<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1997
REGISTRATION NO. 333-29213
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 4
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
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.......................... 38,032
Printing expenses........................................... 250,000
Accounting fees and expenses................................ 225,000
Legal fees and expenses..................................... 350,000
Fees and expenses (including legal fees) for qualifications
under state securities laws............................... 10,000
Registrar and Transfer Agent's fees and expenses............ 10,000
Miscellaneous............................................... 3,814
--------
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
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<PAGE> 3
(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).
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<PAGE> 4
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 Inc. in the
maximum aggregate amount of $4.7 million and warrants exchangeable into 210,000
shares of Common Stock at an exchange price per share equal to the initial
public offering price of the Company's Common Stock. 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, $19,000 in a
non-negotiable promissory note and $26,000 in cash 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 109,084 shares of Common Stock and
$245,440 in non-negotiable promissory notes in connection with the acquisition
agreements with Craig R. Cassidy, D.O., P.C., Sanford L. Moretsky, D.O., P.C.,
and Valley Outpatient Surgical Center, Inc. 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).
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<PAGE> 5
In June 1997, the Company issued 320,000 shares of Common Stock in
connection with the acquisition of certain assets of Swagel-Wootton Eye Care
Center, Ltd. and Aztec Optical 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).
Effective July 1997, the Company issued 131,050 shares of Common Stock into
escrow pending final closing upon the professional corporation obtaining a
license 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 is 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
- ----------- -------------------
<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 and First Amendment to Amended and Restated
Note and Warrant Purchase Agreement dated August 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.
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C> <C>
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.
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 and First Amendment to Amended and Restated
Note and Warrant Purchase Agreement dated August 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.
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C> <C>
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.
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.
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C> <C>
10.49***** -- Amendment to Agreement and Plan of Reorganization dated July
31, 1997 by and among Kuscat Investments, L.L.C.,
Ocusite-ASC, Inc., Jeffrey I. Katz, M.D. and Barry Kusman,
M.D., Vital Site, P.C., Vision Twenty-One, Inc., Vision 21
of Southern Arizona, Inc., and the escrow agent.
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).
27.3***** -- Financial Data Schedule for six months ended June 30, 1997
(for SEC Use Only).
</TABLE>
- ---------------
** 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.
*** Previously filed as an Exhibit with the same Exhibit Number identification
in the Company's Amendment No. 1 to Registration Statement on Form S-1
filed on July 23, 1997 and incorporated herein by reference.
**** Previously filed as an Exhibit with the same Exhibit Number identification
in the Company's Amendment No. 2 to Registration Statement on Form S-1
filed July 30, 1997 and incorporated herein by reference.
***** Previously filed as an Exhibit with the same Exhibit Number identification
in the Company's Amendment No. 3 to Registration Statement on Form S-1
filed August 14, 1997 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
II-7
<PAGE> 9
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.
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<PAGE> 10
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 August 15, 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 August 15, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/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-9
<PAGE> 11
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 and First Amendment to Amended and Restated
Note and Warrant Purchase Agreement dated August 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.
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C> <C>
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 and First Amendment to Amended and Restated
Note and Warrant Purchase Agreement dated August 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.
</TABLE>
2
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------
<C> <C> <S>
</TABLE>
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.
10.49***** -- Amendment to Agreement and Plan of Reorganization dated July
31, 1997 by and among Kuscat Investments, L.L.C.,
Ocusite-ASC, Inc., Jeffrey I. Katz, M.D. and Barry Kusman,
M.D., Vital Site, P.C., Vision Twenty-One, Inc., Vision 21
of Southern Arizona, Inc., and the escrow agent.
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.
3
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C> <C>
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).
27.3***** -- Financial Data Schedule for six months ended June 30, 1997
(for SEC Use Only).
</TABLE>
- ---------------
** 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.
*** Previously filed as an Exhibit with the same Exhibit Number identification
in the Company's Amendment No. 1 to Registration Statement on Form S-1
filed on July 23, 1997 and incorporated herein by reference.
**** Previously filed as an Exhibit with the same Exhibit Number identification
in the Company's Amendment No. 2 to Registration Statement on Form S-1
filed July 30, 1997 and incorporated herein by reference.
***** Previously filed as an Exhibit with the same Exhibit Number identification
in the Company's Amendment No. 3 to Registration Statement on Form S-1
filed August 14, 1997 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 aeriform and filed separately with the Securities and
Exchange Commission.
4
<PAGE> 1
EXHIBIT 4.8
as of June 13, 1997
Vision Twenty-One, Inc.
7209 Bryan Dairy Road
Largo, Florida 33777
Attention: Mr. Richard T. Welch
Amended and Restated Note and Warrant Purchase Agreement
Ladies and Gentlemen:
Vision Twenty-One, Inc. (the "COMPANY") and we entered into a Note and
Warrant Purchase Agreement, dated April 11, 1997 (the "ORIGINAL PURCHASE
AGREEMENT"). You have requested, and we have agreed, to amend and restate the
terms of the Original Purchase Agreement, as hereinafter set forth. Accordingly,
effective as of the Closing Date (as defined in paragraph 8), you and we agree
as follows:
1. AGREEMENT FOR PURCHASE AND SALE OF NOTES AND THE WARRANT. We
agree, on the terms and conditions set forth below, to purchase from you, and
you agree to sell to us: (a) at par, from time to time during the period from
the Closing Date (as defined in paragraph 8 below) until the Note Termination
Date (as defined below) one or more notes of the Company, substantially in the
form of Exhibit A hereto (individually, a "NOTE" and, collectively, the
"NOTES"), in an aggregate principal amount not to exceed at any time outstanding
$4,680,000 (such agreement to purchase the Notes, as modified from time to time
pursuant to paragraph 3 below, being hereinafter referred to as the "NOTE
COMMITMENT"), and (b) for an aggregate purchase price of $320,000, no later than
2:00 P.M. (New York City time) on the Closing Date, a certificate evidencing
warrants of the Company, in substantially the form of Exhibit B hereto (the
"WARRANT"). As used herein, "NOTE TERMINATION DATE" shall mean the earliest to
occur of (i) January 1, 1998, (ii) the first date on which capital stock of the
Company is offered to the public pursuant to a registration statement filed with
the Securities and Exchange Commission, (iii) the direct or indirect acquisition
by any person (as such term is defined in Section 13(d) of the Securities and
Exchange Act of 1934, as amended) of beneficial ownership of more than 51% of
the outstanding capital shares of stock of the Company entitled to vote
generally for the election of members of the board of directors of the Company,
and (iv) the date of termination of the Note Commitment pursuant to paragraph 3
or 14 below.
<PAGE> 2
2
2. PROCEDURES FOR PURCHASE OF NOTES. Each Note shall be purchased
by us on at least 2 (two) Business Days' (as defined in paragraph 7 below)
notice from you to us specifying the date (which shall be the date of purchase
of such Note) and principal amount thereof (which shall be at least $500,000).
Not later than 11:00 A.M. (New York City time) on the date of such purchase and
upon fulfillment of the applicable conditions set forth in paragraphs 8, 9 and
10 below, we will make the purchase price of such Note available to you in same
day funds at such account as you shall designate in the notice from you
requesting such purchase. Each notice from you to us requesting the purchase of
a Note shall be irrevocable and binding on you.
3. REDUCTION OF THE NOTE COMMITMENT. You shall have the right,
upon at least 2 (two) Business Days' notice to us, to terminate in whole or
reduce in part the unused portion of the Note Commitment, provided that each
partial reduction shall be in the amount of not less than $500,000.
4. INTEREST AND REPAYMENT. You shall repay, and shall pay
interest on, the aggregate unpaid principal amount of the Notes purchased by us
hereunder in accordance with the terms thereof.
5. OPTIONAL PREPAYMENTS. You may, upon at least 2 (two) Business
Days' notice to us stating the proposed date and principal amount of the
prepayment, and if such notice is given you shall, prepay the principal of any
Note in whole or in part with accrued interest to the date of such prepayment on
the amount prepaid, provided, that each partial prepayment shall be in a
principal amount not less than $500,000. Amounts repaid or prepaid hereunder may
not be reborrowed.
6. PAYMENTS AND COMPUTATIONS. You shall make each payment
hereunder and under the Notes not later than 12:00 noon (New York City time) on
the day when due in U.S. dollars to us in same day funds in care of Morgan
Guaranty Trust Company, ABA 021000238, For the Account of Prudential Securities
Group Inc., Account Number: 003-88-392, or such other address as we may from
time to time designate in writing to you. You hereby authorize us, if and to the
extent payment is not made when due hereunder or under the Notes, to charge from
time to time against any or all of your accounts with us any amount so due. All
computations of interest shall be made by us on the basis of a year of 360 days,
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable.
7. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment hereunder
or under any Note shall be stated to be due on a day of the year on which banks
are required or authorized to close in New York City (any such other day being a
"BUSINESS DAY"), such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest.
8. CONDITIONS PRECEDENT TO INITIAL PURCHASE. Our obligation to
purchase any Note and the Warrant is subject to the conditions precedent that
(a) we shall have received on or before
<PAGE> 3
3
the date of the initial purchase the following, each dated such date (the
"CLOSING DATE"), which must occur no later than July 4, 1997, in form and
substance satisfactory to us:
(i) A Note, duly executed by you, in the aggregate
principal amount of the "Notes" outstanding under (and as defined in)
the Original Purchase Agreement immediately prior to the Closing Date;
(ii) The Warrant, duly executed by you;
(iii) Separate security agreements, substantially in the
form of Exhibit C hereto (the "SECURITY AGREEMENTS", and together with
this letter, the Notes and the Warrant, the "LOAN DOCUMENTS"), duly
executed by each of the Company, Vision 21 of Southern Arizona, Inc.
("VISION 21 OF SOUTHERN ARIZONA") and Vision 21 of Sierra Vista, Inc.
("VISION 21 OF SIERRA VISTA", and together with Vision 21 of Southern
Arizona and the Company, the "LOAN PARTIES");
(iv) Evidence, satisfactory to us, that all indebtedness
under the Loan Agreement, dated February 7, 1997 (the "BARNETT LOAN"),
between Barnett Bank, N.A. and the Company shall be paid in full on the
Closing Date;
(v) Appropriately completed and duly executed termination
statements (Form UCC-3) for filing under the Uniform Commercial Code of
all jurisdictions as may be necessary or, in the opinion of the
Purchaser, desirable, to release the security interests and liens
securing the obligations of the Company under the Barnett Loan;
(vi) Appropriately completed and duly executed financing
statements (Form UCC-1) for filing under the Uniform Commercial Code of
all jurisdictions as may be necessary or, in the opinion of the
Purchaser, desirable, to perfect the security interests and liens
created by the Security Agreements;
(vii) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving each Loan Document to which it
is, or is to become, a party, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to each Loan Document to which it is, or is to become, a party;
(viii) A certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true signatures
of the officers authorized to sign each Loan Document to which it is,
or is to become, a party and the other documents to be delivered
hereunder and thereunder;
(ix) True and complete copies, certified by the Secretary
or Assistant Secretary of each Loan Party, of the articles of
incorporation and by-laws of such Loan Party, as in effect on the
Closing Date;
<PAGE> 4
4
(x) A favorable opinion or opinions of counsel to the
Loan Parties as to such matters as we may reasonably request;
(xi) Copies of the balance sheet of the Company and its
consolidated subsidiaries as at December 31, 1996, and the related
statement of income and retained earnings for the fiscal year then
ended, certified in a manner acceptable to us by independent public
accountants acceptable to us;
(xii) A schedule of potential acquisitions of
ophthalmological and optometric practices to be made by you during
fiscal year 1997; and
(xiii) Copies of insurance policies or certificates of
insurance of the Loan Parties evidencing liability and casualty
insurance in full force and effect, in such amounts, covering such
risks and liabilities and with such deductibles or self-insurance
retentions as are in accordance with normal industry practice and
naming us as named insured and loss payee thereon.
In connection with the transactions to occur on the Closing Date, we hereby
agree to return to you for cancellation the "Notes" and the "Warrant" (each, as
defined in the Original Purchase Agreement) simultaneously with your
satisfaction of the conditions set forth in this paragraph 8.
9. CONDITIONS PRECEDENT TO ALL PURCHASES. Our obligation to make
each purchase (including the initial purchase) hereunder shall be subject to the
further conditions precedent that on the date of such purchase (a) the following
statements shall be true and we shall have received a certificate signed by your
duly authorized officer, dated the date of such purchase, stating that:
(i) The representations and warranties contained in
paragraph 11 hereof and Section 4 of each Security Agreement are
correct on and as of the date of such purchase, before and after giving
effect to such purchase and to the application of the proceeds
therefrom, as though made on and as of such date, and
(ii) No event has occurred and is continuing, or would
result from such purchase or from the application of the proceeds
therefrom, that constitutes an Event of Default (as defined in
paragraph 14) or would constitute an Event of Default but for the
requirement that notice be given or time elapse or both;
and (b) we shall have received such other approvals, opinions or documents as we
may reasonably request.
10. CONDITION PRECEDENT TO ALL NOTE PURCHASES. Our obligation to
purchase each Note shall be subject to the further condition precedent that on
the date of such purchase, we shall have received a Note in the principal amount
to be purchased, duly completed (in accordance with the
<PAGE> 5
5
notice delivered by you under paragraph 2 above) and executed by you, and in
form and substance satisfactory to us.
11. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. You represent
and warrant to us as follows:
(a) The Company is the 100% owner of the subsidiaries listed
on Schedule 11(a) hereto, and each of the Company and each of its
subsidiaries is duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and
each has the requisite corporate power and authority to own and operate
its properties and carry on its business as now conducted.
(b) The execution, delivery and performance by the Company of
each Loan Document to which the Company is, or is to become, a party
are within its corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the articles of
incorporation or by-laws of the Company or (ii) law or any contractual
restriction binding on or affecting the Company.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the
Company of any Loan Document to which the Company is, or is to become,
a party.
(d) This letter is, and each other Loan Document to which the
Company is to become a party, when delivered hereunder will be, the
legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(e) The balance sheet of the Company and its consolidated
subsidiaries as at December 31, 1996, and the related statement of
income and retained earnings for the fiscal year then ended, fairly
present the financial condition of the Company and its consolidated
subsidiaries as at such date and the results of operations of the
Company and its consolidated subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting principles
consistently applied, and since December 31, 1996, there has been no
material adverse change in such condition or operations or on the
ability of the Company to perform its obligations under any Loan
Document to which the Company is, or is to become, a party.
(f) There is no pending or threatened action or proceeding
affecting the Company before any court, governmental agency or
arbitrator that may materially adversely affect the financial condition
or operations of the Company or which could
<PAGE> 6
6
reasonably be expected to affect the legality, validity or
enforceability of any Loan Document to which the Company is, or is to
become, a party.
(g) No part of the proceeds of the sale of the Notes and the
Warrant hereunder will be used, directly or indirectly, for the purpose
of buying or carrying any margin stock within the meaning of Regulation
G of the Board of Governors of the Federal Reserve System (12 CFR 207),
or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does
not constitute more than 25% of the value of the assets of the Company
and its consolidated subsidiaries.
(h) The authorized capital stock of the Company consists of
50,000,000 shares of common stock (the "COMMON STOCK") and 10,000,000
shares of preferred stock. On the Closing Date, upon the issuance of
the Warrant pursuant to this letter, there will be (i) in the aggregate
5,595,929 shares of Common Stock outstanding and owned of record by the
stockholders identified on Schedule 11(h) hereto and no shares of
preferred stock outstanding, and (ii) 1,822,625 shares of Common Stock
issuable upon the exercise of options or warrants, including the
Warrant, by the parties identified in Schedule 11(h) hereto (assuming
the maximum number of shares are issuable under all such warrants). The
633,333 shares of Common Stock issuable upon the exercise of the
Warrant have been duly reserved. All outstanding Common Stock is, and
the Common Stock that may be issued upon exercise of the Warrant will
be, when so issued, duly authorized and legally and validly issued,
fully-paid and non-assessable and free and clear of all pledges, liens,
encumbrances, security interests, equities, options, claims, charges
and restrictions, except as provided in the Warrant, the articles of
incorporation and the by-laws of the Company and except for
restrictions imposed by laws relating to the sale of securities.
(i) Except as provided in the Note Purchase Agreement, dated
December 20, 1996, relating to the Company's 10% Senior Subordinated
Notes due December 19,1999 (and the related detachable warrants), the
Note Purchase Agreement, dated February 27, 1997, relating to the
Company's 10% Senior Subordinated Series 1997 Notes due December 19,
1999 (and the related detachable warrants), the Warrant, the Articles
of Incorporation and the By-Laws, or otherwise set forth in Schedule
11(h), there are no outstanding rights, registration rights,
subscriptions, convertible securities, warrants, calls, puts,
unsatisfied preemptive rights, options, or other agreements of any kind
to purchase or otherwise receive from the Company any securities of the
Company.
(j) All sales of securities by the Company have been made in
compliance with all applicable laws relating to the sale of securities,
and the Company is in compliance with all such laws except to the
extent that any noncompliance could not reasonably be expected to have
a material adverse effect on the financial condition or operations of
the Company or on its ability to perform its obligations under this
letter, the Notes or the Warrant.
<PAGE> 7
7
(k) Neither the Company nor anyone acting on its behalf has
offered the Notes or the Warrant for sale to, or solicited any offer to
buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any person other than us. Neither the Company nor
anyone acting on its behalf has taken, or will take, any action that
would subject the issuance or sale of the Notes or the Warrant to the
registration requirements of Section 5 of the Securities Act of 1933,
as amended from time to time (the "SECURITIES ACT"), other than
pursuant to the terms of the Warrant.
(l) The offer and sale of the Notes and Warrant is, and the
issuance of the Common Stock upon the exercise of the Warrant will be,
exempt from the registration requirements of the Securities Act, and in
compliance with all applicable state securities laws.
(m) Neither any certificate nor any other statement furnished
to us in writing by or on behalf of the Company in connection with the
transactions contemplated hereby contains any untrue statement of
material fact or omits to state a material fact necessary in order to
make the statements contained therein not misleading. There is no fact
known to the Company that materially and adversely affects or in the
future may (so far as the Company can now reasonably foresee)
materially and adversely affect the business, prospects, condition,
affairs or operations of the Company and its subsidiaries, considered
as a whole.
12. AFFIRMATIVE COVENANTS. So long as any Note shall remain unpaid
or we shall have any Note Commitment hereunder, you will, unless we shall
otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of your
subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon you or any such
subsidiary or upon your or its property except to the extent contested
in good faith and except to the extent that any noncompliance could not
reasonably be expected to have a material adverse effect on the
financial condition or operations of the Company or on its ability to
perform its obligations under any Loan Document to which it is, or is
to become, a party.
(b) GOVERNMENTAL APPROVALS. Obtain and maintain, and cause
each of your subsidiaries to obtain and maintain, in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary for the ownership of your and their respective
properties and for the conduct of your and their respective businesses,
in each case to the extent necessary to ensure that any noncompliance
could not reasonably be expected to have a material adverse effect on
the financial condition or operations of the Company or on its ability
to perform its obligations under any Loan Document to which it is, or
is to become, a party.
<PAGE> 8
8
(c) INSURANCE. Maintain, and cause each of your subsidiaries
to maintain, with financially sound and reputable insurers, insurance,
naming us as named insured and loss payee, with respect to your and
their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in the same or a
similar business and similarly situated.
