<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): October 14, 1999
VISION TWENTY-ONE, INC.
-----------------------
(Exact name of registrant as specified in its charter)
FLORIDA 0-22977 59-3384581
- ----------------------- ------------------- ----------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
7360 BRYAN DAIRY ROAD
LARGO, FLORIDA 33777
- ------------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 727-545-4300
<PAGE> 2
ITEM 5. OTHER EVENTS.
Letter of Intent. On October 22, 1999 the Company entered into a binding
Letter of Intent (the "Letter of Intent") for a capital investment in the
Company of $35.0 million from private investors co-led by MedEquity Investors,
LLC and Chase Capital Partners. The proceeds from the equity investment will be
used to continue the Company's aggressive development and acquisition of
refractive and ambulatory surgery centers. In addition, the new equity
investment will position the Company to restructure its exiting credit facility
and substantially exit the physician practice management business. The
transaction will consist of the sale of newly issued 9% Senior Series A
Convertible Preferred Stock (the "Preferred Stock") which will be convertible at
any time into the Company's common stock at a conversion price of $6.50 per
share, representing approximately 25% of the Company's common stock on a diluted
basis at closing, subject to adjustment. MedEquity Investors and Chase Capital
Partners will each appoint one director to the Company's Board of Directors upon
closing. Closing is expected to occur on or before November 30, 1999 and is
contingent upon the satisfaction of customary closing conditions and Hart Scott
Rodino approval. A copy of the Letter of Intent is filed with this report as
Exhibit 10.68 and the descriptions herein and in the press release are qualified
in their entirety by reference to the terms and conditions set forth in the
Letter of Intent.
Credit Facility. As the Company pursues closing the above transaction and
the amendment to its credit facility contemplated thereby and discussed below
in the press release, the Company, the Bank of Montreal as Agents for the Banks
and the Banks party to the Company's Amended and Restated Credit Agreement (the
"Credit Agreement") executed a waiver letter dated October 14, 1999 relating to
certain provisions of the Credit Agreement. A copy of the waiver letter is
filed herewith as Exhibit 4.18 and incorporated herein by reference.
Press Release. On October 25, 1999 the Company issued a press release
announcing a $35.0 million capital infusion and exit of the physician practice
management business. A copy of the press release is filed herewith as Exhibit
99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
See Exhibit Index attached hereto.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in the press release filed with this Form 8-K and
oral statements by officers of the Company that are not based on historical fact
constitute "forward-looking statements" within the meaning of the Securities Act
of 1933 and Securities Exchange Act of 1934. The terms "Vision Twenty-One,"
"company," "we," "our" and "us" refer to Vision Twenty-One, Inc. The words
"expect," "believe," "goal," "plan," "intend," "estimate," and similar
expressions and variations thereof are intended to specifically identify
forward-looking statements. Those statements appear in the press release, and
include statements regarding the intent, belief or current expectations of the
company, its directors or its officers with respect to, among other things; our
future growth and operating strategies and anticipated future performance and
operating results, our financing plans, our plan regarding the anticipated
restructuring of managed practice relationships, our business integration plan
and cost reduction program and the expected savings therefrom, our expected
charges for the fourth quarter, and our current and expected future savings and
charges from the consolidation of infrastructure and the impact it may have on
our future performance. You are cautioned that any such forward looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected in the forward looking statements as a result of various factors. The
factors that might cause such differences include, among others, the following:
(i) our inability to successfully increase and expand vision care and refractive
surgery programs; (ii) any future material reduction in demand for refractive
surgeries or should the actual refractive eye care market be smaller than
predicted; (iii) the degree current shortages in refractive surgery equipment
adversely impact our access to same at reasonable prices; (iv) any material
inability to successfully open and integrate and profitably operate de novo
clinics, refractive surgery centers and ASCs; (v) any inability to either close
the sale of $35.0 million in preferred stock, to obtain the benefits anticipated
from the new relationships with the partners making such capital investment or
obtain the required and anticipated amendment to our credit facility or
accomplish the same within anticipated time frames or any additional preferred
shares that would be issued in the event we are unable to timely repurchase and
retire up to 3.0 million shares of common stock as contemplated in the letter of
intent; (vi) any inability to obtain an amendment to our credit facility or
