions where Vision 21
is qualified to do business
1. Florida
2. Arizona
3. Minnesota
4. New York
<PAGE> 118
Schedule 5.6
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Consents required for Vision 21
from Governmental Authority or other persons
None.
<PAGE> 119
Schedule 5.7
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Finder's, brokers or
agent's fees owed by Vision 21
None.
<PAGE> 120
Schedule 5.11
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Liabilities of Vision 21
not reflected in Financial Statements
None.
<PAGE> 121
Schedule 7.6
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Other Contracts or
Agreements of New, P.C.
None.
<PAGE> 122
Schedule 8.1(b)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Exception to Physician "accredited
investor" or "sophisticated investor" representation
None.
<PAGE> 123
Schedule 8.1(d)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Physician's principal residence
[IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
CONFIDENTIAL PORTIONS OF THIS AGREEMENT (INCLUDING THE INFORMATION ON THIS
SCHEDULE) HAVE BEEN OMITTED HEREFROM AND FILED SEPARATELY WITH THE SECURITIES
EXCHANGE COMMISSION.]
<PAGE> 124
Schedule 9.16
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Non-Shareholder Physician
Employees not required to enter into
Physician Employment Agreement with New, P.C.
None.
<PAGE> 125
Schedule 9.17
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Optometrist Employees not
required to enter into Optometrist
Employment Agreement with New, P.C.
None.
<PAGE> 126
Schedule 9.21
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Exceptions to Assignment of Fees for
Medical and Optometry Services
from all Professional Employees of Company
None.
<PAGE> 127
Schedule 10.6
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Personal liabilities of
Physician for which Vision 21 will use
best efforts to obtain release
1. Copelco Capital, Inc. (See Schedule 3.14(b))
2. Advanta Leasing Corp. (See Schedule 3.14(b))
3. Real Property Leases (See Schedule 3.14(c))
<PAGE> 128
Schedule 11.5
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Joint personal liabilities of Physician
and Company to which Vision 21
will use best efforts to obtain release
None.
<PAGE> 129
Schedule 18.1
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Liquidated damages for Physician
breaching Physician Employment Agreement
Liquidated damages for Daniel B. Feller, M.D. shall equal $2.77 per
share of Vision 21 common stock times 217,303 shares of Vision 21 common stock
granted to Daniel B. Feller, M.D. in connection with the Merger, which total
equals $601,929.
<PAGE> 130
Exhibit 2.8(a)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
Share Exchange
A total of 217,303 shares of Vision 21 common stock for all of the
issued and outstanding common stock of Daniel B. Feller, M.D., P.C., d/b/a
Paradise Valley Eye Specialists.
<PAGE> 131
Exhibit 14.1(o)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement"), dated as of
________________, 19__, is by and between Vision 21, Inc., a Florida
corporation and any successor ("Vision 21"), and ______________________, M.D.
("Shareholder") located at 4845 East Thunderbird Road, Scottsdale, Arizona
85254.
1. Registration Rights.
(a) In the event that Vision 21 proposes to file a
registration statement under the Securities Act for purposes of effecting an
underwritten public offering of shares of Vision 21 common stock for cash
(including, but not limited to, a registration statement relating to a
secondary offering of Vision 21 common stock, but excluding registration
statements relating to any employee benefit plan or a corporate
reorganization), Vision 21 shall give written notice of such proposed filing to
the Shareholder at least fifteen (15) days before the anticipated filing date,
and such notice shall offer Shareholder the opportunity to register such number
of the Shareholder's shares of common stock as Shareholder may request in
writing within ten (10) days after receipt of such notice; provided, however,
that the maximum number of shares of common stock that such Shareholder may
request to include in any registration statement shall be limited as provided
in Section 1(c).
(b) In the event that (i) one (1) year has elapsed from
the date of effectiveness of the registration statement filed in connection
with an underwritten initial public offering of shares of Vision 21 common
stock, and (ii) Vision 21 receives a written request from holders holding in
the aggregate a minimum of 300,000 shares of Vision 21 common stock issued to
the founding practices described in Vision 21's Confidential Information
Memorandum dated September 27, 1996, as amended, and issued to certain
professionals owning equity interests in such founding practices (the founding
practices and professionals of such practices holding share's of common stock
of Vision 21 are collectively referred to as the "Founding Shareholders"), that
Vision 21 file a registration statement under the Securities Act effecting an
offering of shares of Vision 21 common stock; then Vision 21 shall as soon as
practicable file a registration statement at its own expense effecting a public
offering of shares of Vision 21 common stock held by Founding Shareholders, as
well as any other Vision 21 shares owned by any other shareholders which Vision
21 wishes to include in the offering (which offering may be an underwritten
offering at Vision 21's sole discretion); provided however that Vision 21 shall
be obligated to effect only one registration statement containing each
Shareholder, and Vision 21 shall be obligated to file only two (2) registration
statements in the aggregate, pursuant to this Section 1(b).
<PAGE> 132
(c) The maximum aggregate number of shares of common
stock that Shareholder may request to be registered under this Agreement shall
be sixty percent (60%) of Shareholder's original shares of Vision 21 common
stock. In no event shall the total number of Shareholder's shares of common
stock that Vision 21 is obligated to register under this Agreement exceed sixty
percent (60%) of Shareholder's original shares of Vision 21 common stock, and
in no event shall Vision 21 be obligated to register more than (i) in an
initial offering, thirty percent (30%) of Shareholder's original shares of
Vision 21 common stock or (ii) in a second offering, sixty percent (60%) of the
Shareholder's original shares minus the percent of the Shareholder's original
shares that the Shareholder registered in the first offering. The "original
shares" of Vision 21 as described herein shall be deemed to be the
_______________ shares of common stock received by the Shareholder on the date
of this Agreement.
(d) Vision 21 shall have the sole and exclusive right to
select the underwriters of any public offering of shares of Vision 21 common
stock, including any public offering conducted pursuant to the demand
registration right set forth in Section 1(b) above. The use of underwriters in
any demand registration right set forth in Section 1(b) above is subject to
Vision 21's ability to engage underwriters under terms and conditions deemed
reasonable by Vision 21.