(d) USE OF PROCEEDS. Use the proceeds of each Note and the
Warrant solely for (i) the refinancing of all amounts payable under the
Original Purchase Agreement as of the Closing Date, (ii) the payment of
professional fees (including legal, accounting and appraisal fees)
relating to acquisition by the Company of assets relating to
ophthalmological and optometric practices and (iii) general corporate
purposes (including the acquisition of various assets but excluding the
payment or prepayment of any indebtedness, other than as specified in
clause (i) above).
(e) SENIOR DEBT TO CAPITAL FUNDS RATIO. Maintain as at the end
of each calendar month a ratio of Senior Debt to Capital Funds not
greater than 3.00 to 1.00. As used herein, the term "SENIOR DEBT" shall
mean Debt of the Company and its subsidiaries less Subordinated Debt.
"DEBT" shall be determined in accordance with generally accepted
accounting principles, consistent with those applied in the preparation
of the financial statements described in paragraph 11(e) hereof
("GAAP"). The term "SUBORDINATED DEBT" shall mean all indebtedness and
liabilities of the Company and its subsidiaries that have been
subordinated by written agreement to indebtedness owed by the Company
to the Purchaser in form and substance acceptable to the Purchaser. The
term "CAPITAL FUNDS" shall mean Net Worth plus Subordinated Debt. The
term "NET WORTH" shall mean the Company's consolidated assets,
excluding receivables from and loans to employees of the Company, less
total Debt of the Company.
(f) EBITDA TO INTEREST CHARGES RATIO. Maintain as at the end
of each fiscal quarter a ratio of EBITDA to Interest Charges greater
than the number set forth below next to the applicable fiscal quarter
ending date:
<TABLE>
<S> <C>
March 31, 1997 0.00 to 1.00
June 30, 1997 0.00 to 1.00
September 30, 1997 1.00 to 1.00
December 31, 1997 1.00 to 1.00
</TABLE>
As used herein, the term "EBITDA" shall mean, for any period, net
income of the Company and its subsidiaries (determined in accordance
with GAAP) for such period plus all amounts deducted in the computation
thereof on account of Interest Charges, taxes, depreciation and
amortization allowances and other non-cash expenses for such period.
The term "INTEREST CHARGES" shall mean, for any period, the sum
(without duplication)
<PAGE> 9
9
of the following (in each case, eliminating all offsetting debits and
credit between the Company and its subsidiaries and all other items
required to be eliminated in the course of the preparation of the
consolidated financial statements of the Company and its subsidiaries
in accordance with GAAP): (i) all interest in respect of Debt of the
Company and its subsidiaries deducted in determining net income of the
Company for such period and (ii) all debt discount and expense
amortized or required to be amortized in the determination of net
income of the Company and its subsidiaries for such period.
(g) REPORTING REQUIREMENTS. Furnish to us: (i) as soon as
available and in any event within 45 days after the end of each of the
first three quarters of each of your fiscal years, your balance sheet
as of the end of such quarter and a statement of your income and
retained earnings for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, certified by your
chief financial officer; (ii) as soon as available and in any event
within 90 days after the end of each of your fiscal years, a copy of
your annual report for such year, containing financial statements for
such year certified in a manner reasonably acceptable to us by
independent public accountants reasonably acceptable to us; (iii) as
soon as available and in any event within 30 days after the end of each
calendar month, a certificate of your chief financial officer as to (A)
your compliance with the covenant set forth in paragraph 12(e) hereof,
including a reasonably detailed calculation of such compliance and (B)
a reasonably detailed calculation of EBITDA for the month most recently
ended; (iv) as soon as available and in any event within 45 days after
the end of each fiscal quarter of each of your fiscal years, a
certificate of your chief financial officer as to your compliance with
the covenant set forth in paragraph 12(f) hereof, including a
reasonably detailed calculation of such compliance; and (v) such other
information respecting your condition or operations, financial or
otherwise, as we may from time to time reasonably request.
(h) PRUDENTIAL ACCOUNTS. Within 30 days of the Closing Date,
furnish to us evidence, satisfactory to us, that Theodore N. Gillette
and Raena B. Gillette have opened personal investment accounts with
Prudential Securities, Inc.
13. NEGATIVE COVENANTS. So long as we shall hold any Note or the
Warrant or we shall have any Note Commitment hereunder, you will not, without
our written consent:
(a) LIENS, ETC. Create or suffer to exist, or cause or permit
any of your subsidiaries to create or suffer to exist, any lien,
security interest or other charge or encumbrance, or any other type of
preferential arrangement, upon or with respect to any of your or such
subsidiary's properties, whether now owned or hereafter acquired, or
assign any right to receive income, in each case to secure any Debt of
any person or entity, other than (i) purchase money liens or purchase
money security interests upon or in any property acquired or held by
you or such subsidiary in the ordinary course of business to secure the
purchase price of such property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of such property,
(ii) liens or security
<PAGE> 10
10
interests existing on such property at the time of its acquisition
(other than any such lien or security interest created in contemplation
of such acquisition), or (iii) liens securing the indebtedness
hereunder.
(b) SENIOR DEBT. Create or suffer to exist (i) any Debt that
ranks senior to the Debt evidenced by the Notes, (ii) any Debt that
ranks pari passu (on a secured or unsecured basis) with the Debt
evidenced by the Notes, other than unsecured Debt not exceeding
$3,000,000 in aggregate principal amount payable to one or more sellers
of assets acquired by the Company as part of the purchase price of such
assets, or (iii) any Subordinated Debt, other than unsecured
Subordinated Debt not exceeding $7,000,000 in aggregate principal
amount payable to one or more sellers of assets acquired by the Company
as part of the purchase price of such assets.
(c) MERGERS, ETC. Merge or consolidate, or cause or permit any
of your subsidiaries to merge or consolidate, with or into, or convey,
transfer, lease or otherwise dispose of, or cause or permit any of your
subsidiaries to convey, transfer, lease or otherwise dispose of,
(whether in one transaction or in a series of transactions) all or
substantially all of your or such subsidiary's assets (whether now
owned or hereafter acquired) to any person or entity, except that the
Company may merge with any other person or entity and any subsidiary of
the Company may merge with or into any other such subsidiary or the
Company, provided that, immediately after giving effect to such
proposed transaction, no Event of Default or event which, with the
giving of notice or lapse of time, or both, would constitute an Event
of Default would exist and, in the case of any merger involving the
Company, the Company is the surviving corporation.
(d) CERTAIN AMENDMENTS. Amend or modify the articles of
incorporation or the by-laws of the Company so as to materially impair
any of your rights under any Loan Document.
14. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur and be continuing:
(a) You shall fail to pay any principal of any Note when due,
or you shall fail to pay any interest on any Note or any other amount
payable hereunder within three days of the date when the same becomes
due and payable; or
(b) Any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) Any Loan Party shall fail to perform or observe (i) any
term, covenant or agreement contained in paragraph 12(e) or (f) or
paragraph 13 or (ii) any other term, covenant or agreement contained in
any Loan Document, in each case, on its part to be
<PAGE> 11
11
performed or observed if such failure shall remain unremedied for 10
days after written notice thereof shall have been given to you by us;
or
(d) Any Loan Party shall fail to pay any principal of or
premium or interest on any Debt that is outstanding in an aggregate
principal amount of at least $250,000 (but excluding Debt evidenced by
the Notes) when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate,
or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof; or
(e) Any Loan Party or any Affiliate (As used herein,
"AFFILIATE" shall mean any individual, corporation, partnership,
association, trust, limited liability company, joint venture or other
entity, or government or any political subdivision or agency or
instrumentality thereof (each, a "PERSON") that directly or indirectly
controls, is controlled by or is under common control with such Person
or is an officer or director of such Person.) of any Loan Party shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Loan Party or any Affiliate of any Loan
Party seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of 30
days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or
shall take any corporate action to authorize any of the actions set
forth above in this subparagraph (e); or
(f) Any judgment or order for the payment of money in excess
of $250,000 shall be rendered against any Loan Party and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect; or
<PAGE> 12
12
(g) In any month, Adjusted EBITDA shall fail to equal or
exceed 85% of Projected EBITDA for such month (as used herein,
"ADJUSTED EBITDA" means EBITDA for any month following March 1997, plus
the amount by which the previous month's Adjusted EBITDA exceeded 85%
of such previous month's Projected EBITDA, where Adjusted EBITDA for
March 1997 is deemed to be zero, and "PROJECTED EBITDA" means the
monthly EBITDA projections as set forth on Schedule 14(g) hereto); or
(h) Any provision of any Loan Document after delivery thereof
shall for any reason cease to be valid and binding on any Loan Party
that is a party thereto, or any Loan Party shall so state in writing;
or
(i) Any material adverse change shall occur in the financial
condition or operations of the Company and its consolidated
subsidiaries or on the ability of the Company to perform its
obligations under any Loan Document to which it is, or is to become, a
party; or
(j) The Company shall fail to deliver within 30 days of the
Closing Date copies of the balance sheet of the Company and its
consolidated subsidiaries as at December 31, 1996 and the related
statement of income and retained earnings for the fiscal year then
ended prepared in accordance with GAAP for a company the common stock
of which is publicly traded and certified in a manner acceptable to us
by Ernst & Young; or
(k) Any Security Agreement shall for any reason, except to the
extent permitted by the terms hereof and thereof, cease to create a
valid and perfected first priority security interest (to the extent
purported to be granted by such Security Agreement) in all or any
portion of the Collateral (as defined in the Security Agreements);
then, and in any such event, we may, by notice to you, (i) declare our
obligation to purchase the Warrant and the Notes to be terminated, whereupon the
same shall forthwith terminate; (ii) declare the Notes, all interest thereon and
all other amounts payable under this letter to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by you; and (iii)
exercise in respect of the Collateral, in addition to the other rights and
remedies provided for herein and in the Security Agreements, all the rights and
remedies of a secured party on default under the Uniform Commercial Code in
effect from time to time in the State of New York and in effect in any other
jurisdiction in which the Collateral is located at that time; provided, however,
that in the event of an actual or deemed entry of an order for relief with
respect to you under the Federal Bankruptcy Code, (A) our obligation to purchase
the Warrant and the Notes shall automatically be terminated and (B) the Notes,
all such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by you.
<PAGE> 13
13
15. REPRESENTATIONS AND WARRANTIES OF PRUDENTIAL SECURITIES GROUP
INC. We represent and warrant that:
(a) We are acquiring the Notes, the Warrant and the shares of
the Common Stock issuable upon exchange of the Warrant (collectively,
the "SECURITIES") for the purpose of investment for our own account and
not with a view to or for sale in connection with any distribution
thereof, provided, that the disposition of our property shall at all
times be and remain within our control. We understand that the
Securities have not been registered under the Securities Act, and may
be resold only if registered pursuant to the provisions of the
Securities Act and any applicable state "blue sky" laws or if an
exemption from such registration is available and we will not
distribute any of the Securities in violation of the Securities Act and
such state "blue sky laws."
(b) The address set forth in paragraph 17 hereof is our
principal business address.
(c) We (i) acknowledge that the Securities to be issued to us
at the Closing must be held indefinitely by us unless such Securities
are subsequently registered under the Securities Act or an exemption
from registration is available, and (ii) are 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 or exemption
will be required.
(d) We have knowledge and experience in financial and business
matters such that we are capable of evaluating the merits and risks of
the Securities to be acquired by us upon consummation of the
transactions described in this agreement and can afford a complete loss
of our investment in the Securities.
(e) We have had the opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions of
our investment in the Securities, and we have received, to our
satisfaction, information about the Company's operations and the terms
and conditions of our investment in the Securities as we have
requested.
(f) We acknowledge and agree that each of the Securities
issued by the Company or issued as a result of any subsequent transfer
thereof, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented hereby have not been registered
under the Securities Act of 1933 or applicable state "blue
sky" laws. Such securities may not be sold or transferred in
the absence of such registration or an opinion of counsel that
an exemption therefrom under said Act and
<PAGE> 14
14
applicable state "blue sky" laws is available. Any transfer of
such securities in violation of the foregoing shall be
invalid."
We further acknowledge and agree that appropriate "stop-transfer"
instructions will be given to the Company's transfer agent, if any, in
the event of any attempted transfer in violation of such restriction.
(g) We understand that although the Company is contemplating
the registration of shares of its Common Stock under the Securities Act
pursuant to an underwritten public offering, there are no assurances
that such offering will occur or if it does occur that it will be
successful.
(h) We are an "accredited investor" within the meaning of
Securities and Exchange Commission Rule 501 of Regulation D, as
presently in effect.
16. AMENDMENTS, ETC. No amendment or waiver of any provision of
this letter or the Notes, nor consent to any departure by you therefrom, shall
in any event be effective unless the same shall be in writing and signed by us,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
17. NOTICES, ETC. All notices and other communications provided
for hereunder shall be in writing (including telecopier communication) and
mailed, telecopied or delivered, if to you, at your address at 7209 Bryan Dairy
Road, Largo, Florida 33777, Attention: Richard T. Welch (fax 813-547-4371); and
if to us, in care of Prudential Securities Incorporated, One Seaport Plaza, New
York, New York 10292, Attention: George D. Morgan, III and Erika P.
Walters-Engemann (fax 212-214-7678); or, as to each party, at such other address
as shall be designated by such party in a written notice to the other party. All
such notices and communications shall, when mailed or telecopied, be effective
when deposited in the mails or telecopied, respectively.
18. NO WAIVER; REMEDIES; BENEFITS. No failure by either party to
exercise, and no delay in exercising, any right hereunder or under any Note or
the Warrant shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder or under any Note preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law. All
Notes at any time outstanding shall be equally and ratably entitled to the
benefits of this letter, without priority, preference or distinction on account
of the date or dates of issue thereof.
19. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in clause
(xii) of paragraph 8(a).
20. COSTS AND EXPENSES. You agree to pay on demand all reasonable
costs and expenses in connection with the preparation, execution, delivery,
filing, recording, administration,
<PAGE> 15
15
modification and amendment of this letter, the other Loan Documents and the
other documents to be delivered hereunder and thereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of our counsel with
respect thereto and with respect to advising us as to our rights and
responsibilities under this letter. You further agree to pay on demand all costs
and expenses, if any (including counsel fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this letter, the other Loan Documents and the other documents to be delivered
hereunder and thereunder, including, without limitation, counsel fees and
expenses in connection with the enforcement of rights under this paragraph 20.
In addition, you shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
letter, the other Loan Documents and the other documents to be delivered
hereunder and thereunder, and agree to save us harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
21. BINDING EFFECT; GOVERNING LAW; ENTIRE AGREEMENT; ETC. This
letter shall be binding upon and inure to the benefit of you and us and your and
our respective successors and assigns, except that you shall not have the right
to assign your rights hereunder or any interest herein without our prior written
consent. This letter and the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York. This letter may be executed
in separate counterparts, each of which shall be an original, with the same
effect as if the signatures were upon the same instrument. This letter and the
other Loan Documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral (including, without limitation, the Original
Purchase Agreement), with respect thereto.
<PAGE> 16
16
If the terms of this letter are satisfactory to you, please indicate
your agreement and acceptance thereof by executing a counterpart of this letter
and returning it to us.
Very truly yours,
PRUDENTIAL SECURITIES GROUP INC.
By
------------------------------------
Name:
Title:
Agreed and Accepted:
VISION TWENTY-ONE, INC.
By
------------------------------------
Name:
Title:
<PAGE> 17
EXHIBIT C
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT, dated June ___, 1997, made by ____________________, a
_________________________________ corporation ("THE GRANTOR"), to PRUDENTIAL
SECURITIES GROUP INC. (the "PURCHASER").
PRELIMINARY STATEMENTS:
(1) The Purchaser has entered into an Amended and Restated Note and
Warrant Purchase Agreement, dated as of June 13, 1997 (said Agreement, as it may
hereafter be amended or otherwise modified from time to time, being the
"PURCHASE AGREEMENT", the terms defined therein and not otherwise defined herein
being used herein as therein defined) with [the Grantor] [Vision Twenty-One,
Inc., a Florida corporation (the "COMPANY")]. [The Grantor may receive a portion
of the proceeds of the Notes under the Purchase Agreement and will derive
substantial direct and indirect benefit from the transactions contemplated by
the Purchase Agreement.]
(2) It is a condition precedent to the purchase of Notes by the
Purchaser under the Purchase Agreement that the Grantor shall have granted the
security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Purchaser to purchase Notes under the Purchase Agreement, the Grantor
hereby agrees as follows:
SECTION 1. GRANT OF SECURITY. The Grantor hereby assigns and pledges to
the Purchaser, and hereby grants to the Purchaser a security interest in, all of
the Grantor's right, title and interest in and to the following, whether now
owned or hereafter acquired (the "COLLATERAL"):
(a) all equipment in all of its forms, wherever located, now or
hereafter existing, all fixtures and all parts thereof and all accessions
thereto (any and all such equipment, fixtures, parts and accessions
being the "EQUIPMENT");
(b) all inventory in all of its forms, wherever located, now or
hereafter existing (including, but not limited to, (i) all raw materials
and work in process therefor, finished goods thereof, and materials used
or consumed in the manufacture or production thereof, (ii) goods in which
the Grantor has an interest in mass or a joint or other interest or right
of any kind (including, without limitation, goods in which the Grantor
has an interest or right as consignee), and (iii) goods which are
returned to or repossessed by the Grantor),
<PAGE> 18
and all accessions thereto and products thereof and documents therefor
(any and all such inventory, accessions, products and documents being the
"INVENTORY");
(c) all accounts, contract rights, chattel paper, instruments,
deposit accounts, general intangibles and other obligations of any kind,
now or hereafter existing, whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services, and all
rights now or hereafter existing in and to all security agreements,
leases, and other contracts securing or otherwise relating to any such
accounts, contract rights, chattel paper, instruments, deposit accounts,
general intangibles or obligations (any and all such accounts, contract
rights, chattel paper, instruments, deposit accounts, general intangibles
and obligations being the "Receivables", and any and all such leases,
security agreements and other contracts being the "Related Contracts");
and
(d) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds which constitute property of
the types described in clauses (a) - (c) of this Section 1) and, to the
extent not otherwise included, all (i) payments under insurance (whether
or not the Purchaser is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral and (ii) cash.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment
of all obligations of the Grantor [Company] now or hereafter existing under the
Purchase Agreement and the Notes, whether for principal, interest, fees,
expenses or otherwise, and all obligations of the Grantor now or hereafter
existing under this Agreement (all such obligations of the [Company and] the
Grantor being the "OBLIGATIONS"). Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts which constitute
part of the Obligations and would be owed by the Grantor [Company] to the
Purchaser under the Purchase Agreement and the Notes but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Grantor [Company].
SECTION 3. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Purchaser of any of the
rights hereunder shall not release the Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) the Purchaser shall not have any obligation or liability under the contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
the Purchaser be obligated to perform any of the obligations or duties of the
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
<PAGE> 19
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Grantor represents and
warrants as follows:
[Where Grantor is not the Company, include additional representations and
warranties as to authorization, validity, noncontravention of law or contracts,
etc.]
(a) All of the Equipment and Inventory are located at the places
specified in the Schedule hereto. The chief place of business and chief
executive office of the Grantor and the office where the Grantor keeps its
records concerning the Receivables, and the originals of all chattel paper that
evidence Receivables, are located at its address specified in Section __. None
of the Receivables is evidenced by a promissory note or other instrument.