acquire additional sufficient working capital and financing at a reasonable cost
to fund our future ongoing operations and growth strategy in the event an
amendment is not obtained or any inability to maintain compliance with the
covenants and commitments set forth in our credit facility; (vii) our ability to
successfully restructure existing relationships with our managed practices and
maintain relationships with a significant portion of our managed practices for
vision care and refractive business; (viii) any unexpected increase in the
charges related to the restructuring of our managed practices; (ix) the number
of practices terminating their relationships with us completely and the impact,
of any larger number of terminations than anticipated, on our operations; (x)
our inability to realize any significant benefits, cost savings or reductions
from our restructuring and cost programs; (xi) unanticipated impact on the
Company of loss of future revenues due to the restructuring of practice
management relationships, (xii) any failure or significant delay of the newly
structured business divisions of the Company to perform profitably, successfully
and in line with analysts future expectations; (xiii) any material inability to
successfully manage changes in our business mix; (xiv) any material inability to
achieve internal growth in our business and increase shareholder value; (xv) any
future operating and net losses we may incur; (xvi) our inability to
successfully integrate and profitably operate our managed care business or for
existing managed care contracts to positively impact gross profit; (xvii) the
inability to expand our managed care business, renew existing managed care
contracts or maintain and expand our Contract Provider Network; (xviii) any
adverse change in our medical claims to managed care revenue ratio; (xviv)
changes in state and/or federal governmental regulations which could materially
affect our ability to operate or materially affect
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our profitability; (xx) any adverse governmental or regulatory changes
or actions, including any healthcare regulations and related enforcement
actions; and (xxi) the inability to maintain or obtain required licensure in
the states in which we operate and in the states in which we may seek to
operate in the future; (xxii) consolidation of our competitors, poor operating
results by our competitors, or adverse governmental or judicial rulings against
our competitors; (xxiii) any failure by us to meet analysts expectations;
(xxiv) our stock price; (xxv) the effect of any future stock overhang in the
market place (where the available stock for sale would be in excess of demand)
and any negative impact on our stock price as a result of the overhang; (xxvi)
our inability to successfully defend against the class action lawsuits or any
additional litigation that may arise; (xxvii) any reduction in coverage of and
ratings by analysts following us and other factors including those identified
in our filings from time-to-time with the SEC. The Company undertakes no
obligation to publicly update or revise forward looking statements to reflect
events or circumstances after the date of the press release and this Form 8-K
or to reflect the occurrence of unanticipated events.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
VISION TWENTY-ONE, INC.
By: /s/ Theodore Gillette
--------------------------------------
Theodore Gillette
Its: Chief Executive Officer
Dated: October 25, 1999
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
4.13* Credit Agreement dated as of January 30, 1998 among Vision
Twenty-One, Inc. the Banks Party Hereto and Bank of Montreal as
Agent.(1)
4.14* Amended and Restated Credit Agreement dated as of July 1, 1998
among Vision Twenty-One, Inc., and the Bank of Montreal as Agent
for a consortium of banks.(2)
4.15* First Amendment to the Amended and Restated Credit Agreement dated
as of February 23, 1999 among Vision Twenty-One, Inc., the Banks
party hereto and Bank of Montreal as Agent for the Banks.(3)
4.16* Second Amendment to the Amended and Restated Credit Agreement dated
as of June 11, 1999 among Vision Twenty-One, Inc., the Banks party
hereto and Bank of Montreal as Agent for the Banks.(3)
4.17* Third Amendment to the Amended and Restated Credit Agreement dated
as of August 30, 1999 by and among Vision Twenty-One, Inc., the
Banks party hereto and Bank of Montreal as Agent for the Banks.(4)
4.18 Waiver Letter dated October 14, 1999 to Amended and Restated Credit
Agreement dated as of July 1, 1998 by and among Vision Twenty-One,
Inc. the Banks Party thereto and Bank of Montreal as Agent.
(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.)
10.59* Credit Agreement dated as of January 30, 1998 among Vision
Twenty-One, Inc., the Banks Party Hereto and Bank of Montreal as
Agent filed as Exhibit 4.13 to this Report and incorporated herein
by reference.
10.60* Amended and Restated Credit Agreement dated as of July 1, 1998
among Vision Twenty-One, Inc. the Banks Party Hereto and Bank of
Montreal as Agent, filed as Exhibit 4.14 to this Report and
incorporated herein by reference.
10.61* First Amendment to the Amended and Restated Credit Agreement dated
as of February 23, 1999 among Vision Twenty-One, Inc., the Banks
party hereto and Bank of Montreal as Agent for the Banks, filed as
Exhibit 4.15 to this Report and incorporated herein by reference.