(e) If the managing underwriter of any offering advises
Vision 21 that the total number of shares of Vision 21's common stock which
Vision 21, the Shareholder and any other persons intend to include in such
offering would adversely affect the success of such offering, then the amount
of shares of common stock to be offered for the account of Shareholder shall be
reduced to the extent necessary to reduce the total number of shares of common
stock to be included in such offering to the amount recommended by such
managing underwriter.
(f) Vision 21 shall not be required to (i) reduce the
amount of shares of common stock to be offered by Vision 21 in such offering
for any reason or (ii) include any shares of common stock of Shareholder in any
public offering for which a registration statement is or is proposed to be
filed if such shares of common stock are, at the time of effectiveness of such
registration statement, eligible to be sold under Rule 144 under the Securities
Act or otherwise eligible for sale to the public without registration.
(g) Vision 21 shall have the right to extend or delay the
effectiveness of any registration statement for a period of up to ninety (90)
days if, upon the advice of counsel, such delay is advisable and in the best
interests of Vision 21 because of the existence of non-public material
information, or to allow Vision 21 to complete any pending audit of its
financial statements or any public financing plan.
(h) Shareholder agrees to cooperate with Vision 21 in all
respects in connection with registration of the common stock, including timely
supplying all information and executing and returning all documents requested
by Vision 21 and its managing underwriter.
Exhibit 14.1(o) - Page 2
<PAGE> 133
(i) Vision 21 shall not be required to include any of
Shareholder's shares of common stock in any registration statement unless
Shareholder accepts the terms of the underwriting as agreed upon between Vision
21 and its underwriters.
(j) Vision 21 shall have the right to defer the filing of
any registration statement if the Board of Directors of Vision 21 determines in
good faith that it would be seriously detrimental to Vision 21 and its
shareholders for such registration statement to be filed.
(k) This Agreement shall expire two (2) years from the
date of an initial public offering of Vision 21 common stock.
2. Covenants of Vision 21. Vision 21 hereby covenants and
agrees:
(a) To take such steps as may be necessary to comply with
the Blue Sky laws of such states as the managing underwriter may reasonably
request; provided that in no event shall Vision 21 be obligated to qualify to
do business in any state where it is not so qualified or to take any action
which would subject it to unlimited service of process in any state where it is
not at such time so subject;
(b) To use reasonable efforts to cause the registration
statement to become effective and to keep the registration statement effective
for such period as may be required under the terms of the underwriting
agreement relating thereto but no longer than for a period of forty-five (45)
days, to file such post-effective amendments as may be necessary to keep any
prospectus contained in such registration statement true and complete during
such period as the registration statement shall be effective, and to furnish
and file such other amendments, supplements, and other documents the managing
underwriter may reasonably request;
(c) To supply such numbers of prospectuses as may be
reasonably required by the managing underwriter;
(d) To pay the reasonable costs and expenses of the
registration statement including without limitation all registration and Blue
Sky filing fees, all fees and expenses of Vision 21's counsel (but not the fees
and expenses of counsel for Shareholder), all accounting costs (including costs
associated with the preparation of interim period financial statements), NASD
fees, printing costs, experts' fees, expenses, costs of post-effective
amendments, and all other usual and customary expenses in connection with the
registration statement, except for Shareholder's pro rata share of underwriting
discounts, fees, and selling commissions (calculated in the manner set forth in
Section 3(a)(ii) of this Agreement); and
(e) With respect to any registration statement filed
pursuant to this Agreement, where underwriters are utilized, to cooperate with
the underwriters to the best of its abilities and to enter into an underwriting
agreement with such underwriters containing such representations,
Exhibit 14.1(o) - Page 3
<PAGE> 134
warranties, and covenants on the part of Vision 21 as are usual and customary
in an underwritten public sale of common stock.
3. Covenants of Shareholder.
(a) Shareholder hereby covenants and agrees:
(i) To cooperate with Vision 21 in its compliance
with all federal and state securities laws, including without limitation
providing such information and signing such documents as are necessary to
effect a registration or reasonably requested by underwriters pursuant to this
Agreement;
(ii) To pay his pro rata portion (calculated on
the basis of the ratio of the aggregate offering price attributable to the
shares of Shareholder being registered and sold in relation to the aggregate
offering price attributable to the total number of securities being registered
and sold, including securities being registered and sold by other selling
stockholders) of the underwriting discounts and selling commissions and to pay
all the fees and disbursements of his counsel; and
(iii) To the entry of stop transfer instructions
with the Company's transfer agent against the transfer of any shares of
Shareholder's Vision 21 common stock except in compliance with the restrictions
as set forth in this Section 3.
(b) Shareholder shall be considered an "affiliate" of
Vision 21 for purposes of Rule 144 under the Securities Act, even in the event
Shareholder is not technically an affiliate of Vision 21 as defined in Rule
144, and the Vision 21 common stock owned by Shareholder shall be subject to
the restrictions and limitations on resale imposed by Rule 144 on affiliates of
Vision 21. Shareholder shall not sell any of his shares of Vision 21 common
stock under Rule 144 unless Shareholder would be eligible to do so under the
provisions applicable to affiliates.
(c) In addition to the transfer restrictions otherwise
provided for herein, Shareholder shall not, whether or not Shareholder elects
to cause the registration of his shares pursuant to this Agreement, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of any shares of Vision 21 common stock
(other than the shares covered by such registration, which may be sold in
accordance with the plan or plans of distribution described in the registration
statement) owned by Shareholder for a period of one hundred eighty (180) days
or such shorter period as negotiated by the Company following the effective
date of such registration statement without the prior written consent of Vision
21. In the event that Shareholder is a corporation, professional corporation
or professional limited liability company, Shareholder may after receiving the
written approval of Vision 21 (which approval shall not be unreasonably
withheld) transfer its shares of Vision 21 Common Stock to any of the
individuals and/or trusts described in Sections 7(a), (b) and (c)
Exhibit 14.1(o) - Page 4
<PAGE> 135
hereof. Such transferee shall, for purposes of the transfer restrictions
contained in this Agreement, be deemed to have held such transferred shares for
the same period as Shareholder.