(b) The Grantor is the legal and beneficial owner of the Collateral
free and clear of any lien, security interest, option or other charge or
encumbrance except for the security interest created by this Agreement. No
effective financing statement or other document similar in effect covering all
or any part of the Collateral is on file in any recording office, except such
as may have been filed in favor of the Purchaser relating to this Agreement.
The Grantor has the trade names listed on the Schedule hereto.
(c) The Grantor has exclusive possession and control of the
Equipment and Inventory.
(d) This Agreement creates a valid and enforceable security interest
in the Collateral, and upon proper filings of appropriately completed financing
statements, duly executed by the Grantor, will create a perfected first priority
security interest in the Collateral, securing the payment of the Obligations.
(e) No consent of any other person or entity and no authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required (i) for the grant by the Grantor of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by the Grantor, (ii) for the perfection or maintenance of the
security interest created hereby (including the first priority nature of such
security interest) or (iii) for the exercise by the Purchaser of its rights and
remedies hereunder.
(f) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(g) The Grantor has, independently and without reliance upon the
Purchaser and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.
SECTION 5. FURTHER ASSURANCES. (a) The Grantor agrees that from time to
time, at the expense of the Grantor, the Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Purchaser
<PAGE> 20
4
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Purchaser to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, the Grantor will:
(i) mark conspicuously each document included in the Inventory and each chattel
paper included in the Receivables and each Related Contract and, at the request
of the Purchaser, each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Purchaser, indicating that
such document, chattel paper, Related Contract or Collateral is subject to the
security interest granted hereby; (ii) if any Receivable shall be evidenced by
a promissory note or other instrument or chattel paper, deliver and pledge to
the Purchaser such note or instrument or chattel paper duly indorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance reasonably satisfactory to the Purchaser; and (iii) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Purchaser may reasonably request, in order to perfect and preserve the security
interest granted or purported to be granted hereby.
(b) The Grantor hereby authorizes the Purchaser to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of the Grantor where
permitted by law. A photocopy or other reproduction of this Agreement or any
financing statements covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) The Grantor will furnish to the Purchaser from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Purchaser may
reasonably request, all in reasonable detail.
SECTION 6. AS TO EQUIPMENT AND INVENTORY. (a) The Grantor shall keep
the Equipment and Inventory (other than Inventory sold in the ordinary course
of business) at the places therefor specified in Section 4(a) or, upon 30 days'
prior written notice to the Purchaser, at such other places in jurisdictions
where all action required by Section 5 shall have been taken with respect to
the Equipment and Inventory.
(b) The Grantor shall cause the Equipment to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's manual, and
shall forthwith, or in the case of any loss or damage to any of the Equipment
as quickly as practicable after the occurrence thereof, make or cause to be
made all repairs, replacements, and other improvements in connection therewith
which are necessary or desirable to such end. The Grantor shall promptly
furnish to the Purchaser a statement respecting any loss or damage to any of
the Equipment.
(c) The Grantor shall pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor,
<PAGE> 21
5
materials and supplies) against, the Equipment and Inventory (except to the
extent contested in good faith).
SECTION 7. INSURANCE. (a) The Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to the Purchaser from time to time. Each policy for liability
insurance shall provide for all losses to be paid on behalf of the Purchaser
and the Grantor as their respective interests may appear and each policy for
property damage insurance shall provide for all losses (except for losses of
less than $150,000 per occurrence) to be paid directly to the Purchaser. Each
such policy shall in addition (i) name the Grantor and the Purchaser as insured
parties thereunder (without any representation or warranty by or obligation
upon the Purchaser) as their interests may appear, (ii) contain the agreement by
the insurer that any loss thereunder shall be payable to the Purchaser
notwithstanding any action, inaction or breach of representation or warranty by
the Grantor, (iii) provide that there shall be no recourse against the
Purchaser for payment of premiums or other amounts with respect thereto and
(iv) provide that at least ten days' prior written notice of cancellation or of
lapse shall be given to the Purchaser by the insurer. The Grantor shall, if so
requested by the Purchaser, deliver to the Purchaser original or duplicate
policies of such insurance and, as often as the Purchaser may reasonably
request, a report of a reputable insurance broker with respect to such
insurance. Further, the Grantor shall, at the request of the Purchaser, duly
execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 5 and cause the insurers to acknowledge
notice of such assignment.
(b) Reimbursement under any liability insurance maintained by the
Grantor pursuant to this Section 7 may be paid directly to the person who shall
have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this Section
7 is not applicable, the Grantor shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by the Grantor pursuant to this Section 7 shall be paid to
the Grantor by the Purchaser (after payment to the Purchaser as provided in
Section 7(a)(ii) above) reimbursement for the costs of such repairs or
replacements.
(c) Upon (i) the occurrence and during the continuance of any
Event of Default, or (ii) the actual or constructive total loss (in excess of
$150,000 per occurrence) of any Equipment or Inventory, all insurance payments
in respect of such Equipment or Inventory shall be paid to and applied by the
Purchaser as specified in Section 13(b).
SECTION 8. AS TO RECEIVABLES. (a) The Grantor shall keep its chief
place of business and chief executive office and the office where it keeps its
records concerning the Receivables, and the originals of all chattel paper that
evidence Receivables, at the location therefor specified in Section 4(a) or,
upon 30 days' prior written notice to the Purchaser, at any other locations in
a jurisdiction where all action required by Section 5 shall have been taken
with respect to the Receivables. The Grantor will hold and preserve such
records and chattel paper and will permit
<PAGE> 22
6
representatives of the Purchaser at any time during normal business hours upon
at least one day's prior notice to inspect and make abstracts from such records
and chattel paper.
(b) Except as otherwise provided in this subsection (b), the
Grantor shall continue to collect, at its own expense, all amounts due or to
become due the Grantor under the Receivables. In connection with such
collections, the Grantor may take (and, at the Purchaser's direction, shall
take) such action as the Grantor or the Purchaser may deem necessary or
advisable to enforce collection of the Receivables; provided, however, that the
Purchaser shall have the right at any time, in the event that the Purchaser in
good faith believes that the prospect of payment of the Obligations in the
normal course, or the performance of collection of the Receivables, is impaired
and upon written notice to the Grantor of its intention to do so, to notify the
account debtors or obligors under any Receivables of the assignment of such
Receivables to the Purchaser and to direct such account debtors or obligors to
make payment of all amounts due or to become due to the Grantor thereunder
directly to the Purchaser and, upon such notification and at the expense of the
Grantor, to enforce collection of any such Receivables, and to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as the Grantor might have done. After receipt by the Grantor of the
notice from the Purchaser referred to in the proviso to the preceding sentence,
(i) all amounts and proceeds (including instruments) received by the Grantor in
respect of the Receivables shall be received in trust for the benefit of the
Purchaser hereunder, shall be segregated from other funds of the Grantor and
shall be forthwith paid over to the Purchaser in the same form as so received
(with any necessary indorsement) to be held as cash collateral and either (A)
released to the Grantor so long as no Event of Default shall have occurred and
be continuing or (B) if any Event of Default shall have occurred and be
continuing, applied as provided by Section 13(b), and (ii) the Grantor shall
not adjust, settle or compromise the amount or payment of any Receivable,
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
SECTION 9. TRANSFERS AND OTHER LIENS. The Grantor shall not (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, except Inventory in the ordinary
course of business, or (ii) create to permit to exist any lien, security
interest, option or other charge or encumbrance upon or with respect to any of
the Collateral, except for the security interest under this Agreement.
SECTION 10. PURCHASER APPOINTED ATTORNEY-IN-FACT. The Grantor hereby
irrevocably appoints the Purchaser the Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor,
the Purchaser or otherwise, from time to time in the Purchaser's discretion, to
take any action and to execute any instrument which the Purchaser may deem
necessary or advisable to accomplish the purposes of this Agreement (subject to
the rights of the Grantor under Section 8), including, without limitation:
(a) to obtain and adjust insurance required to be paid
to the Purchaser pursuant to Section 7,
<PAGE> 23
(b) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in connection with the Collateral,
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper, in connection therewith, and
(d) to file any claims or take any action or institute any
proceedings which the Purchaser may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of the Purchaser with respect to any of the Collateral.
SECTION 11. PURCHASER MAY PERFORM. If the Grantor fails to perform
any agreement contained herein, the Purchaser may itself perform, or cause
performance of, such agreement, and the expenses of the Purchaser incurred in
connection therewith shall be payable by the Grantor under Section 14(b).
SECTION 12. THE PURCHASER'S DUTIES. The powers conferred on the
Purchaser hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Purchaser shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. The
Purchaser shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Purchaser accords its own
property.
SECTION 13. REMEDIES. If any Event of Default shall have occurred
and be continuing:
(a) The Purchaser may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of
a secured party on default under the Uniform Commercial Code in effect
in the State of New York at that time (the "Code") (whether or not the
Code applies to the affected Collateral), and also may (i) require the
Grantor to, and the Grantor hereby agrees that it will at its expense
and upon request of the Purchaser forthwith, assemble all or part of
the Collateral as directed by the Purchaser and make it available to
the Purchaser at a place to be designated by the Purchaser which is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Purchaser's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Purchaser may deem commercially reasonable. The
Grantor agrees that, to the extent notice of sale shall be required by
law, at least ten days' notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Purchaser shall not be
obligated to make any sale of
<PAGE> 24
Collateral regardless of notice of sale having been given. The
Purchaser may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) Any cash held by the Purchaser as Collateral and all cash
proceeds received by the Purchaser in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Purchaser, be held by the
Purchaser as collateral for, and/or then or at any time thereafter be
applied (after payment of any amounts payable to the Purchaser pursuant
to Section 14) in whole or in part by the Purchaser against, all or any
part of the Obligations in such order as the Purchaser shall elect.
Any surplus of such cash or cash proceeds held by the Purchaser and
remaining after payment in full of all the Obligations shall be paid
over to the Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 14. INDEMNITY AND EXPENSES. (a) The Grantor agrees to
indemnify the Purchaser from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting from the Purchaser's
gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Purchaser the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, which the Purchaser may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Purchaser hereunder or (iv) the failure by the Grantor
to perform or observe any of the provisions hereof.
(1)[SECTION __. SECURITY INTEREST ABSOLUTE. [The obligations of the
Grantor under this Agreement are independent of the Obligations, and a separate
action or actions may be brought and prosecuted against the Grantor to enforce
this Agreement, irrespective of whether any action is brought against the
Company or whether the Company is joined in any such action or actions.] All
rights of the Purchaser and security interests hereunder, and all obligations
of the Grantor hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the Purchase
Agreement, the Notes or any other agreement or instrument relating
thereto;
- ---------------
(1) If the Grantor is the Company, this Section may be omitted.
<PAGE> 25
(ii) any change in the time, manner, or place of payment of, or in
any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
Purchase Agreement or the Notes, including, without limitation, any
increase in the Obligations resulting form the extension of additional
credit to the Company or any of its subsidiaries or otherwise;
(iii) any taking, exchange, release or non-perfection of any other
collateral, or any taking, release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Obligations;
(iv) any manner of application of collateral, or proceeds thereof,
to all or any of the Obligations, or any manner of sale or
other disposition of any collateral for all or any of the Obligations
or any other assets of the Company or any of its subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of the Company or any of its subsidiaries; or
(vi) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Company or a third
party grantor of a security interest.]
SECTION __. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Purchaser, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION __. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (including
telecopier, telegraphic, telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered to it, if to the Grantor, at its
address at ____________________, Attention: ____________, and if to the
Purchaser, at its address specified in the Purchase Agreement, or, as to either
party, at such other address as shall be designated by such party in a written
notice to the other party. All such notices and other communications shall,
when mailed, telecopied, telegraphed, telexed or cabled, be effective when
deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively.
SECTION __. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER PURCHASE
AGREEMENT. This Agreement shall create a continuing assignment of and security
interest in the Collateral and shall (i) remain in full force and effect until
the later of (x) the payment in full of the Obligations and all other amounts
payable under this Agreement and (y) the expiration or termination of the
Commitment, (ii) be binding upon the Grantor, its successors and assigns and
(iii) inure to the benefit of, and be enforceable by, the Purchaser and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), the Purchaser may assign or otherwise
<PAGE> 26
10
transfer all or any portion of its rights and obligations under the Purchaser
Agreement (including, without limitation, all or any portion of the Note
Commitment and the Notes to any other person or entity, and such other person
or entity shall thereupon become vested with all the benefits in respect
thereof granted to the Purchaser herein or otherwise. Upon the later of the
payment in full of the Obligations and all other amounts payable under this
Agreement and the expiration of termination of the Note Commitment, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Grantor. Upon any such termination, the
Purchaser will, at the Grantor's expense, execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to evidence such
termination.
SECTION __. GOVERNING LAW; TERMS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York. Unless
otherwise defined herein or in the Purchase Agreement, terms used in Article 9
of the Code are used herein as therein defined.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[NAME OF GRANTOR]
By:
----------------------------
Name:
Title:
<PAGE> 27
SCHEDULE
to
Security Agreement
Locations of Equipment:
Locations of Inventory:
Trade Name:
<PAGE> 28
FIRST AMENDMENT TO
AMENDED AND RESTATED NOTE AND
WARRANT PURCHASE AGREEMENT
FIRST AMENDMENT, dated as of August 15, 1997 (this "AMENDMENT") is made
between VISION TWENTY-ONE, INC. (the "COMPANY") and PRUDENTIAL SECURITIES GROUP
INC. ("PRUDENTIAL").
W I T N E S S E T H
WHEREAS, the Company and Prudential have entered into that certain
Amended and Restated Note and Warrant Purchase Agreement, dated as of June 13,
1997 (the "PURCHASE AGREEMENT"), pursuant to which Prudential purchased a
certain Note and certain Warrants (as such terms are defined in the Purchase
Agreement); and
WHEREAS, in accordance with Section 16 of the Purchase Agreement, the
Company and Prudential wish to amend the Purchase Agreement as herein provided.
NOW THEREFORE, the Company and Prudential agree as follows:
A G R E E M E N T
SECTION 1. CERTAIN DEFINED TERMS. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed thereto in the Purchase
Agreement.
SECTION 2. AMENDMENT TO PURCHASE AGREEMENT. The Purchase Agreement is
hereby amended by adding a new Section 22 at the end thereof to read as follows:
"SECTION 22. USURY SAVINGS CLAUSE. It is the intention of the
parties hereto to comply with all applicable usury laws; accordingly,
it is agreed that no provisions in this letter or any Loan Document
shall require the payment or permit the collection of interest in
excess of the maximum interest rate per annum permitted by applicable
law (the "MAXIMUM RATE"). If any interest in excess of the Maximum Rate
is provided for, or shall be adjudicated to be so provided for, then in
such event (i) the provisions of this Section 22 shall govern, (ii) the
Company shall not be obligated to pay interest to the extent that it is
in excess of the Maximum Rate, (iii) any excess interest which may have
been collected shall, at our option, be either applied as a credit
against the then unpaid principal indebtedness or refunded to the
Company and (iv) the effective rate of interest automatically shall be
reduced to the Maximum Rate; provided, however, if from time to time
thereafter the interest rate otherwise then in effect shall be less
than the Maximum Rate then in force, the interest rate then in effect
shall be automatically increased to the Maximum Rate and remain at the
Maximum Rate until the total amount of (i) any excess interest
theretofore credited or repaid to
<PAGE> 29
2
the Company (pursuant to the foregoing provisions of this Section 22)
and (ii) any interest which would have been earned if the interest rate
had not been reduced to the Maximum Rate (as provided in this Section
22) has been fully repaid or paid to us."
SECTION 3. CONDITIONS OF EFFECTIVENESS. This Amendment shall become
effective on the date (the "EFFECTIVE DATE") if and when, and only if and when,
(i) the representations and warranties contained herein shall be true on and as
of such date, (ii) no Event of Default shall have occurred and be continuing as
of such date, (iii) no material adverse change in the financial condition,
business, operation or prospects of the Company shall have occurred since
December 31, 1996 and (iv) the following documents have been delivered, each
(unless otherwise indicated) being dated the date hereof, in form and substance
satisfactory to Prudential:
(a) Cancelled Note issued under the Purchase Agreement;
(b) Cancelled Warrant Certificate issued under the Purchase
Agreement;
(c) Duly executed Note in the form attached hereto as Exhibit
A;
(d) Duly executed Warrant Certificate in the form attached
hereto as Exhibit B; and
(e) Such other documents, instruments, approvals or opinions
as Prudential may reasonably request;
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. (a) The
Company hereby repeats and confirms each of the representations and warranties
made by it in the Purchase Agreement as though made on and as of the date
hereof, with each reference therein to "this Agreement", "hereof", "hereunder",
"thereof", "thereunder" and words of like import being deemed to be a reference
to the Purchase Agreement as amended hereby.
(b) The Company further represents and warrants as follows:
(i) The execution, delivery and performance by
the Company of this Amendment and the Note and Warrant
Certificate executed in connection herewith are within its
corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (A) the Company's
charter or by-laws, (B) any law or (C) any legal or
contractual restriction binding on or affecting the Company;
and such execution, delivery and performance do not or will
not result in or require the creation of any lien upon or with
respect to any of its properties (other than liens
contemplated by the Purchase Agreement, as amended hereby).
<PAGE> 30
3
(ii) No governmental approval is required for the
due execution, delivery and performance by the Company of this
Amendment.
(iii) Each of this Amendment and the Note and
Warrant Certificate to be executed in connection herewith
constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms.
SECTION 5. CONFIRMATION OF SECURITY AGREEMENTS. Each Loan Party as a
Grantor under its Security Agreement, hereby consents and agrees to this
Amendment. Each Loan Party hereby confirms and agrees that its Security
Agreement is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects, except each reference in each Loan
Party's Security Agreement to "the Purchase Agreement", "thereunder", "thereof"
or words of like import shall mean and be a reference to the Purchase Agreement,
as amended by this Amendment. Each Loan Party agrees that no consent or
acknowledgment by such Loan Party is or shall be required with respect to any
other amendment or modification of the Purchase Agreement or any other Loan
Document in order to ensure the continued effectiveness and enforceability of
its Security Agreement.
SECTION 6. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon the
effectiveness of this Amendment, on and after the date hereof, each reference in
the Purchase Agreement to "this Agreement", "hereunder", "hereof" or words of
like import referring to the Purchase Agreement and each reference in the other
Loan Documents to "the Purchase Agreement", "thereunder", "thereof" or words of
like import referring to the Purchase Agreement, shall mean and be a reference
to the Purchase Agreement, as amended hereby.
(b) Except as specifically amended above, the Purchase
Agreement, the Note, the Warrant Certificate and all other Loan
Documents are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, each Security Agreement and all of the
Collateral described therein do and shall continue to secure the
payment of all obligations of the Company under the Purchase Agreement,
the Note and the other Loan Documents, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy
of Prudential under any Loan Document, nor constitute a waiver of any
provision of any Loan Document.
SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which when taken together shall
constitute but one and the same instrument.
<PAGE> 31
4
SECTION 8. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the governing law provisions set forth in Section
21 of the Purchase Agreement.
[Signatures on following page.]
<PAGE> 32
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective duly authorized officers as of
the date hereof.