10.62* Second Amendment to the Amended and Restated Credit Agreement dated
as of June 11, 1999 among Vision Twenty-One, Inc., the Banks party
thereto and Bank of Montreal as Agent for the Banks, filed as
Exhibit 4.16 to this Report and incorporated herein by reference.
10.65* Third Amendment to the Amended and Restated Credit Agreement dated
as of August 30, 1999
</TABLE>
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<TABLE>
<S> <C>
by and among Vision Twenty-One, Inc., the Banks party hereto and
Bank of Montreal as Agent for the Banks, filed as Exhibit 4.17 to
this Report and incorporated herein by reference.
10.67 Waiver Letter dated October 14, 1999 to Amended and Restated Credit
Agreement dated as of July 1, 1998 by and among Vision Twenty-One,
Inc. the Banks Party thereto and Bank of Montreal as Agent, filed
as Exhibit 4.18 to this report and incorporated herein by
reference.
10.68 Letter of Intent dated October 22, 1999 by and among Vision
Twenty-One, Inc., MedEquity Investors Partners, LLC, Vision
Twenty-One Partners, LLC, Peachtree Vision Twenty-One Partners, LLC
and Chase Venture Capital Associates, L.P.
99.1 Press Release dated October 25, 1999 announcing a $35.0 million
capital infusion and exit of the physician practice management
business.
</TABLE>
- ----------------
*Previously filed as an Exhibit in the Company filing identified in the
footnote following the Exhibit Description and incorporated herein by
reference.
(1) Form 8-K filed February 10, 1998.
(2) Form 8-K filed July 10, 1998.
(3) Form 10-K filed June 18, 1999.
(4) Form 8-K filed September 14, 1999
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<PAGE> 1
EXHIBIT 4.18
October 14, 1999
Vision Twenty-One, Inc.
7360 Bryan Dairy Road, Suite 200
Largo, FL 33777
Attention: Richard T. Welch
Gentlemen:
We refer to the Amended and Restated Credit Agreement dated as of July
1, 1998, as amended, between you and us (the "Credit Agreement"). All
capitalized terms used herein without definition shall have the same meaning
herein as such terms are defined in the Credit Agreement.
The Borrower has advised the Banks that it is currently negotiating
with two or more private equity groups for the injection of $35,000,000 in cash
in exchange for convertible preferred stock. In order to afford the Borrower
time to negotiate with the potential investors, the Borrower has requested that
the Banks temporarily waive effective September 30, 1999, the Borrower's
non-compliance with the following covenants contained in the Credit Agreement:
(i) Section 1.8(b) which required payment of the September 30, 1999, principal
installment of $388,040.80 due with respect to the Term A Loans, (ii) Section
1.4 which required timely payment of interest when due in the amount of
$409,411.96 which payment was received on October 6 and 7, 1999, which was
after the applicable grace period, (iii) Section 8.5(a) which required the
furnishing of the July 1999 monthly financial statements to the Banks, (iv)
Section 4.2 which required putting in place blocked account arrangements (which
such agreements were required to be entered into no later than September 30,
1999, with respect to the 15 largest accounts), (v) Section 8.5(h) which
required providing the Banks with written notice of default, (vi) Section
8.5(a) which will require timely delivery of the August 1999 financial
statements to the Banks, and (vii) Section 8.34 which will require repayment of
the Loans by $2,000,000 out of the proceeds of repayment of advances made by
the Borrower to the practice groups.
In order to accommodate the Borrowers request, the Banks hereby agree
to temporarily waive the Borrower's non-compliance with the above-referenced
covenants through the period ending November 5, 1999. This waiver is
conditioned upon the following: (a) on or before October 29, 1999, the Borrower
shall have received written commitments to inject not less than $31,600,000 of
new cash equity into the Borrower's business (which commitments shall not have
any conditions which the Agent in its reasonable credit judgment deems
unacceptable), and (b) the Borrower and the Banks hereby agree that it shall
constitute an Event of Default under the
<PAGE> 2
Vision Twenty-One, Inc.
October 14, 1999
Page 2
Credit Agreement if the Borrower fails to receive at least $31,600,000 of new
cash equity proceeds on or before November 5, 1999, or, notwithstanding receipt
of such equity proceeds, the Borrower and the Banks fail to restructure the
credit facility provided for in the Credit Agreement on mutually agreeable
terms on or before the date of the Borrower's receipt of such equity proceeds.