4. Indemnification of Shareholder. Whenever registration with
respect to any shares of Shareholder's common stock is effected under the
Securities Act pursuant hereto, Vision 21 will indemnify and hold harmless
Shareholder, each underwriter, the directors, officers, employees and agents of
each underwriter, and each person, if any, who controls each underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, liabilities, expenses and
damages (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
(including any securities law violations) insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading, provided that Vision 21 will not be liable to Shareholder to the
extent that such loss, claim, liability, expense or damage is based on an
untrue statement or omission made in reliance on and in conformity with
information furnished to Vision 21 by Shareholder, or by Shareholder through
any attorney-in-fact, expressly for inclusion in the registration statement or
any prospectus included in such registration statement.
5. Indemnification of Vision 21. Whenever registration with
respect to any shares of Shareholder's common stock is effected under the
Securities Act pursuant hereto, Shareholder will indemnify and hold harmless
Vision 21, each of Vision 21's directors and officers, each person who controls
Vision 21 within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, each underwriter, the directors, officers, employees and
agents of each underwriter, and each person, if any, who controls each
underwriter within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, from and against any and all losses, claims,
liabilities, expenses and damages (including any and all investigative, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claim asserted), to
which they, or any of them, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact required to be stated in it or necessary to make
the statements in it not misleading; provided that Shareholder will not be
liable except to the extent that such loss, claim, liability, expense or damage
arises from or is based upon an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
furnished to Vision 21 by the Shareholder, or by Shareholder through any
attorney-in-fact, expressly for inclusion in the registration statement or any
prospectus included in such registration statement.
Exhibit 14.1(o) - Page 5
<PAGE> 136
6. Defense of Claim. Promptly after receipt by an indemnified
party of notice of the commencement of any action, the indemnified party shall
notify the indemnifying party in writing of the commencement thereof if a claim
in respect thereof is to be made against an indemnifying party under this
Agreement, but the omission of such notice shall not relieve the indemnifying
party from liability which it may have to the indemnified party under this
Agreement, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to any indemnified
party otherwise than under this Agreement. In case any action is brought
against the indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and to the extent that it chooses, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party, and after notice from
the indemnifying party to the indemnified party that it so chooses, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided however that (i) if the indemnifying party fails to take
reasonable steps necessary to defend diligently the claim within twenty (20)
days after receiving notice from the indemnified party that the indemnified
party believes the indemnifying party has failed to diligently defend such
claim, or (ii) if the indemnified party who is a defendant in any action or
proceeding which is also brought against the indemnifying party reasonably
shall have concluded that there are legal defenses available to the indemnified
party which conflict with the defense strategy of the indemnifying party, or
(iii) if representation under applicable standards of professional conduct
require separate representation of the indemnified party and the indemnifying
party, then the indemnified party shall have the right to assume or continue
its own defense as set forth above and the indemnifying party shall reimburse
the indemnified party for the costs of such defense as provided in Section 4
and 5. In no event shall the indemnifying party be responsible for the fees of
more than one firm for all indemnified parties.
7. Non-Transferability. The registration rights and benefits set
forth herein, including indemnification by Vision 21 are granted for the sole
and personal benefit of Shareholder and may not be transferred or assigned
except for (a) gifts to his/her family members (b) assignment to a trust
controlled by the Shareholder, (c) transfers to Shareholder's heirs which occur
by operation of law as a result of the death of the Shareholder, or (d) if the
Shareholder is a corporation, professional corporation or professional limited
liability company, transfers or assignments to the individuals who are current
equity holders of Shareholder and by such equity holders to the individuals
and/or trusts described in subsection (i) and (ii) of this Section.
8. Survival of Indemnity. The indemnifications provided by this
Agreement shall be a continuing right to indemnification and shall survive the
registration and sale of any securities by any person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
Exhibit 14.1(o) - Page 6
<PAGE> 137
9. Delay of Registration. Shareholder agrees that he shall have
no right to obtain or seek an injunction restraining or otherwise delaying any
registration statement filed by Vision 21.
10. Notices.
(a) All communications under this Agreement shall be in
writing and shall be sufficient in all respects if when personally delivered
or mailed by prepaid certified or registered mail, return receipt requested,
addressed as follows:
(i) If to Vision 21, at:
Vision 21, Inc.
7209 Bryan Dairy Road
Largo, Florida 34647
Attn: Theodore N. Gillette,
Chief Executive Officer
With a copy to:
Darrell C. Smith, Esquire
c/o Shumaker, Loop &
Kendrick, LLP
101 E. Kennedy Boulevard
Suite 2800
Tampa, Florida 33602
or at such other address as Vision 21 may have furnished in writing to
Shareholder at the time outstanding, or
(ii) If to Shareholder at:
________________________
________________________
________________________
With a copy to:
Steven M. Goldstein, Esquire
Sacks Tierney, P.A. Lawyers
292 North Central Avenue
Fourteenth Floor
Phoenix, Arizona 85012-2742
Exhibit 14.1(o) - Page 7
<PAGE> 138
(b) Any notice so addressed, when mailed by registered or
certified mail shall be deemed to be given three days after so mailed, and when
delivered by hand shall be deemed to be given immediately.
11. Counterparts. One or more counterparts of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
12. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Florida,
which shall prevail in all matters arising under or in connection with this
Agreement.
13. Headings. The headings in this Agreement are for convenience
of reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
14. Stock Lettering. The Company shall have the right to provide
a legend on the shares of stock covered hereunder reflecting the restriction
described hereunder.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date and year first above written.
"VISION 21"
VISION 21, INC.
By:_____________________________________
Theodore N. Gillette, Chief Executive
Officer
"SHAREHOLDER"
________________________________________
Signature of Shareholder
Print Name of Shareholder
Exhibit 14.1(o) - Page 8
<PAGE> 139
Exhibit 14.1(s)
to Agreement and Plan of Reorganization among Daniel B.
Feller, M.D., P.C., d/b/a Paradise Valley Eye Specialists (the
"Company"), Daniel B. Feller, M.D. (the "Physician") and
Vision 21, Inc. ("Vision 21")
AGREEMENT TO CONTINUE PRACTICE AFTER
TRANSFER EVENT AND STOCK PLEDGE
This Agreement to Continue Practice after Transfer Event and Stock
Pledge (the "Agreement") is made as of _____________, 19__ by and between
__________________, M.D. ("Physician"), an individual licensed to practice
ophthalmology in the State of Arizona (the "State") whose mailing address is
4845 E. Thunderbird Rd., Nos. 1 & 1A, Scottsdale, Arizona 85254, and VISION 21,
INC. ("Business Manager"), a Florida corporation whose mailing address is 7209
Bryan Dairy Road, Largo, Florida 33777.