VISION TWENTY-ONE, INC.
By:
--------------------------------
Name:
Title:
PRUDENTIAL SECURITIES GROUP INC.
By:
--------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
VISION 21 OF SOUTHERN ARIZONA, INC.
By:
--------------------------------
Name:
Title:
VISION 21 OF SIERRA VISTA, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 33
EXHIBIT A
FORM OF PROMISSORY NOTE
The securities represented hereby have not been registered under the
Securities Act of 1933 or applicable state "blue sky" laws. Such
securities may not be sold or transferred in the absence of such
registration or an opinion of counsel that an exemption therefrom under
said Act and applicable state "blue sky" laws is available. Any
transfer of such securities in violation of the foregoing shall be
invalid.
$_______________ Dated: _________, 19__
FOR VALUE RECEIVED, the undersigned, VISION TWENTY-ONE, INC., a Florida
corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of PRUDENTIAL
SECURITIES GROUP INC. (the "LENDER") the principal sum of $[amount in figures]
or, if less, the aggregate principal amount of this Note outstanding on the Note
Termination Date (as defined in the Letter Agreement (as hereinafter defined)),
together with interest on the unpaid principal amount hereof from the date
hereof until such principal amount is paid in full, payable monthly in arrears
with respect to each calendar month, no later than the third Business Day (as
defined in the Letter Agreement) of the calendar month next succeeding the month
in respect of which such interest is then due and payable, and on the Note
Termination Date at a rate equal at all times to 10% per annum (but on any
overdue amount hereon, 14% per annum, payable on demand), provided, that, in the
event that the first date on which the capital stock of the Borrower is offered
to the public pursuant to a registration statement filed with the Securities and
Exchange Commission is later than October 10, 1997, interest on the unpaid
principal amount hereof from such date until such principal amount is paid in
full, payable as provided above, shall be at a rate equal at all times to 18%
per annum (but on any overdue amount hereon, 22% per annum).
Both principal and interest are payable in lawful money of the United
States of America to the Lender in care of Morgan Guaranty Trust Company, ABA
021000238, For the Account of Prudential Securities Group Inc., Account Number:
003-88-392 (or such other address as the Lender may from time to time designate
to the Borrower in writing), in same day funds. All payments made on account of
the principal amount hereof shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this
Note.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Amended and Restated Note and Warrant Purchase Agreement, dated
as of June 13, 1997, as amended as of August 15, 1997 (as amended or otherwise
modified from time
<PAGE> 34
2
to time, the "PURCHASE AGREEMENT"), between the Borrower and the Lender. The
Purchase Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
VISION TWENTY-ONE, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 35
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
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Date Paid or Prepaid Balance Made By
<S> <C> <C> <C>
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<PAGE> 36
EXHIBIT B
FORM OF
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE AND SHARES PURCHASABLE HEREUNDER
(COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE "BLUE SKY" LAWS. THE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND BLUE SKY LAWS. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN CERTAIN AGREEMENTS, DATED AS
OF JUNE 13, 1997, AS AMENDED AS OF AUGUST 15, 1997, BETWEEN THE COMPANY AND
CERTAIN PURCHASERS, COMPLETE AND CORRECT COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE OFFICE OF THE COMPANY AND A CONFORMED COPY OF WHICH WILL BE
FURNISHED TO THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND WITHOUT
CHARGE. NO TRANSFER OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE UNLESS AND
UNTIL THE CONDITIONS SO SPECIFIED HAVE BEEN COMPLIED WITH.
No. of Shares: 210,000
WARRANTS EXCHANGEABLE TO
COMMON STOCK
THIS CERTIFIES THAT, for value received, PRUDENTIAL SECURITIES GROUP
INC. ("PRUDENTIAL") or registered assigns, is the registered owner of 210,000
warrants (collectively, the "WARRANTS"), each of which will entitle the
registered owner thereof to purchase one share of common stock, par value $.001
per share (the "COMMON STOCK"), of VISION TWENTY-ONE, INC., a Florida
corporation (the "COMPANY"), at the Exercise Price (as defined in Section 2
below) in lawful money of the United States of America, all on the terms and
conditions set forth herein. The number of shares of Common Stock to be received
upon exercise of the Warrants and the Exercise Price are subject to adjustment
as hereinafter set forth.
This Warrant has been issued pursuant to the Amended and Restated Note
and Warrant Purchase Agreement, dated as of June 13, 1997 and amended as of
August 15, 1997 (as amended from time to time, the "PURCHASE AGREEMENT"),
between the Company and Prudential. The applicable provisions of the Purchase
Agreement are incorporated herein by reference, and the holder hereof is
entitled to the benefit thereof. A conformed copy of the Purchase Agreement will
be furnished to the holder hereof by the Company upon written request and
without charge.
SECTION 1. EXERCISE OF WARRANTS. (a) The Warrants shall be exchangeable
by the holder hereof, in whole or in part and subject to the terms hereof at any
time from the date hereof to and including the date (the "EXPIRATION DATE") five
years following the IPO Effective Date (as defined in subsection (d) below).
Each Warrant shall initially be exchangeable for one share of Common Stock at
the Exercise Price (as defined below) or in a cashless exchange for a reduced
number of shares (the "NET ISSUABLE EXCHANGE") as determined by the Exchange
Formula (as defined in subsection (b) below). The exercise price for Common
Stock issued upon exercise of the Warrants (the "EXERCISE PRICE") shall be equal
to (i) the Market Price (as defined in subsection
<PAGE> 37
2
(d) below) upon such exercise date if the IPO shall not have occurred prior to
such exercise date or, (ii) the IPO Price (as defined in subsection (d) below)
if the IPO shall have occurred on or prior to such exercise date. The Warrants
will be exercisable upon surrender of this Warrant Certificate to the Company at
its principal office in Florida identified in Section 16 at any time during
usual business hours, accompanied by the Form of Election to Exercise attached
hereto, duly executed by the holder of such Warrant.
(b) In addition to and without limiting the rights of the holder of any
Warrant under the terms of this Warrant Certificate the holder of any Warrant
shall have the right (the "CONVERSION RIGHT") to convert the Warrants into
shares of Common Stock as provided in subsections (b) through (d) of this
Section 1 at any time or from time to time prior to the Expiration Date of such
Warrants. Upon exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant Certificate (the "CONVERTED WARRANT
SHARES"), the Company shall deliver to the holder of Warrants, without payment
by the holder of any exercise price or any cash or other consideration, that
number of shares of Common Stock equal to the quotient obtained by dividing the
Net Value (as hereinafter defined) of the Converted Warrant Shares by the fair
market value (as defined in section (d) below) of a single share of Common
Stock, determined in each case as of the close of business on the Conversion
Date (as defined in subsection (c) below). The "NET VALUE" of the Converted
Warrant Shares shall be determined by subtracting the aggregate Exercise Price
of the Converted Warrant Shares from the aggregate fair market value (as defined
in subsection (d) below) of the Converted Warrant Shares. No fractional shares
shall be issuable upon exercise of the Conversion Right, and if the number of
shares to be issued in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the holder of the relevant Warrants an
amount in cash equal to the fair market value of the resulting fractional share.
(c) The Conversion Right may be exercised by the holder of the Warrants
by the surrender of this Warrant Certificate at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares
subject to the Warrants which are being surrendered (referred to in subsection
(b) above as the "CONVERTED WARRANT SHARES") in exercise of the Conversion
Right. Such conversion shall be effective upon receipt by the Company of this
Warrant Certificate together with the aforesaid written statement or on such
later date as is specified therein (the "CONVERSION DATE"), but not later than
the Expiration Date of the Warrants. Certificates for the shares of Common Stock
issuable upon exercise of the Conversion Right together with a check in payment
of any fractional share and, in the case of a partial exercise, a new warrant
certificate evidencing the shares remaining subject to this Warrant Certificate
shall be issued as of the Conversion Date and shall be delivered to the holder
of this Warrant within 15 days following the Conversion Date.
(d) For purposes of this Warrant Certificate, the "FAIR MARKET VALUE"
of a share of the Common Stock as of a particular date shall be its Market
Price, and "MARKET PRICE" shall mean, if, as of such date, the Common Stock is
not traded on an exchange or on the Nasdaq National Market or Nasdaq SmallCap
Market or otherwise traded in the over-the-counter market, the higher of (i) the
book value thereof as determined by any firm of independent public accountants
<PAGE> 38
3
of recognized standing selected by the Board of Directors of the Company as of a
date that is within 15 days of the date as of which the determination is to be
made, or (ii) the average of the fair values thereof determined in good faith by
(a) any firm of independent public accountants or an independent brokerage firm
selected by the Board of Directors of the Company and (b) any firm of
independent public accountants or an independent brokerage firm selected by
Prudential, each as of a date that is within 15 days of the date as of which the
determination is to be made (the fees and expenses of any such independent
public accountants or independent brokerage firm engaged pursuant to this
definition to be paid by the Company). If, as of any date of Market Price
determination, the Common Stock is traded on a securities exchange or on the
Nasdaq National Market or Nasdaq SmallCap Market, Market Price shall mean the
average of the closing prices of the Common Stock on such exchange or on the
Nasdaq National Market or Nasdaq SmallCap Market on the 10 trading days ending
on the trading day prior to the date of determination, or, if the Common Stock
is otherwise traded in the over-the-counter market, the average of the closing
bid prices on the 10 trading days ending on the trading day prior to the date of
determination. If such determination is made on the date of the first offering
of the Common Stock to the public (the "IPO") pursuant to a registration
statement filed with the Securities and Exchange Commission (the "SEC"), or
within 10 trading days following the effective date of the registration
statement relating to the IPO (the "IPO EFFECTIVE DATE"), then the Market Price
shall be deemed to be the price per share at which the Common Stock is offered
to the public in connection with the IPO (the "IPO PRICE").
SECTION 2. ISSUANCE OF COMMON STOCK UPON EXERCISE. As promptly as
practicable after the exercise, as herein provided, of any Warrant, the Company
shall deliver or cause to be delivered to or upon the written order of the
holder of the Warrant certificates representing the numbers of fully paid and
nonassessable shares of Common Stock into which such Warrant is exchangeable in
accordance with the provisions of this Section 2. Subject to the following
provisions of this Section, such exchange shall be deemed to have been made at
the close of business on the date that such Warrant has been exercised, so that
the rights of the holder of such Warrant exercised shall cease with respect to
such Warrant at such time and the person or persons entitled to receive the
shares of Common Stock upon exchange of such Warrant shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such time, and such exercise shall be at the Exercise Price in effect
at such time; provided, however, that no such surrender on any date when the
stock transfer books of the Company are closed shall be effective to constitute
the person or persons entitled to receive the shares of Common Stock upon such
exercise as the record holder or holders of such shares of Common Stock on such
date, but such surrender shall be effective to constitute the person or persons
entitled to receive such shares of Common Stock as the record holder or holders
thereof for all purposes at the close of business on the next succeeding day on
which such stock transfer books are open, and such exercise shall be at the
Exercise Price in effect on the date that such Warrant has been surrendered for
exchange.
SECTION 3. REGISTERED HOLDER AS OWNER; REPLACEMENT. (a) The Company
shall register each Warrant, upon records to be maintained by the Company for
that purpose, in the name of
<PAGE> 39
4
the record holder of such Warrant from time to time. The Company may treat the
registered holder of each Warrant as the owner thereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary.
(b) Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction, or mutilation of this Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu of this Warrant Certificate, provided, that,
if an original holder of Warrants or its nominee or nominees is such holder, an
agreement of indemnity shall be sufficient for all purposes of this Section 3.
(c) The Company shall register the transfer of any Warrants upon
records to be maintained by the Company for that purpose, upon surrender of this
Warrant Certificate, with the Form of Assignment attached hereto duly filled in
and signed, to the Company at the office specified in or pursuant to Section 16.
Upon any such registration of transfer, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, evidencing the Warrants so
transferred shall be issued to the transferee and a new Warrant Certificate, in
similar form, evidencing the remaining Warrants not so transferred, if any,
shall be issued to the then registered holder thereof.
(d) This Warrant Certificate is exchangeable, upon the surrender hereof
by the holder hereof at the office of the Company specified in or pursuant to
Section 16, for new Warrant Certificates, in substantially the form of this
Warrant Certificate, evidencing in the aggregate the right to purchase the
number of shares of Common Stock which may then be purchased hereunder, each of
such new Warrant Certificates to be dated the date of such exchange.
(e) This Warrant Certificate shall be promptly canceled by the Company
upon the surrender hereof in connection with any exchange, transfer, or
replacement. The Company shall pay all expenses, taxes (other than stock
transfer taxes) and other charges payable in connection with the preparation,
execution, and delivery of Warrant Certificates pursuant to this Section 3.
SECTION 4. ADJUSTMENT TO EXERCISE PRICE. The Exercise Price shall be
subject to adjustment as follows:
(a) For the purposes of this Section 4, the term "CURRENT EXERCISE
PRICE", when used with respect to the Warrants, means at any given time the
Exercise Price for such Warrants then in effect; and the term "CURRENT QUOTIENT"
with respect to the Warrants means on any given date the amount determined at
the close of business on such day by dividing:
(i) An amount equal to (A) the total number of shares of
Common Stock outstanding when the Current Exercise Price with respect
to the Warrants became
<PAGE> 40
5
effective, exclusive of any such shares that may have been issued after
the date hereof as provided in this Section 4(a), multiplied by such
Current Exercise Price, plus (B) the aggregate of the amounts of all
consideration, if any, received by the Company, (or, without
duplication, deemed to be received as provided in paragraph (viii)
below) upon all issuances of shares of Common Stock since such Current
Exercise Price became effective and prior to the time of the
determination of the Current Quotient with respect to such Warrants
except shares of Common Stock issued as provided in subsection (c)
hereof, minus (C) the aggregate amount of all dividends and other
distributions which have been paid or made after June 13, 1997, on
Common Stock, other than in cash out of Company's earned surplus or in
Common Stock, by
(ii) The total number of shares of Common Stock
outstanding immediately prior to the time of such determination,
including any such shares deemed to have been issued as provided in
paragraph (viii) below but excluding any such shares that may have been
issued as provided in this Section 4(a). For the purposes of this
paragraph, the initial Exercise Price shall be deemed to have become
effective at the close of business on June 13, 1997. In determining the
Current Quotient, the result shall be expressed to the nearest cent.
If at the close of business on any date after June 13, 1997 on which
any adjustment event hereunder takes place, the Current Exercise Price exceeds
the Current Quotient by as much as one percent of such Current Exercise Price,
the Exercise Price for the Warrants shall be reduced to the price equal to the
Current Quotient for such Warrants, effective at the close of business on such
date.
For the purposes of this Section 4, the following provisions shall be
applicable:
(i) If additional shares of Common Stock are issued for
cash, the consideration received by the Company therefor shall be
deemed to be the amount of cash received by the Company for such
shares, before deducting therefrom any commissions or other expenses
paid or incurred by the Company for any underwriting of, or otherwise
in connection with, the issuance of such shares.
(ii) If additional shares of Common Stock are issued
(otherwise than upon the exchange of the Company's obligations or
shares of stock or upon the exchange of rights or options to subscribe
for or to purchase shares of Common Stock) for a full or partial
consideration other than cash, the amount of the non-cash consideration
received by the Company for such shares shall be deemed to be the value
of such consideration as determined in good faith by the Company's
Board of Directors.
(iii) If additional shares of Common Stock are issued upon
conversion or exchange of any obligations or of any shares of the
Company's stock that are convertible into or exchangeable for shares of
Common Stock or upon the exercise of rights or options
<PAGE> 41
6
to subscribe for or to purchase shares of Common Stock, the amount of
the consideration received by the Company for such additional shares of
Common Stock shall be deemed to be the total of: (A) the amount of
consideration received by the Company upon the original issuance of
each obligation, share, right, or option so converted, exercised, or
exchanged shall be deemed to be the average amount of the consideration
received by the Company upon the original issuance of such obligations,
shares, rights, or options, plus (B) any other consideration received
by the Company upon conversion, exercise, or exchange except in
adjustment of interest and dividends. If obligations, shares, rights,
or options of the same class or series of a class as the obligations,
shares, rights, or options so converted, exercised or exchanged have
been originally issued for different amounts of consideration, the
amount of consideration received by the Company upon the original
issuance of each obligation, share, right, or option so converted,
exercised, or exchanged shall be deemed to be the average amount of the
consideration received by the Company upon the original issuance of all
such obligations, shares, rights, or options. The amount of the
consideration, obligations, shares, rights, or options so converted,
exercised, or exchanged and the amount of any other consideration
received by the Company upon the original issuance of the obligations,
shares, rights, or options so converted, exercised, or exchanged and
the amount of any other consideration, received by the Company upon
such conversion, exercise, or exchange shall be determined in the same
manner provided in paragraphs (i) and (ii) above with respect to the
consideration received by the Company in case of the issuance of
additional shares of Common Stock. If such obligations, shares, rights,
or options have been issued as a dividend upon any stock of the
Company, the amount of the consideration received by the Company upon
the original issuance thereof shall be deemed to be zero.
(iv) If additional shares of Common Stock are issued as a
dividend, the aggregate number of shares of Common Stock issuable in
payment of such dividend shall be deemed to have been issued and to be
outstanding at the close of business on the record date fixed for the
determination of stockholders entitled to such dividend. Shares of
Common Stock issued otherwise than as a dividend shall be deemed to
have been issued and to be outstanding at the close of business on the
date of issue.
(v) The term dividend shall mean a dividend or other
distribution upon stock of the Company.
(vi) The number of shares of Common Stock at any time
outstanding shall not include all shares of Common Stock then owned or
held by or for the account of the Company.
(vii) If the Company declares a dividend without fixing a
record date for determining the stockholders entitled thereto, the
first business day during which the Company's stock transfer books are
closed for the purpose of such determination shall be
<PAGE> 42
7
deemed to be the record date fixed for the determination of
stockholders entitled to such dividend.