The Banks expect and require that the Borrower comply with the covenants
referred to in clauses (i)-(vii) above on or before November 5, 1999, to the
extent they have not been terminated or modified in a restructured credit
facility. If acceptable written commitments as described above to provide such
equity are not provided on or before October 29, 1999, or if the Borrower fails
to pay the $80,000 fee due the Banks on November 5, 1999, or if Borrower is not
in compliance with covenants listed in clauses (i)-(vii) above as of November
5, 1999, or an Event of Default arises under the terms of clause (b) set forth
above, the waiver set forth herein shall no longer be in effect and the Banks
shall be entitled to enforce the covenants referenced above as Events of
Default pursuant to Section 9 of the Credit Agreement and any and all of the
Banks' rights and remedies under the Loan Documents as a result thereof.
Except as specifically waived or modified hereby, all of the terms and
conditions of the Credit Agreement shall stand and remain unchanged and in full
force and effect. This waiver does not extend to or cover any other Events of
Default which may now or hereafter exist under the Credit Agreement, this
waiver being expressly limited to the covenants referred to in clauses
(i)-(vii) above. This waiver shall become effective upon the execution and
delivery hereof by each of the Banks and the Borrower as set forth below. This
waiver may be executed in counterparts and by different parties on separate
counterpart signature pages, each of which shall be an original and all of
which taken together shall constitute one and the same instrument. This waiver
shall be governed by, and construed in accordance with, the laws of the State
of Illinois.
[SIGNATURE PAGES TO FOLLOW]
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Vision Twenty-One, Inc.
October 14, 1999
Page 3
This waiver letter is entered into by and among the parties hereto as
of the date first above written.
<TABLE>
<S> <C>
BANK OF MONTREAL, in its individual BANK ONE TEXAS, N.A.
capacity as a Bank and as Agent
By /s/ By /s/
------------------------------------------- -------------------------------------------
Name Name
-------------------------------------- --------------------------------------
Title Title
------------------------------------- -------------------------------------
PACIFICA PARTNERS I, L.P. PILGRIM PRIME RATE TRUST
By: Imperial Credit Asset Management, as By: Pilgrim Investments, Inc., as its
its Investment Manager Investment Manager
By /s/ By /s/
------------------------------------------- -------------------------------------------
Name Name
-------------------------------------- --------------------------------------
Title Title
------------------------------------- -------------------------------------
PILGRIM AMERICA HIGH INCOME MERRILL LYNCH BUSINESS FINANCIAL
INVESTMENTS LTD. SERVICES, INC.
By: Pilgrim Investments, Inc., as its
Investment Manager
By /s/ By /s/
------------------------------------------- -------------------------------------------
Name Name
-------------------------------------- --------------------------------------
Title Title
------------------------------------- -------------------------------------
</TABLE>
Acknowledged and agreed to as of the date first above written
<TABLE>
<S> <C>
VISION TWENTY-ONE, INC.
By /s/ Richard Welch
-------------------------------------------
Name Richard Welch
--------------------------------------
Title Chief Financial Officer
--------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.68
LETTER OF INTENT
BY AND AMONG VISION TWENTY-ONE, INC. (THE "COMPANY"),
MEDEQUITY INVESTORS PARTNERS, LLC ("MEDEQUITY"),
CHASE VISION TWENTY-ONE PARTNERS, LLC ("CHASE"),
PEACHTREE VISION TWENTY-ONE PARTNERS, LLC ("PEACHTREE") AND
CHASE VENTURE CAPITAL ASSOCIATES, L.P. ("CVCA")
I. PURPOSE
Among other things, to enter into a binding letter of intent which
sets forth the terms upon which MedEquity, CVCA, Chase and Peachtree
(collectively the "Investors") will purchase equity securities of the Company.
II. SALE AND PURCHASE OF PREFERRED STOCK
Issuer: The Company
Type of Security: $35,000,000 Series A Senior Convertible
Preferred Stock (the "Preferred Stock")
Economic Terms of the
Preferred Stock: At any time before redemption, the
Preferred Stock shall be convertible into
common stock of the Company at the option
of the holders of the Preferred Stock,
subject to adjustment upon the occurrence
of certain events (see Conversion Feature
and Anti-Dilution Provisions). The
Preferred Stock will rank senior to any
other capital stock of the Company.