R E C I T A L S
A. Millennium Vision, P.C. ("P.C.") is an Arizona professional
corporation which employs ophthalmologists.
B. Physician is the sole shareholder of P.C.
C. Pursuant to that certain Business Management Agreement (the
"Business Management Agreement") dated December 1, 1996, the Business Manager
provides certain services and support to the ophthalmology practices of P.C.'s
employed ophthalmologists.
D. Physician has agreed to sell all of P.C.'s shares owned by him
to the Business Manager's designee for value if certain events occur, and the
Business Manager desires its designee to purchase such shares if certain events
occur.
E. Physician desires to pledge all of P.C.'s shares owned by him
to secure the promise referenced in Paragraph D above and Business Manager
desires to accept such security interest.
NOW, THEREFORE, for and in consideration of the mutual agreements,
terms, covenants and conditions contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions.
1.1. "Collateral" means the five hundred (500) shares of
P.C. stock owned by Physician consisting of all of the validly issued
and outstanding shares of P.C.
<PAGE> 140
1.2. "Transferee" means an ophthalmologist chosen by the
Business Manager who is licensed to practice ophthalmology in the
State.
2. Conditional Agreement to Transfer Stock. Physician shall
immediately transfer the Collateral to the Transferee for the Purchase Price
set forth in Section 5 below if any of the following occurs (collectively,
"Events of Transfer"):
(a) Physician dies,
(b) Physician loses his State license to practice
ophthalmology for any reason, or
(c) Physician is adjudicated incompetent by
any court of law.
3. Grant of Security Interest. Physician grants to Business
Manager a security interest in the Collateral to secure the promise set forth
in Section 2 above.
4. Designation of Transferee. The Business Manager shall
designate the Transferee to purchase the Collateral upon an Event of Transfer.
5. Payment of Purchase Price. The purchase price for the
Collateral purchased by the Transferee (the "Purchase Price") shall be an
amount equal to the fair market value of the Collateral as of the date of the
transfer, determined by the accounting firm of Ernst & Young, LLP (or any
successor to Ernst & Young LLP) acting through the personnel at its office in
Tampa, Florida, if that firm is willing to make the determination; or, if not,
any nationally recognized firm of independent certified public accountants
agreed to by Business Manager and Physician (or by Physician's guardian or
personal representative, if an Event of Transfer occurs pursuant to Sections
2(a) or (c)). Any determination of the Collateral's fair market value by such
firm shall be deemed a final determination of the fair market value as of the
determination date and shall be conclusive upon all parties for purposes of
this Agreement as a commercially reasonable price. The Purchase Price shall be
payable by cashier's check to Physician or his guardian or personal
representative (as the case may be) within thirty (30) days after the Business
Manager's receipt of the accounting firm's Purchase Price determination.
6. Commercially Reasonable Disposition. The parties acknowledge
that it would be impossible to realize a commercially reasonable price in the
event of the disposition of the pledged stock by public sale and very difficult
to do so by private sale, except on the terms and conditions in Sections 4 and
5 hereto. Therefore, the parties acknowledge that a disposition of the
Collateral under Sections 4 and 5 hereto is a commercially reasonable
disposition, and agree that the determination of the Purchase Price under
Section 5 is commercially reasonable and that they will be bound by the
Purchase Price determination.
Exhibit 14.1(s) - Page 2
<PAGE> 141
7. Term. This Agreement shall continue for as long as the
Business Management Agreement and any renewals thereof are in effect.
8. Representations and Warranties. Physician represents and
warrants the following:
8.1. Physician. There is no provision of any agreement to
which Physician is a party or of any law that would be contravened by
the execution, delivery, or performance of this Agreement; Physician's
name and the description of the legal status of the P.C. in the
Preamble and the information contained in the Recitals hereto are
correct.
8.2. Collateral. As to each item of Collateral, Physician
has good title, free and clear of all claims, charges, liens,
encumbrances, restrictions, options, calls and defects of any kind or
nature whatsoever, except for the security interest granted hereby; no
other person, entity, or governmental authority has or claims any lien
or other interest in the Collateral; no adverse financing statements
are on file; and there is no litigation nor are there any proceedings
by any public body, agency, or authority presently pending or
threatened against Physician, the outcome of which might materially
and adversely affect the Collateral.
8.3. P.C. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
P.C. to issue, sell, or otherwise cause to become outstanding any of
its capital stock; and there is no litigation nor are there any
proceedings by any public body, agency, or authority presently pending
or threatened against P.C. or Physician, the outcome of which might
materially and adversely affect the continued operations of P.C.
8.4. Survival of Warranties. All representations and
warranties shall survive the execution and delivery of this Agreement.
9. Affirmative Covenants.
9.1. No Agency and Defense Against Claims. Nothing in
this Agreement shall make Physician an agent of Business Manager for
any purpose whatsoever. Physician shall defend the Collateral against
all claims, demands, and defenses affecting Business Manager's
security interest, regardless of merit, and shall hold Business
Manager harmless therefrom, including, without limitation, holding
Business Manager harmless from all attorneys' fees and other
litigation expenses arising out of any such claims, demands, or
defenses.
Exhibit 14.1(s) - Page 3
<PAGE> 142
9.2. Disposition and Issuances of P.C. Common Stock. P.C.
shall not, and during the term of this Agreement Physician shall not
cause the P.C. to issue, sell or otherwise cause to be outstanding any
additional capital stock, except for (a) sales of such stock made to
successor shareholders pursuant to Section 4.1 of the Business
Management Agreement, provided that if there shall be only one
shareholder holding the P.C.'s stock following such transfer, such
successor shareholder shall execute an agreement in substantially the
same form as this Agreement; (b) issuances of additional stock to
individuals licensed to practice ophthalmology in the State who are
competent and capable and who are approved by Business Manager;
provided that Business Manager shall not unreasonably withhold its
approval to the sale of such additional stock to such individual, and
after the sale of such additional stock, this Agreement shall be
terminated and the Collateral pledged hereby shall be returned to
Physician free of the restrictions imposed by this Agreement; (c) the
transfer without consideration of such stock to a revocable trust
created by the Physician, provided that any and all trustees of such
trust first agrees in writing to hold such stock so transferred
subject to this Agreement; and (d) the transfer of such stock upon the
occurrence of an Event of Transfer by any other means as determined by
Physician and agreed to in writing by Business Manager, which
agreement shall not be unreasonably withheld.