(viii) In case of (A) the issuance of shares of stock or
obligations convertible into or exchangeable for shares of Common Stock
at an exercise price per share less than the Current Exercise Price in
effect immediately prior to the issuance of such convertible stock or
obligations, or (B) the issuance of any rights to subscribe for or to
purchase, or any options for the purchase of, additional shares of
Common Stock, at a price per share for the additional shares of Common
Stock issuable upon the exchange of such rights or options less than
the Current Exercise Price in effect immediately prior to the issuance
of such rights or the granting of such options, then the issuance of
such stock, obligations, rights, or options shall be deemed to be an
issuance (as of the date of issuance of such stock, obligations,
rights, or options) of the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such convertible
stock or obligations or upon the exchange of all such rights or
options, as the case may be. In such case, the amount received or
receivable by the Company in consideration of the issuance of such
stock, obligations, rights, or options (plus the minimum aggregate
amount of premium or additional consideration payable to the Company
upon conversion or exchange of the stock or obligations or upon the
exchange of such rights or options) before deducting therefrom any
commissions or other expenses paid or incurred by the company for any
underwriting of, or otherwise in connection with, the issuance of such
stock, obligations, rights or options, shall be deemed to be the
consideration actually received (as of the date of issuance of such
rights or options) for the issuance of the additional shares of Common
Stock. The consideration actually received by the Company for any
shares of Common Stock issued upon the exchange of such stock or
obligations or upon the exchange of such rights or options, which
pursuant to this paragraph (viii) is deemed to have been received,
shall not be included in the first paragraph of this Section 4 for the
purpose of computing the Current Quotient and no further adjustment of
the Exercise Price shall be made in respect thereof except that:
(1) On the expiration of such rights or options or
the termination of the right to convert or exchange such stock
or obligations, such Current Quotient and such Current
Exercise Price shall forthwith be readjusted to the Current
Quotient and Current Price which would have been obtained had
the adjustments made on account of the issuance of such
options, rights or convertible or exchangeable securities been
made upon the basis of the delivery of only the number of
shares of Common Stock actually delivered upon the exchange of
such rights or options or upon conversion or exchange of such
securities for the consideration actually received by the
Company for such options, rights or securities and upon the
exchange, exchange or conversion thereof; and
(2) If the purchase or exchange price or exchange
rate provided for in any such options, rights, stock, or
obligations changes or a different purchase or
<PAGE> 43
8
exchange price or exchange rate becomes effective at any time
or from time to time (other than under or by reason of
provisions designated to protect against dilution) then, upon
such change becoming effective, the Current Quotient and
Current Exercise Price then in effect hereunder shall
forthwith be increased or decreased to such Current Quotient
and Current Exercise Price as would have been obtained had the
adjustments made upon the issuance of such options, rights or
convertible or exchangeable securities been made upon the
basis of (x) the issuance of the number of shares of Common
Stock theretofore actually delivered upon the exchange,
conversion or exchange thereof, (y) the issuance of all Common
Stock and all other options, rights or convertible or
exchangeable securities issued after the issuance of such
options, rights or convertible or exchangeable securities, and
(z) the original issuance at the time of such exchange of any
such options, rights or convertible or exchangeable securities
then still outstanding.
(3) In case, however, such stock or obligations are
convertible or exchangeable at an exchange price or exchange
rate or such rights or options are exercisable at a purchase
price per share equal to or in excess of the Current Exercise
Price immediately prior to the issuance or sale of such
convertible stock or obligations or of such rights or options,
then no adjustment of the Exercise Price shall be made except
in respect of additional shares of Common Stock actually
issued upon the conversion or exchange of any such convertible
stock or obligations or upon the exchange of any such rights
or options.
(ix) No adjustment in the Exercise Price shall be made in
respect of the issuance or sales of Common Stock held in the Company's
treasury to the extent it acquired such Common Stock after June 13,
1997, except that if any such treasury shares are issued or sold for a
consideration per share that is less than the Exercise Price in effect
immediately prior to such issue or sale and that is less than the
average cost per share of such treasury shares, the Company shall be
deemed, for purposes of this Section 4, to have issued or sold shares
of Common Stock equal in number to such treasury shares for a
consideration per share equal to the Exercise Price in effect
immediately prior to such issue or sale reduced by the amount by which
such average cost of such treasury shares exceeds such consideration
per share.
(b) If the Company at any time subdivides or issues a stock dividend
upon the outstanding shares of Common Stock, the Exercise Price in effect
immediately prior to such subdivision or stock dividend shall be proportionately
decreased, and if the Company at any time combines the outstanding shares of
Common Stock, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased. In such case of a subdivision or combination
of the outstanding shares of Common Stock issuable upon exchange of the
Warrants, the Exercise Price shall be first reduced, effective immediately prior
to an adjustment of the Exercise Price pursuant to this Section 4, by the
amount, if any, by which such Exercise Price
<PAGE> 44
9
exceeds the Current Quotient. Any such adjustment shall become effective at the
close of business on the date that such subdivision, stock dividend or
combination becomes effective.
(c) No adjustment of the Exercise Price shall be made as a result of or
in connection with any Approved Transfer (as defined in Section 6(a) below).
(d) Whenever any Exercise Price is adjusted, as herein provided, the
Company shall promptly deliver to each holder of Warrants a computation setting
forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such computation shall be made
by certified public accountants (who may be the Company's regular auditors or
certified public accountants) and shall be conclusive evidence of the
correctness of such adjustment.
SECTION 5. AGREEMENT TO REGISTER. The Company agrees that:
(a) Subject to Section 13 hereof, if at any time prior to the date
seven years after the IPO Effective Date, the Company determines to take action
to register any of its securities under the Securities Act of 1933, as then in
effect, or any similar federal statute (collectively the "ACT"), otherwise than
pursuant to Form S-8, or any other form not applicable to an offering of Common
Stock issued or issuable upon the exercise of the Warrants, it will notify in
writing each registered holder of any Warrants or any shares of Common Stock
issued upon exchange thereof of such determination and, upon written request
received within 15 days of the mailing of such notice will use its best efforts
to effect the registration under the Act of any shares of Common Stock issued or
issuable upon such conversion or exchange to which such request relates.
(b) Subject to Section 13 hereof, the Company agrees at any time
following the date one year after the IPO Effective Date and prior to the date
five years after the IPO Effective Date, upon receipt from the registered
holders of at least 50 percent in principal amount of the then outstanding
Warrants or shares of Common Stock issued in respect thereto of a request to
register under the Act any shares of Common Stock issued or issuable upon the
exercise of any such Warrants, it will notify all other registered holders
thereof of such request and will use its best efforts to effect the registration
under the Act of the shares of Common Stock to which such request relates. Such
holders shall be entitled to make one request for registration pursuant to this
paragraph (b).
(c) If at any time holders of shares of Common Stock request that the
Company file a registration statement of Form S-3 for a public offering of all
or any portion of the shares held by such requesting holders, the reasonably
anticipated aggregate price to the public of which would exceed $500,000, and
the Company is a registrant entitled to use Form S-3 or any successor thereto to
register such shares, then the Company shall use its best efforts to register
under the Securities Act on Form S-3 or any successor thereto, for public sale
in accordance with the method of disposition specified in such notice, the
number of shares of stock specified in such notice. Whenever the Company is
required by this Section 5(c) to use its best efforts to effect the
<PAGE> 45
10
registration of stock, each of the procedures and requirements of this Section
5(c) (including but not limited to the requirement that the Company notify all
holders of Common Stock from whom notice has not been received and provide them
with the opportunity to participate in the offering) shall apply to such
registration, provided, however, that there shall be only one registration on
Form S-3 that may be requested and obtained under this Section.
(d) If the Company is required to use its best efforts to effect the
registration of any Common Stock under the Act, it will use its best efforts to:
(i) Prepare and file with the SEC, within 90 days after
the receipt of the written request for registration a registration
statement with respect to such shares of Common Stock and cause such
registration statement to become and remain effective for at least a
period of 45 days.
(ii) Prepare and file with the SEC all amendments and
supplements to such registration statement and the prospectus used in
connection therewith necessary to keep such registration statement
effective for said 45 day period (if any stand-off period is imposed
pursuant to this Section, such 45 day period shall commence at the
termination thereof) and to comply with the provisions of the Act with
respect to the disposition of all such shares of Common Stock covered
by such registration statement whenever the holders thereof desire to
dispose of the same;
(iii) Furnish to the holders of such shares of Common Stock
whatever numbers of copies of prospectuses, including one or more
preliminary prospectuses, they need to comply with the Act, and all
other documents they reasonably request in order to facilitate the
disposition of such shares; and
(iv) Register or qualify the shares of Common Stock
covered by such registration statement under the other securities or
blue sky laws of any jurisdictions the holders thereof reasonably
request, and do all other necessary or advisable acts and things to
enable such holders to consummate the disposition of such shares in the
applicable jurisdictions, except that the Company shall not be required
to file a general consent to service in any such jurisdiction.
(e) The Company shall pay all expenses incurred by it in complying with
subsection (d) of this Section 5 and all reasonable out-of-pocket expenses
(including the reasonable fees and disbursements of one attorney or law firm
representing all the holders of Common Stock pursuant to exercise of the
Warrants and covered by any such registration statement) incurred by such
holders in connection therewith (including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of the Company's
counsel, and expenses of any special audits incident to or required by any such
registration, but not including, however, any underwriting discounts, fees or
commissions which are to be paid by such holders).
<PAGE> 46
11
(f) Notices and requests delivered to the Company pursuant to this
Section 5 shall contain all information regarding the shares of Common Stock to
be registered and the intended method of disposition thereof that is reasonably
required in connection with the action to be taken.
(g) In the event of any registration under the Act of any shares of
Common Stock pursuant to this Section 5, the Company hereby agrees to indemnify
and hold harmless each shareholder disposing of such shares, each other person,
if any, who controls such shares within the meaning of the Act, and each other
person, who participates in the offering of such shares, against all losses,
claims, damages or liabilities; joint or several, to which such shareholder,
controlling person, or participating person may become subject under the Act or
otherwise, in so far as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such shares of
Common stock were registered under the Act, or in any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Company will reimburse such
shareholder and each such controlling person or participating person for all
legal or any other expenses reasonably incurred by such shareholders,
controlling person, or participating person in connection with investigating or
defending any such loss, claim, damage, liability or proceeding; provided,
however, that the Company will not be liable in any such case to the extent that
any such losses, claims, damages or liabilities arise out of or are based upon
any untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or said amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by such shareholder specifically for use in the preparation thereof.
Each such shareholder will agree to indemnify the Company, each person who
signed any such registration statement, and each person, if any, who controls
the Company within the meaning of the Act, in the same manner and to the same
extent that Company has agreed to indemnify in this paragraph. Such
indemnification, however, shall only relate to untrue statements or alleged
untrue statements or omissions or alleged omissions contained in any such
registration statement, or amendment or supplement thereto, based upon and in
conformity with written information furnished to the Company by such shareholder
specifically for use in the preparation thereof.
(h) As a condition of the registration of any shares of Common Stock,
the holders thereof shall agree:
(i) Not to sell any such shares of Common Stock pursuant
to the registration statement of an IPO until one year after completion
of the offering;
(ii) To comply with all requirements of the Act and of the
SEC in connection with the offering and sale of such shares of Common
Stock;
<PAGE> 47
12
(iii) To effect sales of all such shares of Common Stock,
if so required by the Company, in an organized manner through a single
broker or dealer, or a single syndicate or selling group of brokers
and/or dealers, provided that any such required arrangement shall not
prejudice any plan of distribution proposed by any of such holders;
(iv) To cooperate with the Company 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 registration or reasonably requested by underwriters pursuant
to this Warrant Certificate;
(v) To pay such holder's pro rata portion (calculated on
the basis of the ratio of the aggregate offering price attributable to
the shares of such holder 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 such
holder's counsel;
(vi) To cooperate with the Company in all respects in
connection with registration of the Common Stock, including timely
supplying all information and executing and returning all documents
requested by the Company and its managing underwriter;
(vii) That the Company shall not be required to include any
of such holder's shares of Common Stock in any registration statement
unless holder accepts the terms of the underwriting as agreed upon by
the Company and underwriters selected by the Company; and
(viii) That the Company shall have the right to defer or
suspend the filing of any registration statement if the Board of
Directors of the Company determines in good faith that it would be
seriously detrimental to the Company and its shareholders for such
registration statement to be filed.
(i) Notwithstanding the above:
(i) The Company shall have the sole and exclusive right
to select the underwriters of any public offering of the Common Stock,
including any public offering conducted pursuant to the demand
registration right set forth above. The use of underwriters in any
demand registration right set forth above is subject to the Company's
ability to engage underwriters under terms and conditions deemed
reasonable by the Company. Notwithstanding anything contained herein,
the demand registration right set forth above shall be permitted to be
exercised only on one occasion, and the Company may elect, upon
receiving such demand to combine such registration with any other
registration of securities it may seek to file.
<PAGE> 48
13
(ii) If the managing underwriter of any public offering
advises the Company that the total number of shares of Common Stock
that the Company, the holder of the Warrants and any other person
intend to include in such public offering would adversely affect the
success of such public offering, then the amount of shares of Common
Stock to be offered for the account of such holder of Warrants will be
reduced to the extent necessary to reduce the total number of shares of
Common Stock to be included in such public offering to the amount
recommended by such managing underwriter. Such reduction will be on a
pro rata basis with all other shareholders holding registration rights
for the sale of shares in the offering. However, this cut back shall
not be applicable to the demand registrations.
(iii) The Company shall not be required (i) to reduce the
amount of shares of Common Stock to be offered by the Company in any
public offering for any reason or (ii) to include any shares of Common
Stock 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 Act or otherwise eligible for sale to the
public without registration.
(iv) The Company shall have the right to extend, suspend
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 the Company because of the
existence of non-public material information, or to allow the Company
to complete any pending audit of its financial statements, any public
financing plan, any pending material acquisition or to release audited
financial statements of an acquiree in a pending acquisition.
SECTION 6. PURCHASE RIGHT OF FIRST REFUSAL. (a) Except for shares
issued in connection with acquisitions made by the Company, shares issued in
establishing a strategic alliance and option shares issued to employees,
contractors, consultants or affiliated physicians approved by the Board of
Directors of the Company and pursuant to options, grants or warrants disclosed
on Schedule 11(h) to the Purchase Agreement, no shares of the Company and no
interest therein shall be sold or transferred by the Company after the date
hereof, in any manner whatsoever without the prior written consent of the
registered holders of a majority of the Warrants or without following the terms
of this Section 6. All of the above described sales or transfers of Company
shares that may be made by the Company without prior approval and without
complying with the provisions below shall be deemed "APPROVED TRANSFERS".
(b) Prior to making or upon receiving any bona fide offer, or
counteroffer that the Company intends to assert, with respect to any disposition
of any shares of Common Stock other than pursuant to an Approved Transfer, the
Company shall convey the terms with respect to such proposed disposition (the
"OFFER TERMS") to the registered holders of the Warrants, which shall have the
right to purchase all, and only all, of the shares that are the subject of such
offer or counteroffer on the Offer Terms. Any holder of Warrants may exercise
its right to acquire such
<PAGE> 49
14
shares by written notice to the Company (x) with respect to an offer, within the
25 day period following receipt by such holder of the initial Offer Terms or
(xi) with respect to a counteroffer, within 10 business days after receipt by
such holder of the Offer Terms with respect thereto, provided that such holder
shall have previously received written notice of the initial Offer Terms as
hereinabove provided. The closing of such purchase shall occur at the Company's
offices or such other location as may be agreed upon on the date indicated in
the written notice delivered to such holder within the time specified by the
most recently delivered Offer Terms. If one or more registered holders of
Warrants do not purchase all such shares during such period, the Company shall
be free within the time period specified by the most recently delivered Offer
Terms, or, if no such time period is specified, within 90 days, to sell or
transfer such shares to the third party making or receiving such offer or
counteroffer on Offer Terms no more favorable to such third party than those
contained in the last offer or counteroffer delivered to the holders. In the
event more than one holder wishes to acquire Common Stock pursuant to this
Section, they shall be entitled to acquire their pro rata share of the shares to
be sold. The rights under this Section 6 shall expire upon an IPO.
SECTION 7. CO-SALE RIGHTS. (a) Prior to any IPO and except in
connection with Approved Transfers, neither the Company, Theodore N. Gillette,
Richard L. Sanchez or their respective affiliates (each, a "SELLER") shall
transfer, sell, or otherwise dispose of (collectively, a "TRANSFER") shares of
Common Stock (either directly or indirectly), which transfer together with all
previous transfers from and after the date hereof (other than Approved
Transfers) would be in excess of an aggregate of 15% (on a fully diluted basis)
of the outstanding shares of Common Stock, to any person (such person being
hereinafter referred to individually as a "THIRD PARTY" and collectively as
"THIRD PARTIES"), unless the terms and conditions of such transfer shall include
an offer at the most favorable price, and on the most favorable terms and
conditions, at which the Company is then intending to transfer Common Stock
(except that the only representation and warranty that any registered holder of
Warrants and any transferee thereof that acquired Common Stock pursuant to this
Warrant Certificate ("TRANSFEREES") shall be required to make in connection with
any transfer is a warranty with respect to its own ownership of the Common Stock
to be sold by it and its ability to convey title thereto free and clear of
liens, encumbrances or adverse claims) to the registered holder of Warrants and
any Transferee to include, at their option, in the transfer to the Third Party,
an amount of Common Stock determined in accordance with this Section.
(b) The Third Party shall purchase from holders of Warrants and any
Transferee the number of shares of Common Stock owned by such holder or such
Transferee, as the case may be, equaling the number derived by multiplying the
total number of shares to be purchased by the Third Party by a fraction, the
numerator of which is the total number of shares of Common Stock owned by such
holder or such Transferee, as the case may be, that such holder or such
Transferee, as the case may be, desires to require the Third Party to purchase
and the denominator of which is the sum of (i) the total number of shares of
Common Stock owned by all holders and all Transferees desiring to require the
Third Party to purchase their shares and (ii) the total number of shares of
Common Stock owned by Sellers and their affiliates. Each holder of Warrants
shall be entitled to sell its pro rata share of the right to sell to all holders
of Warrants.
<PAGE> 50
15
(c) Unless the same is an Approved Transfer or in connection with an
IPO, before the Company proposes to transfer any Common Stock, it shall notify,
or cause to be notified, all holders of Warrants and any Transferee in writing
of each such proposed transfer. Such notice shall set forth: (i) the name of the
Third Party and the number of shares of Common Stock proposed to be transferred,
(ii) the address of the Third Party, (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by the Third Party
(the "THIRD PARTY TERMS") and (iv) whether the Third Party has been informed of
the "Co-Sale Right" provided for in this Section and has agreed to purchase
shares of Common Stock in accordance with the terms hereof. The Co-Sale right
may be exercised by delivery of a written notice to the Company (the "CO-SALE
NOTICE") within 15 days following receipt of the notice specified in the
preceding sentence. The Co-Sale Notice shall state the number of shares of
Common Stock that holder of Warrants and Transferees would be entitled to
include in such transfer to the Third Party.
(d) Upon the giving of a Co-Sale Notice, holders of Warrants and
Transferees, as the case may be, shall be entitled and obligated to sell the
number of shares of Common Stock set forth in the Co-Sale Notice to the Third
Party on the Third Party Terms; provided, however, that the Company and its
affiliates shall not consummate the sale of any shares offered by them if the
Third Party does not purchase all shares that holders of Warrants and
Transferees are entitled to and desire to sell pursuant hereto. After expiration
of the 15 day period referred to in subsection (c) above, if the provisions of
this Section have been complied with in all respects, the Company shall have the
right for a 90 day period to transfer the shares of Common Stock to the Third
Party on the Third Party Terms without further notice to holders of Warrants or
any Transferee that have not given a Co-Sale Notice, but after such 90 day
period, no such transfer may be made without again giving notice to holders of
Warrants and all Transferees of the proposed transfer and complying with the
requirements of this Section 7.
(e) Notwithstanding anything to the contrary, any Approved Transfer may
be made without compliance with this Section 7. The Co-Sale Rights contained
herein shall terminate upon an IPO.
SECTION 8. FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of any
Warrants. If the exercise of any Warrants results in a fraction, an amount of
money equal to such fraction multiplied by the fair market value of one share of
Common Stock of the Company on the date on which such exercise is deemed made
shall be paid to the person otherwise entitled to such fraction.
SECTION 9. EFFECT OF RECLASSIFICATIONS, ETC. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of any Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety, the
Company, or such successor or purchasing corporation, as the case may be, shall
execute with each holder of Warrants a supplemental agreement providing that the
holder of each Warrant then outstanding
<PAGE> 51
16
shall have the right thereafter to exchange such Warrant to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, change, sale or conveyance. Such supplemental agreement
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The above
provisions of this Section 9 shall similarly apply to successive
reclassifications and changes of shares of Common stock and to successive sales
or conveyances.