Conversion Feature: The conversion price per share of Preferred
Stock (the "Conversion Price") will be set
at $6.50 and shall be subject to certain
adjustments as outlined below and in
Anti-Dilution Provisions.
It is the intent of the parties that the
Company shall repurchase as soon as
reasonably practical after closing
3,000,000 shares of common stock pursuant
to its practice management divestiture
plan. If, by December 31, 2000, the Company
has not reduced the number of its
outstanding shares of common stock (on a
fully diluted basis) by at least 3,000,000
shares pursuant to such plan, the Company
will be obligated to adjust the Conversion
Price for shares of Preferred Stock based
on a pro-rata formula which takes into
account the number of outstanding shares
the Company reduces through practice
management divestitures and the relative
<PAGE> 2
percentage ownership interest in the
Company the aggregate number of shares of
Preferred Stock would have initially
represented if the number of outstanding
shares at Closing had been 3,000,000 shares
less.
Upon conversion of the Preferred Stock, the
Company will pay cash in lieu of fractional
shares based on the prevailing fair market
value of the common stock.
Dividend: The Preferred Stock shall receive a
dividend of 9.0% per annum. The dividend
will accrue or be payable in cash, at the
option of the Company on a quarterly basis.
Liquidation Preference: In the event of a liquidation of the
Company, the holders of the Preferred Stock
shall be entitled to receive, in preference
to the holders of Common Stock, a
Liquidation Preference equal to the
Original Issue Price plus any accrued but
unpaid dividends in the form of
consideration utilized. For the purpose of
this provision, a liquidation shall
include, at the option of the holders of
the Preferred Stock, the disposition of
substantially all of the assets of the
Company, whether by sale, merger or other
reorganization or by a sale of over 50% of
the ownership of the Company.
Use of Proceeds: General corporate purposes including
property and equipment, working capital,
acquisitions, payment of fees and expenses
and potentially the buyback of certain
amounts of the Company's outstanding common
stock, the terms and conditions of which
are to be as agreed to by the parties.
Registration Requirements: The holders of the Preferred Stock, as a
group, will have two demand registrations
on form S-1 and unlimited demand
registrations on form S-3 of their Common
Stock (upon conversion of the Preferred
Stock) exercisable at any time after the
Closing Date. The Company will be required
to use its best efforts to file a
registration statement on the shares within
30 days after the demand date. It is
provided that the Company shall not be
required to effect a registration of common
stock where the value of such stock is less
than $1,500,000. On one or more occasions,
the Company may suspend or delay
registration in the event of material
non-public information or where the Board
of Directors, in good faith, determines
same will be materially detrimental to the
Company; provided, however, that all such
suspensions or delays shall not exceed
customary limitations. The holders of the
Preferred Stock will also have unlimited
senior piggyback rights that would be
subject to customary underwriters cutbacks.
Reasonable expenses will be paid by the
Company.
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Corporate Governance: The holders of the Preferred Stock shall
designate and elect such number of
directors and shall have such other rights
as shall be set forth in a Board of
Director transition plan reasonably
acceptable to the Investors; provided
however that the holders of Preferred Stock
shall be entitled to designate and elect a
minimum of two directors to the Board. The
Directors appointed by the holders will
have the right to any compensation and
option or warrant packages offered to other
members of the Board of Directors,
representation on the Compensation
Committee on the Board of Directors, and
the reasonable payment of expenses related
to attending board meetings and customary
indemnification offered to all members of
the Board of Directors.
Anti-Dilution: Standard weighted average adjustment
provisions for sales of equity at prices
below the Conversion Price, determined on a
weighted average basis, provided, however,
no adjustment (a) for issuances of equity
by the Company in connection with mergers
or acquisitions transactions or (b) if the
Company issues options under option plans
approved by the Board at prices below fair
market value.
Mandatory Redemption: If not converted, the Preferred Stock is
fully redeemable at the Investors' option
at face value plus any accrued and unpaid
dividends at any time after December 31,
2005.
Professional Fees and
Expenses: Upon closing, a closing fee of 1.0% of the
Issue Price plus the reasonable
professional fees and expenses incurred
(including, without limitation, fees for
any Hart-Scott-Rodino filings) by the
Investors in connection with this offering
will be paid out of the gross proceeds from
the offering.
Representations and
Warranties: The Company will make certain
representations and warranties customary
for transactions of this type.
Affirmative Covenants: The Company will agree to certain
Affirmative Covenants and information
rights customary for transactions of this
type.