10. Custody and Handling of Collateral and Records.
10.1. Protection of Secured Party's Security Interest.
Upon execution of this Agreement, Physician shall give the Business
Manager the share certificate(s) representing the Collateral, duly
endorsed in blank or, if not endorsed in blank, Physician shall give
the Business Manager a duly executed stock power in blank.
10.2. No Authority to Sell. Physician shall not sell,
assign, pledge, hypothecate, encumber, or otherwise transfer any item
of Collateral except as expressly provided in this Agreement. If any
item of Collateral or any right therein is transferred contrary to
this Agreement, Business Manager retains a security interest in such
item and in the proceeds of such disposition.
11. Default and Remedies.
11.1. Remedies Upon Default. Upon the occurrence of any
breach of any covenant or warranty contained in this Agreement by
Physician and continuously thereafter until waived in writing,
Business Manager shall have the right and option to immediately sell
the Collateral to Transferee subject to a subsequent determination of
the Purchase Price to be paid later or to exercise any other remedy
available to Business Manager as a secured party under law or equity.
Physician acknowledges that Business Manager shall be entitled upon
any breach or threatened breach of this Agreement to the granting of a
temporary restraining order, a temporary or permanent injunction, or
any other equitable remedy which may then be available.
Exhibit 14.1(s) - Page 4
<PAGE> 143
11.2. Construction of Rights and Remedies and Waiver of
Notice and Consent.
(a) This Section 11 applies to all rights and
remedies provided by this Agreement or at law or in equity.
(b) Unless otherwise expressly provided herein,
any right or remedy may be pursued without notice to or
further consent of Physician, both of which Physician waives.
(c) No forbearance in exercising any right or
remedy shall operate as a waiver thereof; no forbearance in
exercising any right or remedy on any one or more occasions
shall operate as a waiver thereof on any future occasion; and
no single or partial exercise of any right or remedy shall
preclude any other exercise thereof or the exercise of any
other right or remedy.
12. Miscellaneous.
12.1. Notices. Any notices, statements, requests, demands,
consents, or other documents ("notices") shall be in writing and shall
be delivered personally, by certified mail, postage prepaid, return
receipt requested, or by overnight courier (prepaid) to the addresses
set forth in the Preamble hereof. When personally delivered, all
notices shall be deemed given when actually received. When mailed,
all notices shall be deemed given three (3) days after mailing by
certified mail and one (1) day after mailing by overnight courier.
12.2. Governing Law. This Agreement shall be construed and
interpreted under the laws of the State of Florida.
12.3. Binding Effect. This Agreement shall be binding upon
Physician, Physician's personal representatives, heirs, successors,
and assigns, as the case may be, and shall be binding upon and inure
to the benefit of Business Manager and its successors and assigns.
Physician may not assign this Agreement.
12.4. Amendment. This Agreement may be amended, but only
by a written amendment signed by Business Manager and Physician.
12.5. Severability. If any provision of this Agreement or
the application of any provision to any party or circumstance shall be
adjudged invalid or unenforceable to any extent, the remainder of this
Agreement shall not be affected thereby. Each provision of this
Agreement shall be valid and enforceable to the fullest extent
permitted by law.
12.6. Headings. The headings in this Agreement are for
convenience of reference only and shall not be used in interpreting
this Agreement.
Exhibit 14.1(s) - Page 5
<PAGE> 144
12.7. Number; Gender. Where appropriate, the number of all
words in this Agreement shall be both singular and plural and the
gender of all pronouns shall be masculine, feminine, neuter, or any
combination thereof.
"PHYSICIAN"
________________________________
______________________, M.D.
"BUSINESS MANAGER"
VISION 21, INC.
By:___________________________
Theodore N. Gillette, M.D.
Its: President
Exhibit 14.1(s) - Page 6
<PAGE> 1
Exhibit 10.48
"CONFIDENTIAL TREATMENT REQUESTED
BY VISION TWENTY-ONE,
INC."
-------------------------------------------------------
VISION 21 PLUS
JOINT VENTURE AGREEMENT
--------------------------------------------------------
DATED AS OF MAY 1, 1996
BY
AND BETWEEN
FOR EYES MANAGED CARE, INC.
AND
VISION 21, INC.
<PAGE> 2
THIS JOINT VENTURE AGREEMENT ("Agreement") is made and entered into as
of the 1st day of May, 1996, by and between FOR EYES MANAGED CARE, INC., a
Florida corporation ("For Eyes"), and VISION 21 MANAGED EYE CARE OF TAMPA BAY,
INC., a Florida corporation ("Vision 21").
W I T N E S E T H:
WHEREAS, the parties hereto propose to enter into a joint venture
agreement to (i) maximize managed eye care opportunities and to procure managed
care contracts for both primary and/or secondary vision care programs, and to
(ii) develop the infrastructure necessary to effectively administrate and
market high quality vision care products to payer groups.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto intending
legally to be bound hereby agree as follows:
ARTICLE I
FORMATION, PURPOSES, DURATION
Section 1.1 Formation. For Eyes Managed Care, Inc. and Vision 21
hereby enter into and form a general partnership pursuant to the Florida
Revised Uniform Partnership Law for the limited purposes and scope set forth in
this Agreement. The new entity shall be governed by the Florida Revised
Uniform Partnership Law, as from time to time amended, except as expressly
provided herein to the contrary.
Section 1.2 Name. The name of the new entity shall be "Vision 21
Plus" and the business of the new entity shall be conducted solely under the
name of Vision 21. All assets shall be held under the name of Vision 21 Plus.
Section 1.3 Statement of Venture. Concurrently with the
execution of this Agreement, the new entity shall execute, acknowledge and the
new entity shall promptly file or record with the proper offices in each
jurisdiction and political subdivision in which the company does business, such
certificates as are required or permitted by any partnership or joint venture
act, fictitious name act, or similar statute in effect in such jurisdiction or
political subdivision. The new entity shall further execute, acknowledge and
the company shall promptly file or record, such amended certificates or
additional certificates as may from time to time be required by such statutes
to permit the continued existence and operation of the new entity.