SECTION 10. TAXES ON EXCHANGE. The issuance of certificates for shares
of Common Stock upon the exercise of Warrants shall be made without charge to
the Warrant holders for any tax (other than federal or state income taxes) in
respect to the issuance of such certificates. Such certificates shall be issued
in the respective names of, or in the names directed by, the holder of the
Warrant exchanged. The Company, however, shall not be required to pay any tax
which may be payable in respect to any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
Warrants exchanged, or to issue or deliver such certificates until the person or
persons requesting the issuance thereof have paid the Company the amount of such
tax or have established to the satisfaction of the Company that such tax has
been paid.
SECTION 11. NOTICES OF RECORD DATE, ETC. If any of the following events
occur, the Company will mail or cause to be mailed a notice, as specified below,
to every holder of a Warrant:
(a) Any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend at the same rate as
the rate of the last cash dividend theretofore paid) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property or to receive any other right;
(b) Any capital reorganization of the Company, any reclassification or
recapitalization of the Company's capital stock, or any transfer of all or
substantially all of the assets of the Company to or consolidation or merger of
the Company with or into any other Person;
(c) Any voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(d) Any proposed issue or grant by the Company of any shares of stock
of any class or any other securities (other than notes or other obligations
issued or incurred by Company in connection with the purchase of real or
personal property or the borrowing of money privately), or any right or option
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any securities (other than the IPO or any issue or grant referred to herein).
The above notice to the Warrant holder shall specify:
<PAGE> 52
17
(i) The date or expected date on which any such record is
to be taken for the purpose of such dividend, distribution, or right,
and stating the amount and character of such dividend, distribution, or
right;
(ii) The date or expected date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up; and
(iii) The amount and character of any stock or other
securities, or rights or options with respect thereto, proposed to be
issued or granted, the date or expected date of such proposed issue or
grant, and the persons or class of persons to whom such proposed issue
or grant is to be offered or made. Such notice shall be mailed at least
20 days prior to the date therein specified.
SECTION 12. RESTRICTIVE LEGENDS. Each Warrant Certificate and
certificate for Common Stock issued upon the exchange of any Warrant, and each
Warrant Certificate and stock certificate issued upon the transfer of any
Warrant Certificate or Common Stock (except as otherwise permitted by this
Section 12), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented hereby (the "SECURITIES") have not
been registered under the Securities Act of 1933, as amended,
or applicable state "blue sky" laws. The Securities may not be
sold or transferred in the absence of such registration or an
exemption therefrom under said Act and blue sky laws. The
Securities may not be transferred except upon the conditions
specified in certain agreements, dated as of June 13, 1997 and
amended as of August 15, 1997, between the Company and certain
purchasers, complete and correct copies of which are available
for inspection at the office of the Company and a conformed
copy of which will be furnished to the holder of the
Securities upon written request and without charge. No
transfer of the Securities shall be valid or effective unless
and until the conditions so specified have been complied
with."
SECTION 13. RESTRICTION ON TRANSFER OF SECURITIES. Notwithstanding
anything herein to the contrary, neither the Warrants nor the Common Stock
issued upon exercise of the Warrants may be transferred, assigned, pledged or
hypothecated for a period of one year following the IPO Effective Date,
provided, however, that during such period, the Warrants or the Common Stock
<PAGE> 53
18
issued upon exercise of the Warrants may be transferred, in accordance with the
provisions of Conduct Rule 2710(c)(7) of the National Association of Securities
Dealers, Inc. (the "NASD"), to any member of the NASD participating in the IPO
or to any corporate officer of Prudential or its affiliates
SECTION 14. NOTICE OF PROPOSED TRANSFER, OPINIONS OF COUNSEL. Except as
provided in the last paragraph of this Section 14, prior to any transfer of any
such Warrant or Common Stock, the holder thereof will give written notice to the
Company of such holder's intention to effect such transfer and to comply in all
other respects with this Section 14. Each such notice shall (i) describe the
manner and circumstances of the proposed transfer in sufficient detail to enable
counsel to render the opinions referred to below, and (ii) designate counsel for
the holder giving such notice (who may be in-house counsel for such holder). The
holder giving such notice will submit a copy thereof to the counsel designated
in such notice, and the Company will promptly submit a copy thereof to its
counsel, and the following provisions shall apply:
(A) If in the opinion of each such counsel, the proposed
transfer may be effected without registration under the Act of such
Warrants or Common Stock, the Company will promptly notify the holder
thereof, and such holder will thereupon be entitled to transfer such
Warrants or Common Stock (as the case may be) in accordance with the
terms of the notice delivered by such holder to the Company. Each
Warrant Certificate or stock certificate, if any, issued upon or in
connection with such transfer shall bear the appropriate restrictive
legend set forth in Section 12, unless in the opinion of each such
counsel such legend is not longer required to insure compliance with
the Act. If for any reason counsel for the Company (after having been
furnished with the required information under this Section 14) fails to
deliver an opinion to the Company, or the Company fails to notify such
holder thereof as aforesaid, within 20 days after counsel for such
holder has delivered its opinion to such holder (with a copy to the
Company), then for all purposes of this Warrant Certificate, the
opinion of the Company's counsel shall be deemed to be the same as the
opinion of counsel for such holder.
(B) If in the opinion of either or both of such counsel, the
proposed transfer may not be effected without registration under the
Act of such Warrants or Common Stock (as the case may be), the Company
will promptly so notify the holder thereof and thereafter such holder
shall not be entitled to transfer such Warrants or Common Stock (as the
case may be) until receipt of a further notice from Company under
paragraph (A) above or, in the case of Common Stock, unless
registration of such Common Stock under the Act has become effective.
The Company will pay the reasonable fees and disbursements of counsel
(other than in-house counsel) for any holder and of counsel for the Company in
connection with all opinions rendered by them pursuant to this Section 14.
<PAGE> 54
19
SECTION 15. SPECIAL AGREEMENTS OF COMPANY. (a) The Company covenants
and agrees that it will reserve and set apart and have at all times a number of
shares of authorized but unissued Common Stock deliverable upon the exercise of
the Warrants or any other rights or privileges provided for herein sufficient to
enable it at any time to fulfill all its obligations hereunder. The Company
covenants and agrees that it will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, issue or sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of its terms hereunder, but will
at all times in good faith assist in carrying out all of the provisions of this
Warrant Certificate and in taking all necessary or appropriate action in order
to protect the rights of the holders of the Warrants against dilution or other
impairment.
(b) This Warrant Certificate shall be binding upon any corporation
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all of the Company's assets.
SECTION 16. NOTICES. All notices and documents to registered holders of
Warrants under this Warrant Certificate shall be sent by registered or certified
mail to the holder at the address shown on the holder's Warrant Certificate or
any other address the holder has furnished the Company in writing. All notice
and documents to the Company shall be sent by certified or registered mail to
its principal office, at Vision Twenty-One, Inc., 7209 Bryan Dairy Road, Largo,
Florida 34647, or any other address the Company has furnished the registered
holders of Warrants in writing with a copy to Company counsel:
Darrell C. Smith, Esquire
Shumaker, Loop & Kendrick, LLP
Barnett Plaza, Suite 2800
101 E. Kennedy Boulevard
Tampa, Florida 33602
SECTION 17. NO RIGHTS AS SHAREHOLDER; LIMITATION OF LIABILITY. This
Warrant Certificate shall not entitle the holder hereof to any of the rights of
a shareholder of the Company except as set forth in the Purchase Agreement. No
provision hereof, in the absence of affirmative action by the holder to purchase
shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such holder
for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by its creditors.
SECTION 18. LAW GOVERNING. This Warrant shall be governed by, and
construed and enforced in accordance with the laws of the State of Florida.
SECTION 19. RIGHTS UNDER PURCHASE AGREEMENT. The holder hereof shall be
entitled to all rights accorded to a holder, as well as all obligations as
contained in the Purchase Agreement.
<PAGE> 55
20
SECTION 20. EXPIRATION. The Warrants represented hereby shall expire
and become null and void if not exercised on or before 5:00 p.m. on the
Expiration Date.
IN WITNESS WHEREOF, Vision Twenty-One, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officer under its corporate
seal, attested by its duly authorized officer.
VISION TWENTY-ONE, INC.
By
---------------------------------
Title:
<PAGE> 56
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To Vision Twenty-One, Inc.:
The undersigned hereby irrevocably elects to exercise ________ Warrants
evidenced by the foregoing Warrant Certificate for, and to purchase thereunder,
____________ full shares of Common Stock issuable upon exercise of said Warrants
and delivery of $__________ (in cash as provided for in the foregoing Warrant
Certificate) and any applicable taxes payable by the undersigned pursuant to
such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER
________________________
_____________________________________
(Please print name and address)
_____________________________________
_____________________________________
If said number of Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to
_____________________________________
(Please print name and address)
_____________________________________
_____________________________________
<PAGE> 57
2
Name of Holder:_________________________
(Please print)
Dated:__________________, 19__ By_________________________________
Name:
Title:
<PAGE> 58
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby sells, assigns
and transfers to each assignee set forth below all of the rights of the
undersigned in and to the number of Warrants (as defined in and evidenced by the
foregoing Warrant Certificate) set opposite the name of such assignee below and
in and to the foregoing Warrant Certificate with respect to said Warrants and
the shares of Common Stock issuable upon exercise of said Warrants:
<TABLE>
<CAPTION>
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
<S> <C> <C>
</TABLE>
If the total of said Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate evidencing the Warrants not so assigned be issued in the
name of and delivered to the undersigned.
Name of Holder:_________________________
(Please print)
Dated:________________________, ____ By_________________________________
Name:
Title:
<PAGE> 59
The securities represented hereby have not been registered under the
Securities Act of 1933 or applicable state "blue sky" laws. Such
securities may not be sold or transferred in the absence of such
registration or an opinion of counsel that an exemption therefrom under
said Act and applicable state "blue sky" laws is available. Any
transfer of such securities in violation of the foregoing shall be
invalid.
$4,874,000.00 August 15, 1997
FOR VALUE RECEIVED, the undersigned, VISION TWENTY-ONE, INC., a Florida
corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of PRUDENTIAL
SECURITIES GROUP INC. (the "LENDER") the principal sum of $4,874,000.00 or, if
less, the aggregate principal amount of this Note outstanding on the Note
Termination Date (as defined in the Letter Agreement (as hereinafter defined)),
together with interest on the unpaid principal amount hereof from the date
hereof until such principal amount is paid in full, payable monthly in arrears
with respect to each calendar month, no later than the third Business Day (as
defined in the Letter Agreement) of the calendar month next succeeding the month
in respect of which such interest is then due and payable, and on the Note
Termination Date at a rate equal at all times to 10% per annum (but on any
overdue amount hereon, 14% per annum, payable on demand), provided, that, in the
event that the first date on which the capital stock of the Borrower is offered
to the public pursuant to a registration statement filed with the Securities and
Exchange Commission is later than October 10, 1997, interest on the unpaid
principal amount hereof from such date until such principal amount is paid in
full, payable as provided above, shall be at a rate equal at all times to 18%
per annum (but on any overdue amount hereon, 22% per annum).
Both principal and interest are payable in lawful money of the United
States of America to the Lender in care of Morgan Guaranty Trust Company, ABA
021000238, For the Account of Prudential Securities Group Inc., Account Number:
003-88-392 (or such other address as the Lender may from time to time designate
to the Borrower in writing), in same day funds. All payments made on account of
the principal amount hereof shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this
Note.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Amended and Restated Note and Warrant Purchase Agreement, dated
as of June 13, 1997, as amended as of August 15, 1997 (as amended or otherwise
modified from time to time, the "PURCHASE AGREEMENT"), between the Borrower and
the Lender. The Purchase Agreement, among other things, contains provisions for
acceleration of the
<PAGE> 60
2
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
VISION TWENTY-ONE, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 61
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amount of Principal Unpaid Principal Notation
Date Paid or Prepaid Balance Made By
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 62
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE AND SHARES PURCHASABLE HEREUNDER
(COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE "BLUE SKY" LAWS. THE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND BLUE SKY LAWS. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN CERTAIN AGREEMENTS, DATED AS
OF JUNE 13, 1997, AS AMENDED AS OF AUGUST 15, 1997, BETWEEN THE COMPANY AND
CERTAIN PURCHASERS, COMPLETE AND CORRECT COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE OFFICE OF THE COMPANY AND A CONFORMED COPY OF WHICH WILL BE
FURNISHED TO THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND WITHOUT
CHARGE. NO TRANSFER OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE UNLESS AND
UNTIL THE CONDITIONS SO SPECIFIED HAVE BEEN COMPLIED WITH.
No. of Shares: 210,000
WARRANTS EXCHANGEABLE TO
COMMON STOCK
THIS CERTIFIES THAT, for value received, PRUDENTIAL SECURITIES GROUP
INC. ("PRUDENTIAL") or registered assigns, is the registered owner of 210,000
warrants (collectively, the "WARRANTS"), each of which will entitle the
registered owner thereof to purchase one share of common stock, par value $.001
per share (the "COMMON STOCK"), of VISION TWENTY-ONE, INC., a Florida
corporation (the "COMPANY"), at the Exercise Price (as defined in Section 2
below) in lawful money of the United States of America, all on the terms and
conditions set forth herein. The number of shares of Common Stock to be received
upon exercise of the Warrants and the Exercise Price are subject to adjustment
as hereinafter set forth.
This Warrant has been issued pursuant to the Amended and Restated Note
and Warrant Purchase Agreement, dated as of June 13, 1997 and amended as of
August 15, 1997 (as amended from time to time, the "PURCHASE AGREEMENT"),
between the Company and Prudential. The applicable provisions of the Purchase
Agreement are incorporated herein by reference, and the holder hereof is
entitled to the benefit thereof. A conformed copy of the Purchase Agreement will
be furnished to the holder hereof by the Company upon written request and
without charge.
SECTION 1. EXERCISE OF WARRANTS. (a) The Warrants shall be exchangeable
by the holder hereof, in whole or in part and subject to the terms hereof at any
time from the date hereof to and including the date (the "EXPIRATION DATE") five
years following the IPO Effective Date (as defined in subsection (d) below).
Each Warrant shall initially be exchangeable for one share of Common Stock at
the Exercise Price (as defined below) or in a cashless exchange for a reduced
number of shares (the "NET ISSUABLE EXCHANGE") as determined by the Exchange
Formula (as defined in subsection (b) below). The exercise price for Common
Stock issued upon exercise of the Warrants (the "EXERCISE PRICE") shall be equal
to (i) the Market Price (as defined in subsection
<PAGE> 63
2
(d) below) upon such exercise date if the IPO shall not have occurred prior to
such exercise date or, (ii) the IPO Price (as defined in subsection (d) below)
if the IPO shall have occurred on or prior to such exercise date. The Warrants
will be exercisable upon surrender of this Warrant Certificate to the Company at
its principal office in Florida identified in Section 16 at any time during
usual business hours, accompanied by the Form of Election to Exercise attached
hereto, duly executed by the holder of such Warrant.
(b) In addition to and without limiting the rights of the holder of any
Warrant under the terms of this Warrant Certificate the holder of any Warrant
shall have the right (the "CONVERSION RIGHT") to convert the Warrants into
shares of Common Stock as provided in subsections (b) through (d) of this
Section 1 at any time or from time to time prior to the Expiration Date of such
Warrants. Upon exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant Certificate (the "CONVERTED WARRANT
SHARES"), the Company shall deliver to the holder of Warrants, without payment
by the holder of any exercise price or any cash or other consideration, that
number of shares of Common Stock equal to the quotient obtained by dividing the
Net Value (as hereinafter defined) of the Converted Warrant Shares by the fair
market value (as defined in section (d) below) of a single share of Common
Stock, determined in each case as of the close of business on the Conversion
Date (as defined in subsection (c) below). The "NET VALUE" of the Converted
Warrant Shares shall be determined by subtracting the aggregate Exercise Price
of the Converted Warrant Shares from the aggregate fair market value (as defined
in subsection (d) below) of the Converted Warrant Shares. No fractional shares
shall be issuable upon exercise of the Conversion Right, and if the number of
shares to be issued in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the holder of the relevant Warrants an
amount in cash equal to the fair market value of the resulting fractional share.
(c) The Conversion Right may be exercised by the holder of the Warrants
by the surrender of this Warrant Certificate at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares
subject to the Warrants which are being surrendered (referred to in subsection
(b) above as the "CONVERTED WARRANT SHARES") in exercise of the Conversion
Right. Such conversion shall be effective upon receipt by the Company of this
Warrant Certificate together with the aforesaid written statement or on such
later date as is specified therein (the "CONVERSION DATE"), but not later than
the Expiration Date of the Warrants. Certificates for the shares of Common Stock
issuable upon exercise of the Conversion Right together with a check in payment
of any fractional share and, in the case of a partial exercise, a new warrant
certificate evidencing the shares remaining subject to this Warrant Certificate
shall be issued as of the Conversion Date and shall be delivered to the holder
of this Warrant within 15 days following the Conversion Date.
(d) For purposes of this Warrant Certificate, the "FAIR MARKET VALUE"
of a share of the Common Stock as of a particular date shall be its Market
Price, and "MARKET PRICE" shall mean, if, as of such date, the Common Stock is
not traded on an exchange or on the Nasdaq National
<PAGE> 64
3
Market or Nasdaq SmallCap Market or otherwise traded in the over-the-counter
market, the higher of (i) the book value thereof as determined by any firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of a date that is within 15 days of the date as of
which the determination is to be made, or (ii) the average of the fair values
thereof determined in good faith by (a) any firm of independent public
accountants or an independent brokerage firm selected by the Board of Directors
of the Company and (b) any firm of independent public accountants or an
independent brokerage firm selected by Prudential, each as of a date that is
within 15 days of the date as of which the determination is to be made (the fees
and expenses of any such independent public accountants or independent brokerage
firm engaged pursuant to this definition to be paid by the Company). If, as of
any date of Market Price determination, the Common Stock is traded on a
securities exchange or on the Nasdaq National Market or Nasdaq SmallCap Market,
Market Price shall mean the average of the closing prices of the Common Stock on
such exchange or on the Nasdaq National Market or Nasdaq SmallCap Market on the
10 trading days ending on the trading day prior to the date of determination,
or, if the Common Stock is otherwise traded in the over-the-counter market, the
average of the closing bid prices on the 10 trading days ending on the trading
day prior to the date of determination. If such determination is made on the
date of the first offering of the Common Stock to the public (the "IPO")
pursuant to a registration statement filed with the Securities and Exchange
Commission (the "SEC"), or within 10 trading days following the effective date
of the registration statement relating to the IPO (the "IPO EFFECTIVE DATE"),
then the Market Price shall be deemed to be the price per share at which the
Common Stock is offered to the public in connection with the IPO (the "IPO
PRICE").