Negative Covenants: The Company will agree to certain
Negative Covenants including, but not
necessarily limited to:
(a) Limitations on the declaration or
payment of dividends on the Common Stock or
repurchase of any Common Stock (except for
certain agreed upon repurchases of Common
Stock);
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(b) Limitations on the issuance of any
equity security that is pari passu with, or
senior to, the Preferred Stock and
limitations on the incurrence of additional
indebtedness; and
(c) Limitations on amendments of the
Corporate Charter or Bylaws that are
materially adverse to the holders of the
Preferred Stock.
Voting Rights: The holders of the Preferred Stock will
vote with the Common as a single class on
an as-converted basis and, in addition,
shall have the right to vote as a class on
the following:
(a) Any material sale of the Company's
assets where the Board of Directors has
made the determination that the assets are
core to the Company's business, and any
sale of substantially all of the Company's
business;
(b) Any consolidation or merger unless the
Company is the surviving entity and the
shareholders of the Company immediately
prior to the transaction continue to hold
more than 50% of the stock after the
transaction;
(c) Liquidation or winding up of the
Company;
(d) Replacement of Theodore N. Gillette on
the Company's Senior Management Team.
On any occasion, if one of the two
representatives to the Board of Directors
appointed by the holder of the Preferred
Stock votes in favor of any of the above,
it will be deemed to be approved by the
class.
Right of Participation: If the Company privately sells any equity
securities in the future, the holders of
the Preferred Stock shall have the right to
purchase a pro-rata amount of such
securities, so long as the investors retain
25% of the original preferred shares still
outstanding.
Transactions with Affiliates: The Company will not enter into any
transactions with any affiliate unless
conducted on an arm's length basis.
Governing Law: Massachusetts.
Closing Documents: The transaction is subject to completion of
closing documents reasonably acceptable to
all parties, including but not limited to
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Preferred Stock Purchase Agreement and
Registration Rights Agreement (together the
"Transaction Documents").
Conditions Precedent
to Closing: The Investors' obligations to consummate
the transaction shall be subject to
satisfaction of the following conditions:
(a) The consummation of the transaction and
the terms of the Preferred Stock, including
without limitation the Conversion Price and
any adjustments thereto, shall not be
subject to the approval of the shareholders
of the Company.
(b) Any waiting period applicable to the
transaction under the Hart-Scott-Rodino Act
shall have terminated or expired;
(c) The Company's results for the fiscal
quarter ended September 30, 1999 shall not
be materially different than the business
plan as delivered by the Company;
(d) There shall have been no developments
in the business of the Company or any
Subsidiary which in the reasonable opinion
of the Purchasers would be likely to have a
material adverse effect on the business,
properties, prospects, operations or
financial condition of the Company and its
Subsidiaries, taken as a whole (a "Material
Adverse Effect");
(e) A reasonable determination by the
Investors that all outstanding litigation,
other than the existing shareholder class
action of McBride v. Vision Twenty-One,
Inc. et al, individually or in the
aggregate, would not result in a Material
Adverse Effect.
(f) The delivery of an amendment to the
Company's primary bank facility on terms
substantially the same form as those set
forth in the term sheet delivered to the
Investors on October 21, 1999.
The determination of whether the
aforementioned conditions to closing have
been satisfied shall be at the reasonable
discretion, severally, of MedEquity
Investors Partners, LLC, Chase Equity
Associates, L.P., Chase Venture Capital
Associates, L.P., General Electric Capital
Corporation and The Kaufmann Fund.
Information Flow: The Investors will be free to disclose any
and all information so acquired to its
agents, advisors, representatives, etc. and
potential sources of financing for the
transaction, as it deems necessary,
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provided that they acknowledge that they
are bound by Vision Twenty-One's
Confidentiality Agreement.
Non-Disclosure of Terms: The Company agrees that the terms of this
letter of intent and any subsequent
revisions of terms will remain confidential
for a period of one year from the date of
this term sheet, except as might be
necessary according to applicable
securities law or, provided further, that
the Company may disclose terms hereof to
its agents, advisors or representatives.
Confidentiality: The Confidentiality Agreement previously
executed by the parties shall remain in
full force and effect.
Public Announcements: Except as required by law or stock exchange
regulation, the Investors, the Company and
their respective representatives will not
publicly disclose the existence of this
Letter of Intent or make known publicly any
facts related to the proposed transaction
without the prior consent of the other
parties.