2
<PAGE> 3
Section 1.4 Principal Place of Business. The principal place of
business of the new entity shall be located at 7209 Bryan Dairy Road, Largo,
Florida 34647, or at such other location as may be approved by Vision 21 and
For Eyes Managed Care, Inc. from time to time.
ARTICLE II
PURPOSE AND OPERATING STRATEGY
Section 2.1 Business, Purpose and Operating Goals and Objectives.
The primary business objective of Vision 21 Plus will be to maximize
opportunities in managed eye care by securing contracts and providing
comprehensive, fully- integrated eye care products and services to health care
organizations, and self-funded employer groups. Vision 21 Plus' primary
operating goal is to be recognized as the leading managed eye care company
within the Company's target markets. Vision 21 Plus will enter into, perform
and carry out contracts and agreements, and secure approvals, permits and
consents necessary, appropriate or incidental to the development of managed eye
care business.
Vision 21 Plus will also explore opportunities to develop the following
ancillary eye care businesses:
a.) A physician practice management organization in the
eye care industry that would potentially include
optometrists affiliated with For Eyes Optical;
b.) Opportunities to participate in the delivery of photo
refractive surgery;
c.) The management of retail eyewear dispensaries within
ophthalmology and independent optometric practices;
and
d.) Strategic acquisitions of related vision care businesses.
Section 2.2 Operating Strategy. Vision 21 and For Eyes Managed
Care, Inc. will allocate the initial resources required to secure managed
vision care contracts until such time as the new entity is operating on a stand
alone basis. Stand alone basis shall be defined herein as the ability to
generate sufficient cash flow from operations to support the ongoing operation
of the business. Vision 21 Plus will compensate For Eyes Managed Care, Inc.
And Vision 21 for initial start-up costs and various Marketing and Contracting
Services required to secure managed care contracts as defined in Sections 2.4
and 2.5, and as such compensation is
3
<PAGE> 4
more specifically set forth in a budget that is approved by both parties.
Section 2.3 Vision 21 - Marketing and Contracting Services.
Marketing and Contracting Services provided by Vision 21 include the following:
a. Market Analysis -
* Current payers, key decision makers, key relationships,
current contracts
* Current providers, competitors
* Managed care trends by market
* Legislative/regulatory status by market
b. Strategic Plan Development -
* Prioritize potential managed care opportunities for
Vision 21 Plus
* Leverage off existing Vision 21 contracts for target
markets - PCA, Humana, Prucare, United Healthcare,
Aetna.
c. Develop Regional PPO's -
* Develop market specific/contract specific augmented
provider panels
* Organize OD/MD governance and Quality Assurance:
- Optometric director, Medical director
- Credentialing, peer review
- Clinical protocols
- Outcome Assessment, Utilization review
* Develop agreement between PPO and Vision 21 Plus that
provides optical exclusivity and non- compete
protection by market
d. Develop payer specific/market specific "Product"
* Customize product(s) to meet market demand
-Vision plans, comprehensive eye care plans, etc.
-Discount, insured, captitated, etc.
* Develop RFP proposal book and supportive marketing
materials
- Detail delivery system
4
<PAGE> 5
- Pricing options: vision vs. comprehensive
- Service/access parameters/member satisfaction
- Credentialing/NCQA guidelines/delegated provider
role - QA protocol/QI plans
- Scope of service
- MIS/data management/HEDIS reporting
e. Market and Sell Product -
* Organize an aggressive marketing campaign by market
* Utilize Vision 21's credibility with existing payers
to develop specified markets
* Develop managed care structure for Vision 21 Plus
Section 2.4 For Eyes Managed Care. Inc. - Employee Resource
Allocation. For Eyes Managed Care, Inc. will allocate personnel to assist
Vision 21 Plus in the completion of the Marketing and Contracting Services
outlined above. For Eyes will dedicate personnel to complete a comprehensive
analysis of target markets, to develop augmented regional provider panels, and
to. market the products and services of Vision 21 Plus. For Eyes Managed Care,
Inc. will also allocate personnel to oversee the development and distribution
of managed eye care frame collections, and the development of wholesale optical
laboratory services for provider panels. In addition, For Eyes Managed Care,
Inc. will participate in the development and implementation of quality
assurance protocols and quality assurance committees. For Eyes will deposit up
to $*** quarterly in Vision 21 Plus' concentration account to compensate For
Eyes Managed Care, Inc. for actual expenses incurred and in-kind services
provided.
Section 2.5 Compensation for Marketing and Contracting, Services.
Vision 21 will be compensated for Marketing and Contracting Services for up to
24 months or until such time as Vision 21 Plus has secured managed care
contracts of sufficient size within each specific target market, whichever
should occur first. For Eyes will deposit up to $*** quarterly in Vision 21
Plus' concentration account to compensate Vision 21 for actual expenses
incurred and in-kind services provided including Vision 21 administrative
expenses and overhead. In no event shall the compensation period exceed 24
months, or $***. In the event that the actual expenses incurred are less
than the $*** quarterly allocation, For Eyes Managed Care, Inc. all only be
required to bring the balance in the concentration account up to $***.
5
<PAGE> 6
Section 2.6 Marketing and Contracting Personnel. Vision 21 Plus
will employ personnel to assume responsibility for Marketing and Contracting
Services after the initial start-up period.
ARTICLE III
CONTRACTED MANAGED VISION CARE SERVICES
Section 3.1 Administrative Services. Vision 21 will provide
Vision 21 Plus with the administrative services required to effectively manage
a capitated or insured vision care contract. The scope of services will
include, but is not limited to, the collection of encounter data, management
reports, tracking member access, member surveys, and management of capitation
funds (See Attachment A - Vision 21 Administration Function listing). Vision
21's compensation for administrative services will be paid according to the
type of contract at a rate ranging from 10% to 20% of the capitated contract
rate. Vision 21 Plus will negotiate with Vision 21 for claim processing and
administrative services for billable (insured) programs and discount vision
plans as needed.
Section 3.2 Eyewear Delivery Services. For Eyes Managed Care,
Inc. will be responsible for providing managed care benefit frame collections
to all participating panel providers at the providers expense or on a
consignment basis, and establishing the systems and procedures required to
effectively participate in managed vision care contracts. In addition, For
Eyes will provide all participating panel providers with access to discounted
pricing on frames (non- standard), lenses and contact lenses. Vision 21 Plus
will compensate For Eyes for providing eyewear to managed care patients on
either a negotiated capitation arrangement or on a discounted fee for service
basis. For Eyes Optical will be entitled to the fight of first refusal on all
contracts for providing eyewear delivery services. If For Eyes elects not to
participate in a specific contract, Vision 21 Plus will have the option to
contract with other optical providers for the provision of eyewear delivery
services.
Section 3.3 Wholesale Laboratory Services. For Eyes Managed
Care, Inc. will be responsible for providing wholesale lens fabrication
services to the provider panel. For Eyes will provide a discounted wholesale
laboratory price list to all participating panel providers. Vision 21 Plus
will compensate For Eyes Managed Care, Inc. for providing wholesale laboratory
services on either a negotiated capitation arrangement or on a discounted fee
for service basis.
6
<PAGE> 7
ARTICLE IV
TARGET MARKETS & EXCLUSIVITY
Section 4.1 Markets. Vision 21 Plus will initially develop a
managed vision care business in the States of Illinois, Massachusetts,
Maryland, Virginia, the District of Columbia, Georgia and Puerto Rico.
However, the principal partners agree to pursue any managed vision care
opportunities that may arise in For Eyes' remaining markets. The balance of
For Eyes Optical's markets includes the States of New York, New Jersey,
Pennsylvania, California and Hawaii. Additional states, territories or
counties may be added by mutual consent of both parties.
Section 4.2 Exclusivity. Vision 21 and For Eyes Managed Care,
Inc. acknowledge and agree that primary managed vision care business activities
will be conducted exclusively through Vision 21 Plus in existing For Eyes
markets and other markets with mutual consent of both parties. All ancillary
vision care businesses as defined in Section 2.1 will not be subject to the
exclusivity conditions as defined herein.
ARTICLE V
JOINT VENTURE INTERESTS AND CAPITAL CONTRIBUTIONS
Section 5.1 Joint Venture Interests. Upon the execution of this
Agreement and the creation of Vision 21 Plus, For Eyes Managed Care, Inc. and
Vision 21, Inc. will each have a fifty percent (50%) undivided percentage
interest in the new entity. Unless otherwise agreed by Vision 21, Inc. and For
Eyes Managed Care, Inc., no adjustments to the joint venture interest of either
party shall be made.
Section 5.2 Adjustments. No adjustment to the ownership interest
shall be made without the mutual agreement of both parties. In the event that
a party receives a written offer from an unrelated third party to purchase all
of the parties ownership interest, the selling party shall give the non-selling
party written notice stating the terms of the proposed sale and the name of the
Proposed Assignee. The non-selling party shall have the option to meet the
terms of the Offer to Purchase and acquire the entire ownership interest of the
selling party. In the event that the Offer to Purchase contains any non-cash
consideration, the selling party and the non-selling party shall negotiate in
good faith as to the value of such non-cash consideration so as to permit the
non-selling party to pay the purchase price in cash.
7
<PAGE> 8
Section 5.3 Initial Capital Advancement. Simultaneously with the
execution of Agreement, For Eyes will advance to Vision 21 Plus *** dollars
($***). The initial capital advance shall be utilized by Vision 21 Plus to
reimburse For Eyes Managed Care, Inc. and Vision 21 for actual expenses incurred
and in-kind services provided pursuant to Section 2.4 and Section 2.5,
respectively. Vision 21 and For Eyes Managed Care, Inc. have initiated work
since May 1, 1996 under good faith. These services will be considered as part
of the initial $*** start up capital advance.
Section 5.4 Additional Capital Advances. In addition to the
Initial Capital Advance, For Eyes Managed Care, Inc. will deposit up to ***
dollars ($***) within 20 days after the end of each quarter into the Vision 21
Plus' concentration account for actual expenses incurred and in-kind services
provided pursuant to Section 2.4 and Section 2.5, respectively. The quarterly
capital advance will continue for up to 24 months or until such time as Vision
21 Plus has secured a managed care contract and is operating on a stand alone
basis, whichever shall occur first. In the event that additional capital
resources are required in any quarter, For Eyes Managed Care, Inc. and Vision 21
shall agree to provide additional capital advances necessary to fund the
on-going operations of Vision 21 Plus.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES
Section 6.1 Allocation of Profits and Losses. All profits and
losses of Vision 21 Plus for each fiscal year (or part thereof), as determined
by Vision 21 Plus's accountants, shall be allocated to For Eyes Managed Care,
Inc. and Vision 21 according to their respective ownership interests. For
Eyes Managed Care, Inc. will be reimbursed for all capital advances from net
cash flow prior to the allocation of profits. Vision 21 will also be
reimbursed for any capital advances from net cash flow prior to the allocation
of profits as set forth in Section 5.4.
Section 6.2 Net Cash Flow Distribution to Principal Partners. All
Net Cash Flow (as defined in Section 6.3 below) of Vision 21 Plus shall be
distributed to the principal partners within twenty (20) days after the end of
a calendar quarter and sixty (60) days after the end of a fiscal year.
Section 6.3 Definition of Net Cash Flow. For purposes of this
Agreement, Net Cash Flow shall mean the sum of the net profits and losses of
the company for Federal income tax purposes as determined by the company's
accountants plus the amount of depreciation and/or amortization and any other
non-cash expenses
8
<PAGE> 9
deducted in determining the net profits and losses. Net Cash Flow will exclude
payments for the following: (1) the principal of any note or mortgages
outstanding; (2) expenditures for the acquisition of real, tangible or
intangible property, and other capital improvements; and (3) reserves for
capital improvements, security deposits or other required escrows or deposits,
and/or to meet anticipated expenses as deemed reasonably necessary by the
partners.
Section 6.4 Budget. Commencing with the calendar year 1996, and
not less often that one time each Fiscal Year, the President and the Senior
Vice President shall prepare and submit to the principals of Vision 21 and For
Eyes Managed Care, Inc. for their consideration a budget ("Budget") setting
forth the estimated receipts and expenditures in reasonable detail. Each
Budget shall be submitted to the principals on or before November 30 of each
year. The 1996 Budget shall be completed and incorporated herein as Exhibit
"A" by August 15, 1996. The President shall implement the Budget and shall be
authorized to make the expenditures and incur the obligations provided for in
the Budget. If at any time during any Fiscal Year the President shall, in the
performance of its duties hereunder, determine that the Budget relating to such
Fiscal Year is no longer appropriate because of any reason, including without
limitation, the need to incur additional expenses that exceed ten percent (10%)
of the aggregate amount shown on the Budget for such Fiscal Year, the President
shall promptly submit to the principal partners for their consideration a
revised budget for the remainder of such Fiscal Year. When approved by the
principal partners of Vision 21 and For Eyes Managed Care, Inc., the President
shall implement the revised Budget and shall be authorized, without the need
for further approval, to make the expenditures and incur the obligations
provided for in the revised Budget. The principals agree to consult regularly
with respect to all budgetary matters
Section 6.5 Tax Considerations. Any elections or other decisions
relating to Federal, State or local taxes shall be made by the management of
Vision 21 Plus in a manner that reasonably reflects the purpose and intention
of this agreement.
ARTICLE VII
MANAGEMENT
Section 7.1 Management of Vision 21 Plus. The overall management
and control of the business and affairs of Vision 21 Plus shall be vested in
the principals of Vision 21, Dr. Ted Gillette, and For Eyes Managed Care, Inc,
Philip Wolman. AU decisions with respect to the management of Vision 21 Plus
will be carried out by the President and Vice President of Vision 21 Plus, who
will be elected by mutual agreement of both parties for a one
9
<PAGE> 10
year term. The President of Vision 21 Plus for the initial 12 month term will
be Richard L. Sanchez. The Senior Vice President of Vision 21 Plus for the
initial 12 month team will be David H. Dunbar.
ARTICLE VIII
ACCOUNTING
Section 8.1 Books and Records.
(a) General. At all times during the term
hereof, the President shall cause accurate books and records of account to be
maintained in which shall be entered all matters relating to Vision 21 Plus,
including all income expenditures, assets and liabilities thereof.
(b) Method of Accounting. Vision 21 Plus's books
and records of account shall be maintained on an accrual or cash basis (as
determined by the designated accountants) and shall be adequate to provide each
party with all financial information as may be needed.
Section 8.2 Location and Rights of Inspection. Vision 21 Plus's
books and records of account shall be kept and maintained at all times at
Vision 21's principal place of business specified in Section 1.4 unless
otherwise approved by For Eyes and Vision 2 I.
Section 8.3 Fiscal Year. The fiscal year of Vision 21 Plus shall
be December 31 of each year.
Section 8.4 Statements of Financial Condition. The President of
Vision 21 Plus shall cause to be prepared a statement of the financial
condition as of the last day of each fiscal year. Each statement of financial
condition shall be prepared in accordance with generally accepted accounting
principles and shall include income and cash flow statements, and shall be in
such form and content as is auditable at the request of either party. Copies
shall be furnished to the principals within sixty (60) days after the end of
each fiscal year. The President shall also promptly deliver to each principal
monthly income and expense reports. All financial statements required shall be
certified by an officer of Vision 21 Plus and shall be unaudited unless
otherwise approved by the principals.
Section 8.5 Bank Accounts. Funds of Vision 21 Plus shall be
deposited in an account or accounts of a type, in form and name in a bank or
banks approved by the principals.
10
<PAGE> 11
Section 8.6 Other Accounting Decisions. All accounting decisions
for Vision 21 Plus shall be approved by the principals. Vision 21 Plus shall
engage, as necessary, as independent auditors a recorded firm of independent
certified public accountants approved by the principals.
ARTICLE IX
DISPUTE RESOLUTION
Section 9.1 Arbitration Provisions. If any controversy, dispute
or claim between the parties arises under or relates to this Agreement, the
parties shall make good faith efforts to resolve such matter informally within
a reasonable period of time (not exceeding (60) days after written notice,
unless otherwise agreed by the parties). Any controversy, dispute or
disagreement arising out of or relating to this Agreement or the breach thereof
that cannot be resolved informally to the satisfaction of both parties shall be
settled by arbitration. Arbitration proceedings shall be conducted in Broward
County, Florida, in accordance with the Resolution Service Rules and Procedure
for Arbitration, and judgement on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
ARTICLE X
DISSOLUTION OF JOINT VENTURE
Section 10.1 Causes of Dissolution. Vision 21 Plus shall be
dissolved in the event that one or more of the principal partners elects to
terminate the Joint Venture Agreement. Either party shall have the right to
terminate this Agreement at any time without cause upon ninety (90) days'
written notice to the other party by certified mail, return receipt requested.
Termination shall not discharge the parties' obligations existing as of the
date of termination.
Section 10.2 Procedure in Dissolution and Liquidation. Upon
election to dissolve Vision 21 Plus, management shall immediately commence to
wind up its affairs and proceed with reasonable promptness to liquidate
business operations. During the period of the winding up of the affairs of the
Company, the rights and obligations of the principal partners set forth herein
with respect to the management of the Company shall continue. Management shall
continue to act as such and shall make all decisions relating to the conduct of
any business or operations during the winding up period and to the sale or
other disposition of Company assets as provided herein. In addition, the
parties agree that in the event of termination of this Agreement for whatever
reason, they will
11
<PAGE> 12
cooperate with each other to resolve promptly any outstanding financial,
administrative or customer issues.
Section 10.3 Disposition of Documents and Records. A copy of all
documents and records including, without limitations all financial records,
vouchers, canceled checks and bank statements, shall be delivered to each
principal partner upon termination of Vision 21 Plus.
Section 10.4 Joint Venture Agreement Modifications. The terms and
conditions of this Joint Venture Agreement may be amended from time to time
with the, mutual consent of both parties.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Governing Law. This Agreement and all questions with
respect to this Agreement and the rights and liabilities of the parties hereto
shall be governed and construed in accordance with the laws of the State of
Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above set forth.
FOR EYES MANAGED CARE, INC.
By: /s/ Philip Wolman
--------------------------
Its:
--------------------------
VISION 21, INC.
By: /s/ Richard Sanchez
--------------------------
Its:
--------------------------
12