SECTION 2. ISSUANCE OF COMMON STOCK UPON EXERCISE. As promptly as
practicable after the exercise, as herein provided, of any Warrant, the Company
shall deliver or cause to be delivered to or upon the written order of the
holder of the Warrant certificates representing the numbers of fully paid and
nonassessable shares of Common Stock into which such Warrant is exchangeable in
accordance with the provisions of this Section 2. Subject to the following
provisions of this Section, such exchange shall be deemed to have been made at
the close of business on the date that such Warrant has been exercised, so that
the rights of the holder of such Warrant exercised shall cease with respect to
such Warrant at such time and the person or persons entitled to receive the
shares of Common Stock upon exchange of such Warrant shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such time, and such exercise shall be at the Exercise Price in effect
at such time; provided, however, that no such surrender on any date when the
stock transfer books of the Company are closed shall be effective to constitute
the person or persons entitled to receive the shares of Common Stock upon such
exercise as the record holder or holders of such shares of Common Stock on such
date, but such surrender shall be effective to constitute the person or persons
entitled to receive such shares of Common Stock as the record holder or holders
thereof for all purposes at the close of business on the next succeeding day on
which such stock transfer books
<PAGE> 65
4
are open, and such exercise shall be at the Exercise Price in effect on the date
that such Warrant has been surrendered for exchange.
SECTION 3. REGISTERED HOLDER AS OWNER; REPLACEMENT. (a) The Company
shall register each Warrant, upon records to be maintained by the Company for
that purpose, in the name of the record holder of such Warrant from time to
time. The Company may treat the registered holder of each Warrant as the owner
thereof (notwithstanding any notations of ownership or writing hereon made by
anyone other than the Company) for all purposes and shall not be affected by any
notice to the contrary.
(b) Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction, or mutilation of this Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu of this Warrant Certificate, provided, that,
if an original holder of Warrants or its nominee or nominees is such holder, an
agreement of indemnity shall be sufficient for all purposes of this Section 3.
(c) The Company shall register the transfer of any Warrants upon
records to be maintained by the Company for that purpose, upon surrender of this
Warrant Certificate, with the Form of Assignment attached hereto duly filled in
and signed, to the Company at the office specified in or pursuant to Section 16.
Upon any such registration of transfer, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, evidencing the Warrants so
transferred shall be issued to the transferee and a new Warrant Certificate, in
similar form, evidencing the remaining Warrants not so transferred, if any,
shall be issued to the then registered holder thereof.
(d) This Warrant Certificate is exchangeable, upon the surrender hereof
by the holder hereof at the office of the Company specified in or pursuant to
Section 16, for new Warrant Certificates, in substantially the form of this
Warrant Certificate, evidencing in the aggregate the right to purchase the
number of shares of Common Stock which may then be purchased hereunder, each of
such new Warrant Certificates to be dated the date of such exchange.
(e) This Warrant Certificate shall be promptly canceled by the Company
upon the surrender hereof in connection with any exchange, transfer, or
replacement. The Company shall pay all expenses, taxes (other than stock
transfer taxes) and other charges payable in connection with the preparation,
execution, and delivery of Warrant Certificates pursuant to this Section 3.
SECTION 4. ADJUSTMENT TO EXERCISE PRICE. The Exercise Price shall be
subject to adjustment as follows:
<PAGE> 66
5
(a) For the purposes of this Section 4, the term "CURRENT EXERCISE
PRICE", when used with respect to the Warrants, means at any given time the
Exercise Price for such Warrants then in effect; and the term "CURRENT QUOTIENT"
with respect to the Warrants means on any given date the amount determined at
the close of business on such day by dividing:
(i) An amount equal to (A) the total number of shares of
Common Stock outstanding when the Current Exercise Price with respect
to the Warrants became effective, exclusive of any such shares that may
have been issued after the date hereof as provided in this Section
4(a), multiplied by such Current Exercise Price, plus (B) the aggregate
of the amounts of all consideration, if any, received by the Company,
(or, without duplication, deemed to be received as provided in
paragraph (viii) below) upon all issuances of shares of Common Stock
since such Current Exercise Price became effective and prior to the
time of the determination of the Current Quotient with respect to such
Warrants except shares of Common Stock issued as provided in subsection
(c) hereof, minus (C) the aggregate amount of all dividends and other
distributions which have been paid or made after June 13, 1997, on
Common Stock, other than in cash out of Company's earned surplus or in
Common Stock, by
(ii) The total number of shares of Common Stock
outstanding immediately prior to the time of such determination,
including any such shares deemed to have been issued as provided in
paragraph (viii) below but excluding any such shares that may have been
issued as provided in this Section 4(a). For the purposes of this
paragraph, the initial Exercise Price shall be deemed to have become
effective at the close of business on June 13, 1997. In determining the
Current Quotient, the result shall be expressed to the nearest cent.
If at the close of business on any date after June 13, 1997 on which
any adjustment event hereunder takes place, the Current Exercise Price exceeds
the Current Quotient by as much as one percent of such Current Exercise Price,
the Exercise Price for the Warrants shall be reduced to the price equal to the
Current Quotient for such Warrants, effective at the close of business on such
date.
For the purposes of this Section 4, the following provisions shall be
applicable:
(i) If additional shares of Common Stock are issued for
cash, the consideration received by the Company therefor shall be
deemed to be the amount of cash received by the Company for such
shares, before deducting therefrom any commissions or other expenses
paid or incurred by the Company for any underwriting of, or otherwise
in connection with, the issuance of such shares.
<PAGE> 67
6
(ii) If additional shares of Common Stock are issued
(otherwise than upon the exchange of the Company's obligations or
shares of stock or upon the exchange of rights or options to subscribe
for or to purchase shares of Common Stock) for a full or partial
consideration other than cash, the amount of the non-cash consideration
received by the Company for such shares shall be deemed to be the value
of such consideration as determined in good faith by the Company's
Board of Directors.
(iii) If additional shares of Common Stock are issued upon
conversion or exchange of any obligations or of any shares of the
Company's stock that are convertible into or exchangeable for shares of
Common Stock or upon the exercise of rights or options to subscribe for
or to purchase shares of Common Stock, the amount of the consideration
received by the Company for such additional shares of Common Stock
shall be deemed to be the total of: (A) the amount of consideration
received by the Company upon the original issuance of each obligation,
share, right, or option so converted, exercised, or exchanged shall be
deemed to be the average amount of the consideration received by the
Company upon the original issuance of such obligations, shares, rights,
or options, plus (B) any other consideration received by the Company
upon conversion, exercise, or exchange except in adjustment of interest
and dividends. If obligations, shares, rights, or options of the same
class or series of a class as the obligations, shares, rights, or
options so converted, exercised or exchanged have been originally
issued for different amounts of consideration, the amount of
consideration received by the Company upon the original issuance of
each obligation, share, right, or option so converted, exercised, or
exchanged shall be deemed to be the average amount of the consideration
received by the Company upon the original issuance of all such
obligations, shares, rights, or options. The amount of the
consideration, obligations, shares, rights, or options so converted,
exercised, or exchanged and the amount of any other consideration
received by the Company upon the original issuance of the obligations,
shares, rights, or options so converted, exercised, or exchanged and
the amount of any other consideration, received by the Company upon
such conversion, exercise, or exchange shall be determined in the same
manner provided in paragraphs (i) and (ii) above with respect to the
consideration received by the Company in case of the issuance of
additional shares of Common Stock. If such obligations, shares, rights,
or options have been issued as a dividend upon any stock of the
Company, the amount of the consideration received by the Company upon
the original issuance thereof shall be deemed to be zero.
(iv) If additional shares of Common Stock are issued as a
dividend, the aggregate number of shares of Common Stock issuable in
payment of such dividend shall be deemed to have been issued and to be
outstanding at the close of business on the record date fixed for the
determination of stockholders entitled to such dividend. Shares of
Common Stock issued otherwise than as a dividend shall be deemed to
have been issued and to be outstanding at the close of business on the
date of issue.
<PAGE> 68
7
(v) The term dividend shall mean a dividend or other
distribution upon stock of the Company.
(vi) The number of shares of Common Stock at any time
outstanding shall not include all shares of Common Stock then owned or
held by or for the account of the Company.
(vii) If the Company declares a dividend without fixing a
record date for determining the stockholders entitled thereto, the
first business day during which the Company's stock transfer books are
closed for the purpose of such determination shall be deemed to be the
record date fixed for the determination of stockholders entitled to
such dividend.
(viii) In case of (A) the issuance of shares of stock or
obligations convertible into or exchangeable for shares of Common Stock
at an exercise price per share less than the Current Exercise Price in
effect immediately prior to the issuance of such convertible stock or
obligations, or (B) the issuance of any rights to subscribe for or to
purchase, or any options for the purchase of, additional shares of
Common Stock, at a price per share for the additional shares of Common
Stock issuable upon the exchange of such rights or options less than
the Current Exercise Price in effect immediately prior to the issuance
of such rights or the granting of such options, then the issuance of
such stock, obligations, rights, or options shall be deemed to be an
issuance (as of the date of issuance of such stock, obligations,
rights, or options) of the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such convertible
stock or obligations or upon the exchange of all such rights or
options, as the case may be. In such case, the amount received or
receivable by the Company in consideration of the issuance of such
stock, obligations, rights, or options (plus the minimum aggregate
amount of premium or additional consideration payable to the Company
upon conversion or exchange of the stock or obligations or upon the
exchange of such rights or options) before deducting therefrom any
commissions or other expenses paid or incurred by the company for any
underwriting of, or otherwise in connection with, the issuance of such
stock, obligations, rights or options, shall be deemed to be the
consideration actually received (as of the date of issuance of such
rights or options) for the issuance of the additional shares of Common
Stock. The consideration actually received by the Company for any
shares of Common Stock issued upon the exchange of such stock or
obligations or upon the exchange of such rights or options, which
pursuant to this paragraph (viii) is deemed to have been received,
shall not be included in the first paragraph of this Section 4 for the
purpose of computing the Current Quotient and no further adjustment of
the Exercise Price shall be made in respect thereof except that:
<PAGE> 69
8
(1) On the expiration of such rights or options or
the termination of the right to convert or exchange such stock
or obligations, such Current Quotient and such Current
Exercise Price shall forthwith be readjusted to the Current
Quotient and Current Price which would have been obtained had
the adjustments made on account of the issuance of such
options, rights or convertible or exchangeable securities been
made upon the basis of the delivery of only the number of
shares of Common Stock actually delivered upon the exchange of
such rights or options or upon conversion or exchange of such
securities for the consideration actually received by the
Company for such options, rights or securities and upon the
exchange, exchange or conversion thereof; and
(2) If the purchase or exchange price or exchange
rate provided for in any such options, rights, stock, or
obligations changes or a different purchase or exchange price
or exchange rate becomes effective at any time or from time to
time (other than under or by reason of provisions designated
to protect against dilution) then, upon such change becoming
effective, the Current Quotient and Current Exercise Price
then in effect hereunder shall forthwith be increased or
decreased to such Current Quotient and Current Exercise Price
as would have been obtained had the adjustments made upon the
issuance of such options, rights or convertible or
exchangeable securities been made upon the basis of (x) the
issuance of the number of shares of Common Stock theretofore
actually delivered upon the exchange, conversion or exchange
thereof, (y) the issuance of all Common Stock and all other
options, rights or convertible or exchangeable securities
issued after the issuance of such options, rights or
convertible or exchangeable securities, and (z) the original
issuance at the time of such exchange of any such options,
rights or convertible or exchangeable securities then still
outstanding.
(3) In case, however, such stock or obligations are
convertible or exchangeable at an exchange price or exchange
rate or such rights or options are exercisable at a purchase
price per share equal to or in excess of the Current Exercise
Price immediately prior to the issuance or sale of such
convertible stock or obligations or of such rights or options,
then no adjustment of the Exercise Price shall be made except
in respect of additional shares of Common Stock actually
issued upon the conversion or exchange of any such convertible
stock or obligations or upon the exchange of any such rights
or options.
(ix) No adjustment in the Exercise Price shall be made in
respect of the issuance or sales of Common Stock held in the Company's
treasury to the extent it acquired such Common Stock after June 13,
1997, except that if any such treasury shares are issued or sold for a
consideration per share that is less than the Exercise Price in effect
immediately prior to such issue or sale and that is less than the
average cost per share of such treasury
<PAGE> 70
9
shares, the Company shall be deemed, for purposes of this Section 4, to
have issued or sold shares of Common Stock equal in number to such
treasury shares for a consideration per share equal to the Exercise
Price in effect immediately prior to such issue or sale reduced by the
amount by which such average cost of such treasury shares exceeds such
consideration per share.
(b) If the Company at any time subdivides or issues a stock dividend
upon the outstanding shares of Common Stock, the Exercise Price in effect
immediately prior to such subdivision or stock dividend shall be proportionately
decreased, and if the Company at any time combines the outstanding shares of
Common Stock, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased. In such case of a subdivision or combination
of the outstanding shares of Common Stock issuable upon exchange of the
Warrants, the Exercise Price shall be first reduced, effective immediately prior
to an adjustment of the Exercise Price pursuant to this Section 4, by the
amount, if any, by which such Exercise Price exceeds the Current Quotient. Any
such adjustment shall become effective at the close of business on the date that
such subdivision, stock dividend or combination becomes effective.
(c) No adjustment of the Exercise Price shall be made as a result of or
in connection with any Approved Transfer (as defined in Section 6(a) below).
(d) Whenever any Exercise Price is adjusted, as herein provided, the
Company shall promptly deliver to each holder of Warrants a computation setting
forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such computation shall be made
by certified public accountants (who may be the Company's regular auditors or
certified public accountants) and shall be conclusive evidence of the
correctness of such adjustment.
SECTION 5. AGREEMENT TO REGISTER. The Company agrees that:
(a) Subject to Section 13 hereof, if at any time prior to the date
seven years after the IPO Effective Date, the Company determines to take action
to register any of its securities under the Securities Act of 1933, as then in
effect, or any similar federal statute (collectively the "ACT"), otherwise than
pursuant to Form S-8, or any other form not applicable to an offering of Common
Stock issued or issuable upon the exercise of the Warrants, it will notify in
writing each registered holder of any Warrants or any shares of Common Stock
issued upon exchange thereof of such determination and, upon written request
received within 15 days of the mailing of such notice will use its best efforts
to effect the registration under the Act of any shares of Common Stock issued or
issuable upon such conversion or exchange to which such request relates.
(b) Subject to Section 13 hereof, the Company agrees at any time
following the date one year after the IPO Effective Date and prior to the date
five years after the IPO Effective Date,
<PAGE> 71
10
upon receipt from the registered holders of at least 50 percent in principal
amount of the then outstanding Warrants or shares of Common Stock issued in
respect thereto of a request to register under the Act any shares of Common
Stock issued or issuable upon the exercise of any such Warrants, it will notify
all other registered holders thereof of such request and will use its best
efforts to effect the registration under the Act of the shares of Common Stock
to which such request relates. Such holders shall be entitled to make one
request for registration pursuant to this paragraph (b).
(c) If at any time holders of shares of Common Stock request that the
Company file a registration statement of Form S-3 for a public offering of all
or any portion of the shares held by such requesting holders, the reasonably
anticipated aggregate price to the public of which would exceed $500,000, and
the Company is a registrant entitled to use Form S-3 or any successor thereto to
register such shares, then the Company shall use its best efforts to register
under the Securities Act on Form S-3 or any successor thereto, for public sale
in accordance with the method of disposition specified in such notice, the
number of shares of stock specified in such notice. Whenever the Company is
required by this Section 5(c) to use its best efforts to effect the registration
of stock, each of the procedures and requirements of this Section 5(c)
(including but not limited to the requirement that the Company notify all
holders of Common Stock from whom notice has not been received and provide them
with the opportunity to participate in the offering) shall apply to such
registration, provided, however, that there shall be only one registration on
Form S-3 that may be requested and obtained under this Section.
(d) If the Company is required to use its best efforts to effect the
registration of any Common Stock under the Act, it will use its best efforts to:
(i) Prepare and file with the SEC, within 90 days after
the receipt of the written request for registration a registration
statement with respect to such shares of Common Stock and cause such
registration statement to become and remain effective for at least a
period of 45 days.
(ii) Prepare and file with the SEC all amendments and
supplements to such registration statement and the prospectus used in
connection therewith necessary to keep such registration statement
effective for said 45 day period (if any stand-off period is imposed
pursuant to this Section, such 45 day period shall commence at the
termination thereof) and to comply with the provisions of the Act with
respect to the disposition of all such shares of Common Stock covered
by such registration statement whenever the holders thereof desire to
dispose of the same;
(iii) Furnish to the holders of such shares of Common Stock
whatever numbers of copies of prospectuses, including one or more
preliminary prospectuses, they need to
<PAGE> 72
11
comply with the Act, and all other documents they reasonably request in
order to facilitate the disposition of such shares; and
(iv) Register or qualify the shares of Common Stock
covered by such registration statement under the other securities or
blue sky laws of any jurisdictions the holders thereof reasonably
request, and do all other necessary or advisable acts and things to
enable such holders to consummate the disposition of such shares in the
applicable jurisdictions, except that the Company shall not be required
to file a general consent to service in any such jurisdiction.
(e) The Company shall pay all expenses incurred by it in complying with
subsection (d) of this Section 5 and all reasonable out-of-pocket expenses
(including the reasonable fees and disbursements of one attorney or law firm
representing all the holders of Common Stock pursuant to exercise of the
Warrants and covered by any such registration statement) incurred by such
holders in connection therewith (including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of the Company's
counsel, and expenses of any special audits incident to or required by any such
registration, but not including, however, any underwriting discounts, fees or
commissions which are to be paid by such holders).
(f) Notices and requests delivered to the Company pursuant to this
Section 5 shall contain all information regarding the shares of Common Stock to
be registered and the intended method of disposition thereof that is reasonably
required in connection with the action to be taken.
(g) In the event of any registration under the Act of any shares of
Common Stock pursuant to this Section 5, the Company hereby agrees to indemnify
and hold harmless each shareholder disposing of such shares, each other person,
if any, who controls such shares within the meaning of the Act, and each other
person, who participates in the offering of such shares, against all losses,
claims, damages or liabilities; joint or several, to which such shareholder,
controlling person, or participating person may become subject under the Act or
otherwise, in so far as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such shares of
Common stock were registered under the Act, or in any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Company will reimburse such
shareholder and each such controlling person or participating person for all
legal or any other expenses reasonably incurred by such shareholders,
controlling person, or participating person in connection with investigating or
defending any such loss, claim, damage, liability or proceeding; provided,
however, that the Company will not be liable in any such case to the extent that
any such losses, claims, damages or liabilities arise out of or are based upon
any untrue statement or alleged untrue statement or omission or alleged omission
made in such
<PAGE> 73
12
registration statement, or said amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by such shareholder
specifically for use in the preparation thereof. Each such shareholder will
agree to indemnify the Company, each person who signed any such registration
statement, and each person, if any, who controls the Company within the meaning
of the Act, in the same manner and to the same extent that Company has agreed to
indemnify in this paragraph. Such indemnification, however, shall only relate to
untrue statements or alleged untrue statements or omissions or alleged omissions
contained in any such registration statement, or amendment or supplement
thereto, based upon and in conformity with written information furnished to the
Company by such shareholder specifically for use in the preparation thereof.