Prior Term Sheet: This Letter of Intent shall supersede the
term sheet entered into the parties on
August 26, 1999.
Closing: The parties shall use their reasonable best
efforts to close the transaction no later
than November 15, 1999.
Term: This Letter of Intent shall terminate in
its entirety and be of no further force and
effect as of November 30, 1999.
Agreed to this 22nd day of October, 1999.
VISION TWENTY-ONE, INC.
By: /s/ Richard T. Welch
-------------------------------
Richard T. Welch
Chief Financial Officer
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MEDEQUITY INVESTORS
PARTNERS, LLC
By: /s/ Robert W. Daly
-------------------------------
Robert W. Daly
Manager
CHASE VISION TWENTY-ONE
PARTNERS, LLC
By: MedEquity Investors, LLC
its Managing Member
By: /s/ Robert W. Daly
-------------------------------
Robert W. Daly
Manager
PEACHTREE VISION TWENTY-ONE
PARTNERS, LLC
By: MedEquity Investors, LLC
its Managing Member
By: /s/ Robert W. Daly
-------------------------------
Robert W. Daly
Manager
CHASE VENTURE CAPITAL
ASSOCIATES, L.P. by
By: Chase Capital Partners,
its General Partner
By: /s/
-------------------------------
Name: Mitchell J. Bluntt
-------------------------
Title: Executive Partner
-------------------------
7
<PAGE> 1
EXHIBIT 99.1
VISION TWENTY-ONE, INC., ANNOUNCES PLANNED $35 MILLION
EQUITY INVESTMENT TO BE CO-LED BY MEDEQUITY INVESTORS, LLC
AND CHASE CAPITAL PARTNERS - AND - EXIT OF PPM BUSINESS
LARGO, FL., OCTOBER 25, 1999 - Vision Twenty-One, Inc. (Nasdaq: EYES), announced
a number of developments substantially completing its transition to a vision
care company focused on laser vision correction and surgery centers. The Company
has entered into a binding letter of intent for an equity investment in the
Company of $35 million that will be co-led by MedEquity Investors, LLC and Chase
Capital Partners. The proceeds from the equity investment will be used to
continue the Company's aggressive development and acquisition of refractive and
ambulatory surgery centers. In addition, the new equity investment will position
the Company to restructure its existing credit facility and substantially exit
the physician practice management (PPM) business.
$35 MILLION EQUITY INVESTMENT AND RELATED CAPITAL STRUCTURE CHANGES
The transaction will consist of the sale of newly issued 9% Series A Senior
Convertible Preferred Stock (the "Preferred Stock") which will be convertible at
any time into the Company's common stock at a conversion price of $6.50 per
share, representing approximately 25% of the Company's common stock on a diluted
basis at closing, subject to adjustment. MedEquity Investors and Chase Capital
Partners will each appoint one director to the Company's Board of Directors upon
closing. Closing is expected to occur on or before November 30, 1999, and is
contingent upon the satisfaction of customary closing conditions and Hart Scott
Rodino approval.
Vision Twenty-One disclosed additional positive information regarding its
capital structure. The Company announced it has tentatively agreed on a term
sheet with Bank of Montreal, the Agent Bank, whereupon simultaneous with the
closing of the equity investment, the Company's $48 million credit facility will
be amended. The Company also received a waiver for certain items in anticipation
of finalizing the amendment to the bank credit FACILITY. The modifications to
the existing facility are expected to provide the Company with increased
financial flexibility and a procedure for the release of collateral upon
divestiture of practice groups under management pursuant to its PPM exit plan.
Theodore N. Gillette, Chief Executive Officer of Vision Twenty-One, Inc., was
pleased with the latest developments regarding the Company's expected equity
partners and future capital structure. "Partnering with Chase Capital Partners
and MedEquity Investors will provide us with more than just capital - it gives
us access to additional experience, expertise, and global relationships which we
believe will bring us immeasurable benefits both in the short- and long-term.
The equity investment and bank credit facility amendment coupled with our recent
divestitures will significantly de-leverage the balance sheet and provide
significant capital to execute the current business plan."
<PAGE> 2
"Vision Twenty-One is the type of Company we seek to expand our portfolio with,"
said Robert W. Daly, Managing Director of MedEquity Investors. "Laser vision
correction will be one of the most extraordinary investment opportunities
throughout healthcare. Following extensive analysis and diligence, we have
identified Vision Twenty-One as the best strategically positioned Company to
build into a world class leader in this sector."
W. Brett Ingersoll, Principal of Chase Capital Partners also shared his thoughts
supporting the transaction by stating "Chase Capital Partners' long track record
of successful private equity investing is due in large part to our backing of
outstanding management teams. We believe that Vision Twenty-One management has
positioned the Company for extraordinary growth and we are very excited to put
Chase Capital Partners' global resources and experience behind the Vision
Twenty-One organization."
PLANNED EXIT FROM PPM BUSINESS AND RELATED STRATEGIC RESTRUCTURING
The Company additionally announced, subject to completion of the capital
structure changes, it has developed an initial plan to substantially exit the
business of managing practices of optometry and ophthalmology. This is a crucial
step in the Company's strategy of redirecting its corporate resources towards
developing refractive eye laser and surgery center initiatives in these same
markets. The Company expects the majority of the affected physicians to continue
to be part of the Vision Twenty-One national eye care delivery network and/or
participate in its eye laser and surgery center initiatives. The exit of the PPM
business is expected to be accomplished through the sale of the practice assets
back to the physicians or affiliates, the restructuring of the individual
operating models to focus substantially on refractive surgery, and the
discontinuation of select managed care contracts that are not consistent with
the business plan.
As part of the strategic restructuring, the Company substantially completed its
previously announced integration plan and related organizational changes, as it
eliminated over 70 positions and completed the retail chain divestiture in
September 1999.
These actions will result in charges being incurred in both the third and fourth
quarters. The Company expects to recognize an expense of approximately $1
million in the third quarter related to the termination of managed care
contracts and severance expenses. In the fourth quarter, the Company expects to
record a restructuring charge of up to $35 million related to the sale of
practice assets. If successful, the Company could receive back and retire up to
3 million shares in connection with the transactions.
"As a doctor-centered Company, we are uniquely positioned to successfully
transition our physician affiliation model from owning and managing practices to
one of partnering in the development of eye laser and surgery centers. This
narrows our focus, leverages our core competencies and positions us to create
substantial shareholder value in the year 2000 and beyond," said Mr. Gillette.
Vision Twenty-One , Inc. is a vision care Company focused on the development of
refractive eye laser and surgery centers. The Company is headquartered in Largo,
FL., and maintains regional offices in Phoenix, Minneapolis and Somerset, NJ.
For more Company information, visit our Web site at www.vision21.com.
<PAGE> 3
MedEquity Investors, LLC, a private equity firm based in Wellesley Hills, MA,
provides equity investments for emerging private and publicly-traded healthcare
companies. The firm recently formed a $100 million direct investment program
with Chase Capital Partners, GE Capital Healthcare Finance Group and The
Kaufmann Fund. For more Company information, visit their Web site at
www.medequity.com.
Chase Capital Partners is a global private equity investment partnership with
over $10.0 billion under management. Chase Capital Partners is a leading
investor of private equity capital and has closed over 900 individual
transactions, including over 85 in the health care sector since inception. In
the past two years, Chase Capital Partners has invested approximately $550
million in the health care sector alone. The firm's primary limited partner is
The Chase Manhattan Corporation, one of the largest bank holding companies in
the United States with total assets of $371 billion. For more information about
Chase Capital Partners refer to their web site at www.chasecapital.com.
The Company's investment advisor in the transaction is Paine Webber
Incorporated. Other investors in the transaction will include GE Capital Health
Care Finance Group and The Kaufmann Fund.
###
This press release contains statements, which may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various factors
as set forth from time to time in the Company's filings with the SEC, including
the Form 8-K to be filed in connection with this release. The Company undertakes
no obligation to publicly update or revise the forward-looking statements made
in this press release to reflect events or circumstances after the date of this
press release or to reflect the occurrence of unanticipated events.
CONTACTS:
<TABLE>
<S> <C>
VISION TWENTY-ONE, INC. CHASE CAPITAL PARTNERS
Theodore N. Gillette W. Brett Ingersoll
Chief Executive Officer Principal
(727) 545-4300, ext. 2103 (212) 622-3672
Richard T. Welch MEDEQUITY INVESTORS, LLC
Chief Financial Officer Robert W. Daly
(727) 545-4300, ext. 2118 Managing General Partner
(781) 237-6910
Heidi Hart
Investor Relations
(727) 545-4300, ext. 2124
</TABLE>