(h) As a condition of the registration of any shares of Common Stock,
the holders thereof shall agree:
(i) Not to sell any such shares of Common Stock pursuant
to the registration statement of an IPO until one year after completion
of the offering;
(ii) To comply with all requirements of the Act and of the
SEC in connection with the offering and sale of such shares of Common
Stock;
(iii) To effect sales of all such shares of Common Stock,
if so required by the Company, in an organized manner through a single
broker or dealer, or a single syndicate or selling group of brokers
and/or dealers, provided that any such required arrangement shall not
prejudice any plan of distribution proposed by any of such holders;
(iv) To cooperate with the Company 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 registration or reasonably requested by underwriters pursuant
to this Warrant Certificate;
(v) To pay such holder's pro rata portion (calculated on
the basis of the ratio of the aggregate offering price attributable to
the shares of such holder 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 such
holder's counsel;
(vi) To cooperate with the Company in all respects in
connection with registration of the Common Stock, including timely
supplying all information and executing and returning all documents
requested by the Company and its managing underwriter;
<PAGE> 74
13
(vii) That the Company shall not be required to include any
of such holder's shares of Common Stock in any registration statement
unless holder accepts the terms of the underwriting as agreed upon by
the Company and underwriters selected by the Company; and
(viii) That the Company shall have the right to defer or
suspend the filing of any registration statement if the Board of
Directors of the Company determines in good faith that it would be
seriously detrimental to the Company and its shareholders for such
registration statement to be filed.
(i) Notwithstanding the above:
(i) The Company shall have the sole and exclusive right
to select the underwriters of any public offering of the Common Stock,
including any public offering conducted pursuant to the demand
registration right set forth above. The use of underwriters in any
demand registration right set forth above is subject to the Company's
ability to engage underwriters under terms and conditions deemed
reasonable by the Company. Notwithstanding anything contained herein,
the demand registration right set forth above shall be permitted to be
exercised only on one occasion, and the Company may elect, upon
receiving such demand to combine such registration with any other
registration of securities it may seek to file.
(ii) If the managing underwriter of any public offering
advises the Company that the total number of shares of Common Stock
that the Company, the holder of the Warrants and any other person
intend to include in such public offering would adversely affect the
success of such public offering, then the amount of shares of Common
Stock to be offered for the account of such holder of Warrants will be
reduced to the extent necessary to reduce the total number of shares of
Common Stock to be included in such public offering to the amount
recommended by such managing underwriter. Such reduction will be on a
pro rata basis with all other shareholders holding registration rights
for the sale of shares in the offering. However, this cut back shall
not be applicable to the demand registrations.
(iii) The Company shall not be required (i) to reduce the
amount of shares of Common Stock to be offered by the Company in any
public offering for any reason or (ii) to include any shares of Common
Stock 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 Act or otherwise eligible for sale to the
public without registration.
<PAGE> 75
14
(iv) The Company shall have the right to extend, suspend
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 the Company because of the
existence of non-public material information, or to allow the Company
to complete any pending audit of its financial statements, any public
financing plan, any pending material acquisition or to release audited
financial statements of an acquiree in a pending acquisition.
SECTION 6. PURCHASE RIGHT OF FIRST REFUSAL. (a) Except for shares
issued in connection with acquisitions made by the Company, shares issued in
establishing a strategic alliance and option shares issued to employees,
contractors, consultants or affiliated physicians approved by the Board of
Directors of the Company and pursuant to options, grants or warrants disclosed
on Schedule 11(h) to the Purchase Agreement, no shares of the Company and no
interest therein shall be sold or transferred by the Company after the date
hereof, in any manner whatsoever without the prior written consent of the
registered holders of a majority of the Warrants or without following the terms
of this Section 6. All of the above described sales or transfers of Company
shares that may be made by the Company without prior approval and without
complying with the provisions below shall be deemed "APPROVED TRANSFERS".
(b) Prior to making or upon receiving any bona fide offer, or
counteroffer that the Company intends to assert, with respect to any disposition
of any shares of Common Stock other than pursuant to an Approved Transfer, the
Company shall convey the terms with respect to such proposed disposition (the
"OFFER TERMS") to the registered holders of the Warrants, which shall have the
right to purchase all, and only all, of the shares that are the subject of such
offer or counteroffer on the Offer Terms. Any holder of Warrants may exercise
its right to acquire such shares by written notice to the Company (x) with
respect to an offer, within the 25 day period following receipt by such holder
of the initial Offer Terms or (xi) with respect to a counteroffer, within 10
business days after receipt by such holder of the Offer Terms with respect
thereto, provided that such holder shall have previously received written notice
of the initial Offer Terms as hereinabove provided. The closing of such purchase
shall occur at the Company's offices or such other location as may be agreed
upon on the date indicated in the written notice delivered to such holder within
the time specified by the most recently delivered Offer Terms. If one or more
registered holders of Warrants do not purchase all such shares during such
period, the Company shall be free within the time period specified by the most
recently delivered Offer Terms, or, if no such time period is specified, within
90 days, to sell or transfer such shares to the third party making or receiving
such offer or counteroffer on Offer Terms no more favorable to such third party
than those contained in the last offer or counteroffer delivered to the holders.
In the event more than one holder wishes to acquire Common Stock pursuant to
this Section, they shall be entitled to acquire their pro rata share of the
shares to be sold. The rights under this Section 6 shall expire upon an IPO.
<PAGE> 76
15
SECTION 7. CO-SALE RIGHTS. (a) Prior to any IPO and except in
connection with Approved Transfers, neither the Company, Theodore N. Gillette,
Richard L. Sanchez or their respective affiliates (each, a "SELLER") shall
transfer, sell, or otherwise dispose of (collectively, a "TRANSFER") shares of
Common Stock (either directly or indirectly), which transfer together with all
previous transfers from and after the date hereof (other than Approved
Transfers) would be in excess of an aggregate of 15% (on a fully diluted basis)
of the outstanding shares of Common Stock, to any person (such person being
hereinafter referred to individually as a "THIRD PARTY" and collectively as
"THIRD PARTIES"), unless the terms and conditions of such transfer shall include
an offer at the most favorable price, and on the most favorable terms and
conditions, at which the Company is then intending to transfer Common Stock
(except that the only representation and warranty that any registered holder of
Warrants and any transferee thereof that acquired Common Stock pursuant to this
Warrant Certificate ("TRANSFEREES") shall be required to make in connection with
any transfer is a warranty with respect to its own ownership of the Common Stock
to be sold by it and its ability to convey title thereto free and clear of
liens, encumbrances or adverse claims) to the registered holder of Warrants and
any Transferee to include, at their option, in the transfer to the Third Party,
an amount of Common Stock determined in accordance with this Section.
(b) The Third Party shall purchase from holders of Warrants and any
Transferee the number of shares of Common Stock owned by such holder or such
Transferee, as the case may be, equaling the number derived by multiplying the
total number of shares to be purchased by the Third Party by a fraction, the
numerator of which is the total number of shares of Common Stock owned by such
holder or such Transferee, as the case may be, that such holder or such
Transferee, as the case may be, desires to require the Third Party to purchase
and the denominator of which is the sum of (i) the total number of shares of
Common Stock owned by all holders and all Transferees desiring to require the
Third Party to purchase their shares and (ii) the total number of shares of
Common Stock owned by Sellers and their affiliates. Each holder of Warrants
shall be entitled to sell its pro rata share of the right to sell to all holders
of Warrants.
(c) Unless the same is an Approved Transfer or in connection with an
IPO, before the Company proposes to transfer any Common Stock, it shall notify,
or cause to be notified, all holders of Warrants and any Transferee in writing
of each such proposed transfer. Such notice shall set forth: (i) the name of the
Third Party and the number of shares of Common Stock proposed to be transferred,
(ii) the address of the Third Party, (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by the Third Party
(the "THIRD PARTY TERMS") and (iv) whether the Third Party has been informed of
the "Co-Sale Right" provided for in this Section and has agreed to purchase
shares of Common Stock in accordance with the terms hereof. The Co-Sale right
may be exercised by delivery of a written notice to the Company (the "CO-SALE
NOTICE") within 15 days following receipt of the notice specified in the
preceding sentence. The Co-Sale Notice shall state the number of shares of
Common Stock that holder of Warrants and Transferees would be entitled to
include in such transfer to the Third Party.
<PAGE> 77
16
(d) Upon the giving of a Co-Sale Notice, holders of Warrants and
Transferees, as the case may be, shall be entitled and obligated to sell the
number of shares of Common Stock set forth in the Co-Sale Notice to the Third
Party on the Third Party Terms; provided, however, that the Company and its
affiliates shall not consummate the sale of any shares offered by them if the
Third Party does not purchase all shares that holders of Warrants and
Transferees are entitled to and desire to sell pursuant hereto. After expiration
of the 15 day period referred to in subsection (c) above, if the provisions of
this Section have been complied with in all respects, the Company shall have the
right for a 90 day period to transfer the shares of Common Stock to the Third
Party on the Third Party Terms without further notice to holders of Warrants or
any Transferee that have not given a Co-Sale Notice, but after such 90 day
period, no such transfer may be made without again giving notice to holders of
Warrants and all Transferees of the proposed transfer and complying with the
requirements of this Section 7.
(e) Notwithstanding anything to the contrary, any Approved Transfer may
be made without compliance with this Section 7. The Co-Sale Rights contained
herein shall terminate upon an IPO.
SECTION 8. FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of any
Warrants. If the exercise of any Warrants results in a fraction, an amount of
money equal to such fraction multiplied by the fair market value of one share of
Common Stock of the Company on the date on which such exercise is deemed made
shall be paid to the person otherwise entitled to such fraction.
SECTION 9. EFFECT OF RECLASSIFICATIONS, ETC. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of any Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety, the
Company, or such successor or purchasing corporation, as the case may be, shall
execute with each holder of Warrants a supplemental agreement providing that the
holder of each Warrant then outstanding shall have the right thereafter to
exchange such Warrant to purchase the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
sale or conveyance. Such supplemental agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 9. The above provisions of this Section 9 shall
similarly apply to successive reclassifications and changes of shares of Common
stock and to successive sales or conveyances.
SECTION 10. TAXES ON EXCHANGE. The issuance of certificates for shares
of Common Stock upon the exercise of Warrants shall be made without charge to
the Warrant holders for any tax (other than federal or state income taxes) in
respect to the issuance of such certificates. Such certificates shall be issued
in the respective names of, or in the names directed by, the holder of
<PAGE> 78
17
the Warrant exchanged. The Company, however, shall not be required to pay any
tax which may be payable in respect to any transfer involved in the issuance and
delivery of any such certificate in a name other than that of the holder of the
Warrants exchanged, or to issue or deliver such certificates until the person or
persons requesting the issuance thereof have paid the Company the amount of such
tax or have established to the satisfaction of the Company that such tax has
been paid.
SECTION 11. NOTICES OF RECORD DATE, ETC. If any of the following events
occur, the Company will mail or cause to be mailed a notice, as specified below,
to every holder of a Warrant:
(a) Any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend at the same rate as
the rate of the last cash dividend theretofore paid) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property or to receive any other right;
(b) Any capital reorganization of the Company, any reclassification or
recapitalization of the Company's capital stock, or any transfer of all or
substantially all of the assets of the Company to or consolidation or merger of
the Company with or into any other Person;
(c) Any voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(d) Any proposed issue or grant by the Company of any shares of stock
of any class or any other securities (other than notes or other obligations
issued or incurred by Company in connection with the purchase of real or
personal property or the borrowing of money privately), or any right or option
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any securities (other than the IPO or any issue or grant referred to herein).
The above notice to the Warrant holder shall specify:
(i) The date or expected date on which any such record is
to be taken for the purpose of such dividend, distribution, or right,
and stating the amount and character of such dividend, distribution, or
right;
(ii) The date or expected date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon
<PAGE> 79
18
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up; and
(iii) The amount and character of any stock or other
securities, or rights or options with respect thereto, proposed to be
issued or granted, the date or expected date of such proposed issue or
grant, and the persons or class of persons to whom such proposed issue
or grant is to be offered or made. Such notice shall be mailed at least
20 days prior to the date therein specified.
SECTION 12. RESTRICTIVE LEGENDS. Each Warrant Certificate and
certificate for Common Stock issued upon the exchange of any Warrant, and each
Warrant Certificate and stock certificate issued upon the transfer of any
Warrant Certificate or Common Stock (except as otherwise permitted by this
Section 12), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented hereby (the "SECURITIES") have not
been registered under the Securities Act of 1933, as amended,
or applicable state "blue sky" laws. The Securities may not be
sold or transferred in the absence of such registration or an
exemption therefrom under said Act and blue sky laws. The
Securities may not be transferred except upon the conditions
specified in certain agreements, dated as of June 13, 1997 and
amended as of August 15, 1997, between the Company and certain
purchasers, complete and correct copies of which are available
for inspection at the office of the Company and a conformed
copy of which will be furnished to the holder of the
Securities upon written request and without charge. No
transfer of the Securities shall be valid or effective unless
and until the conditions so specified have been complied
with."
SECTION 13. RESTRICTION ON TRANSFER OF SECURITIES. Notwithstanding
anything herein to the contrary, neither the Warrants nor the Common Stock
issued upon exercise of the Warrants may be transferred, assigned, pledged or
hypothecated for a period of one year following the IPO Effective Date,
provided, however, that during such period, the Warrants or the Common Stock
issued upon exercise of the Warrants may be transferred, in accordance with the
provisions of Conduct Rule 2710(c)(7) of the National Association of Securities
Dealers, Inc. (the "NASD"), to any member of the NASD participating in the IPO
or to any corporate officer of Prudential or its affiliates
SECTION 14. NOTICE OF PROPOSED TRANSFER, OPINIONS OF COUNSEL. Except as
provided in the last paragraph of this Section 14, prior to any transfer of any
such Warrant or Common Stock,
<PAGE> 80
19
the holder thereof will give written notice to the Company of such holder's
intention to effect such transfer and to comply in all other respects with this
Section 14. Each such notice shall (i) describe the manner and circumstances of
the proposed transfer in sufficient detail to enable counsel to render the
opinions referred to below, and (ii) designate counsel for the holder giving
such notice (who may be in-house counsel for such holder). The holder giving
such notice will submit a copy thereof to the counsel designated in such notice,
and the Company will promptly submit a copy thereof to its counsel, and the
following provisions shall apply:
(A) If in the opinion of each such counsel, the proposed
transfer may be effected without registration under the Act of such
Warrants or Common Stock, the Company will promptly notify the holder
thereof, and such holder will thereupon be entitled to transfer such
Warrants or Common Stock (as the case may be) in accordance with the
terms of the notice delivered by such holder to the Company. Each
Warrant Certificate or stock certificate, if any, issued upon or in
connection with such transfer shall bear the appropriate restrictive
legend set forth in Section 12, unless in the opinion of each such
counsel such legend is not longer required to insure compliance with
the Act. If for any reason counsel for the Company (after having been
furnished with the required information under this Section 14) fails to
deliver an opinion to the Company, or the Company fails to notify such
holder thereof as aforesaid, within 20 days after counsel for such
holder has delivered its opinion to such holder (with a copy to the
Company), then for all purposes of this Warrant Certificate, the
opinion of the Company's counsel shall be deemed to be the same as the
opinion of counsel for such holder.
(B) If in the opinion of either or both of such counsel, the
proposed transfer may not be effected without registration under the
Act of such Warrants or Common Stock (as the case may be), the Company
will promptly so notify the holder thereof and thereafter such holder
shall not be entitled to transfer such Warrants or Common Stock (as the
case may be) until receipt of a further notice from Company under
paragraph (A) above or, in the case of Common Stock, unless
registration of such Common Stock under the Act has become effective.
The Company will pay the reasonable fees and disbursements of counsel
(other than in-house counsel) for any holder and of counsel for the Company in
connection with all opinions rendered by them pursuant to this Section 14.
SECTION 15. SPECIAL AGREEMENTS OF COMPANY. (a) The Company covenants
and agrees that it will reserve and set apart and have at all times a number of
shares of authorized but unissued Common Stock deliverable upon the exercise of
the Warrants or any other rights or privileges provided for herein sufficient to
enable it at any time to fulfill all its obligations hereunder. The Company
covenants and agrees that it will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, issue or
<PAGE> 81
20
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of its terms hereunder, but will at all times
in good faith assist in carrying out all of the provisions of this Warrant
Certificate and in taking all necessary or appropriate action in order to
protect the rights of the holders of the Warrants against dilution or other
impairment.
(b) This Warrant Certificate shall be binding upon any corporation
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all of the Company's assets.
SECTION 16. NOTICES. All notices and documents to registered holders of
Warrants under this Warrant Certificate shall be sent by registered or certified
mail to the holder at the address shown on the holder's Warrant Certificate or
any other address the holder has furnished the Company in writing. All notice
and documents to the Company shall be sent by certified or registered mail to
its principal office, at Vision Twenty-One, Inc., 7209 Bryan Dairy Road, Largo,
Florida 34647, or any other address the Company has furnished the registered
holders of Warrants in writing with a copy to Company counsel:
Darrell C. Smith, Esquire
Shumaker, Loop & Kendrick, LLP
Barnett Plaza, Suite 2800
101 E. Kennedy Boulevard
Tampa, Florida 33602
SECTION 17. NO RIGHTS AS SHAREHOLDER; LIMITATION OF LIABILITY. This
Warrant Certificate shall not entitle the holder hereof to any of the rights of
a shareholder of the Company except as set forth in the Purchase Agreement. No
provision hereof, in the absence of affirmative action by the holder to purchase
shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such holder
for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by its creditors.
SECTION 18. LAW GOVERNING. This Warrant shall be governed by, and
construed and enforced in accordance with the laws of the State of Florida.
SECTION 19. RIGHTS UNDER PURCHASE AGREEMENT. The holder hereof shall be
entitled to all rights accorded to a holder, as well as all obligations as
contained in the Purchase Agreement.
<PAGE> 82
21
SECTION 20. EXPIRATION. The Warrants represented hereby shall expire
and become null and void if not exercised on or before 5:00 p.m. on the
Expiration Date.
IN WITNESS WHEREOF, Vision Twenty-One, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officer under its corporate
seal, attested by its duly authorized officer.
VISION TWENTY-ONE, INC.
By
---------------------------------
Title:
<PAGE> 83
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To Vision Twenty-One, Inc.:
The undersigned hereby irrevocably elects to exercise ________ Warrants
evidenced by the foregoing Warrant Certificate for, and to purchase thereunder,
____________ full shares of Common Stock issuable upon exercise of said Warrants
and delivery of $___________ (in cash as provided for in the foregoing Warrant
Certificate) and any applicable taxes payable by the undersigned pursuant to
such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER
----------------------
- -----------------------------------
(Please print name and address)
- -----------------------------------
- -----------------------------------
If said number of Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to
- -----------------------------------
(Please print name and address)
- -----------------------------------
- -----------------------------------
<PAGE> 84
Name of Holder:
-------------------------
(Please print)
Dated:________________________, 19__ By
---------------------------------
Name:
Title:
<PAGE> 85
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ____________________________ hereby sells, assigns
and transfers to each assignee set forth below all of the rights of the
undersigned in and to the number of Warrants (as defined in and evidenced by the
foregoing Warrant Certificate) set opposite the name of such assignee below and
in and to the foregoing Warrant Certificate with respect to said Warrants and
the shares of Common Stock issuable upon exercise of said Warrants:
<TABLE>
<CAPTION>
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
<S> <C> <C>
</TABLE>
If the total of said Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate evidencing the Warrants not so assigned be issued in the
name of and delivered to the undersigned.
Name of Holder:
-------------------------
(Please print)
Dated:________________________, ____ By
---------------------------------
Name:
Title:
