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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): DECEMBER 18, 1997
OMEGA HEALTH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19283 63-0858713
(Commission File Number) (I.R.S. Employer Identification No.)
5100 POPLAR AVENUE, SUITE 2100, MEMPHIS, TENNESSEE 38137
(Address of principal executive offices, including Zip Code)
(901) 683-7868
(Registrant's telephone number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 18, 1997, Omega Health Systems of Ohio, Inc. (Omega-Ohio), a
wholly-owned subsidiary of the Registrant, acquired the outstanding stock of
Central Ohio Eye Institute, Inc., an Ohio professional corporation which had
practiced ophthalmology and operated an ambulatory surgery center. Subsequent to
the merger, Omega-Ohio entered into a long-term management agreement with a new
professional corporation owned by Harmeet S. Chawla, M.D. to carry on the
practice formerly conducted by Central Ohio Eye Institute and to managed the
ambulatory surgery center. The consideration for the merger consisted of 463,000
shares of the Registrant's common stock and cash of approximately $5,000,000.
The Registrant financed the cash portion of this transaction with borrowings
under its Revolving Credit Facility with NationsCredit Commercial Corporation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of the Business Acquired and Pro Forma
Financial Statements
To be filed by amendment within 60 days of the date that this report
is due.
(b) Exhibits
2.1 Press Release dated December 22, 1997
2.2 Stock Purchase Agreement
2.3 Stock Pledge and Escrow Agreement
2.4 Stock Restriction and Registration Rights Agreement
SIGNATURES
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.
OMEGA HEALTH SYSTEMS, INC.
Dated: January 2, 1998 By: /s/ Ronald L. Edmonds
-------------------------------
Ronald L. Edmonds
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
SEQUENTIALLY
<TABLE>
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EXHIBIT
NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
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<S> <C> <C>
2.1 Press Release dated December 22, 1997
2.2 Stock Purchase Agreement
2.3 Stock Pledge and Escrow Agreement
2.4 Stock Restriction and Registration Rights Agreement
</TABLE>
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EXHIBIT 2.1
PRESS RELEASE
Omega Completes Affiliation With Central Ohio Eye Institute
MEMPHIS, Tenn., Dec. 22 -- Omega Health Systems, Inc. (Nasdaq: OHSI) today
announced that it has completed the acquisition of the assets of the
ophthalmology practice of Harmeet S. Chawla, MD and its associated ambulatory
surgery center. Omega also entered into a long-term agreement to manage the
practice, known as Central Ohio Eye Institute, and the surgery center.
Dr. Chawla received his medical degree from the Medical College of Virginia
and completed his residency at the University of Illinois Eye and Ear Infirmary.
Board certified in ophthalmology, he previously served as chief of surgery at
the Berger Hospital in Circleville and was an assistant clinical professor of
ophthalmology at Ohio State University. He is a member of both the American
Academy of Ophthalmology and the American Society of Cataract and Refractive
Surgery.
The practice and associated surgery center are estimated to have combined
revenues of approximately $3.7 million in 1997. In addition to the main office
in Circleville, Ohio, Central Ohio Eye Institute also operates five satellite
offices in the southeast Ohio area. Two other surgeons are also associated with
the practice.
"We are delighted to have Dr. Chawla and his colleagues affiliate with
Omega," commented Thomas P. Lewis, president and chief executive officer of
Omega. "His collaborative relationship with area optometrists aligns well with
Omega's culture, and we believe Omega can add value to the practice operations."
Omega Health Systems is a multifaceted eye care company that provides a
broad range of practice management and other services to ophthalmologists and
optometrists to assist in the integration of primary, medical and surgical eye
care. The Company emphasizes cooperative professional relationships between
ophthalmologists and optometrists in the formation of integrated eye care
networks and co-management of patient care.
CONTACT: Thomas P. Lewis, President & CEO, or Ronald L. Edmonds,
Executive Vice President & CFO, Omega Health Systems, Inc.,
901-683-7868
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into as
of this 16th day of December, 1997 by and between HARMEET S. CHAWLA, M.D., a
citizen and resident of Ohio ("Seller"), OMEGA HEALTH SYSTEMS, INC, a Delaware
corporation ("Omega") and OMEGA HEALTH SYSTEMS OF OHIO, INC., an Ohio
corporation ("Buyer").
RECITALS
WHEREAS, Seller is the sole shareholder in Central Ohio Eye Institute,
Inc., an Ohio corporation (the "Corporation");
WHEREAS, Buyer is a wholly owned subsidiary of Omega;
WHEREAS, Seller has agreed to sell all of Seller's stock (the "Shares")
in the Corporation, and Buyer has agreed to purchase the Shares; and
WHEREAS, Seller is the sole shareholder of Eye Associates, Inc., an
Ohio professional corporation (the "Practice"), and Seller will transfer all of
the Excluded Assets (defined herein) and the medical assets and business of the
Corporation to the Practice; and
WHEREAS, in connection with that certain Management Agreement, dated as
of December 16, 1997, and entered into by and between the Practice and Buyer
(the "Management Agreement"); Seller desires Buyer to provide, and Buyer has
agreed to provide management services to the Practice.
NOW, THEREFORE, in consideration of the Recitals (which are
incorporated into and deemed a part of this Agreement), the covenants and
agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by the
parties, the parties agree as follows:
SECTION 1. PURCHASE AND SALE OF SHARES
1.1 AGREEMENT TO PURCHASE AND SELL. Effective as of December
16, 1997, and upon the terms and subject to the conditions set forth in this
Agreement, Seller shall sell, assign, transfer, convey and deliver all of
Seller's rights, title and interest in and to the Shares to Buyer, and Buyer
shall purchase and accept the Shares.
1.2 CLOSING DATE. The closing of the purchase and sale and the
exchange contemplated herein (the "Closing") shall take place at such time and
place as the parties hereto may agree in writing (the "Closing Date"). The
parties agree that the Closing Date shall be
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extended, if required, to allow either party to fulfill any condition of this
Agreement, but in no event shall the Closing be extended beyond December 31,
1997, unless agreed in writing by Seller and Buyer.
1.3 TRANSFER OF THE SHARES. Effective as of the Closing Date, Seller
shall sell, transfer, assign, grant, deliver and convey to Buyer all of Seller's
right, title and interest in and to the Shares, free and clear of any lien,
pledge, charge, security interest or encumbrance of any nature ("Lien") by
delivery by Seller to the Buyer of the stock certificates representing the
Shares duly endorsed in blank for transfer or accompanied by appropriate stock
powers duly executed in blank, with all transfer taxes, direct or indirect,
attributable to the transfer of the Shares paid or provided for.
1.4 EVIDENCE OF TRANSFER. At the Closing and thereafter, as Buyer may
from time to time request, Seller shall execute and deliver to the Buyer such
documents and instruments of conveyance as may be appropriate and shall take or
cause to be taken such actions as Buyer may reasonably request in order to
accomplish the transfer of the Shares, and the consummation of the matters
contemplated by this Agreement. All such documents shall be in form reasonably
satisfactory to Buyer.
1.5 PAYMENT OF PURCHASE PRICE. At the Closing, in consideration for the
Shares, Buyer and Omega shall pay to Seller the Purchase Price set forth in
Section 2.1 hereof.
SECTION 2. CONSIDERATION
2.1 AMOUNT OF CONSIDERATION. The purchase price for the Shares shall be
$8,525,000 plus an additional amount equal to the Contingent Consideration
(defined below) paid pursuant to Section 2.3 herein (the "Purchase Price"). The
Purchase Price shall be paid as follows: at the Closing, the Buyer shall deliver
to the Seller (i) $5,000,000.00 in cash in the form of either a wire transfer or
certified funds and (ii) an amount of shares of Common Stock of Omega (the
"Omega Stock") equal to (a) $3,525,000.00 divided by (b) $7.61, the weighted
average closing price of Omega Common Stock for the twenty (20) trading days
ending December 15, 1997, as quoted through NASDAQ. The Omega Stock will be
subject to restrictions on resale as set forth in the Stock Restriction and
Registration Rights Agreement in substantially the form attached hereto as
Exhibit 2.1 (the "Stock Restriction Agreement"). Seller acknowledges that Buyer
has delivered at Closing certificates representing 440,625 shares of Omega
Stock. Buyer shall deliver to Seller a certificate for the remaining 22,581
shares of Omega Stock on or before December 22, 1997.
2.2 REFERRALS. The parties agree that nothing in this Agreement is
intended to violate state or federal health care laws or regulations including,
but not limited to, those listed in Section 3.9 herein, nor shall any portion of
the consideration be construed as a payment for or inducement of the referral of
patients. Seller shall be free to refer patients to whomever it sees fit in the
exercise of professional judgment, according to the convenience or preference of
the patient, or otherwise.
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2.3 CONTINGENT CONSIDERATION. As additional consideration for the
Shares, the Buyer and Omega shall pay the Seller additional consideration (the
"Contingent Consideration") determined as described below and subject to the
terms, conditions and provisions of this Section 2.3:
(a) On a monthly basis, and in accordance with the provisions of
the Management Agreement, the Buyer shall determine the
Practice's Net Earnings (as defined in, and determined in
accordance with the provisions of, the Management Agreement)
before payment of the Service Fee and the Administration Fee
(as such terms are defined in the Management Agreement) (the
"Contingent Consideration Earnings").
(b) Within twenty (20) days of the end of each month, the Buyer
and Omega shall pay the Seller an amount equal to twenty
percent (20%) of the Contingent Consideration Earnings,
subject to the terms and conditions described herein.
(c) The Contingent Consideration shall be paid monthly until the
earlier of (i) ninety (90) months from the date hereof, (ii)
the Buyer and Omega shall have paid to the Seller cumulative
Contingent Consideration of $4,000,000.00, which amount shall
be increased by the amount of any payments actually made by
Seller to Buyer pursuant to Section 2.10 of the Management
Agreement or (iii) termination of the Management Agreement
pursuant to the terms and provisions thereof.
(d) In no event shall payment of the Contingent Consideration
reduce the Buyer's aggregate Service Fee and Administration
Fee (as defined in the Management Agreement) below (a)
$1,470,000.00 in any given year that Dr. Chawla is no longer
an employee of the Practice or that the Management Agreement
has been terminated or (b) $1,102,851.00 in any given year
that Dr. Chawla remains employed by the Practice and the
Management Agreement continues to be in full force and effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants and agrees with Buyer that:
3.1 NUMBER OF, TITLE TO THE SHARES. The entire authorized capital stock
of the Corporation consists of 750 shares, no par value, of which 100 shares are
issued and outstanding, all of which are owned by Seller. All of the issued and
outstanding Shares have been duly authorized, are validly issued, fully paid,
and nonassessable, and are held of record by Seller. Seller owns beneficially
and of record, and has good and marketable title to, the Shares and shall convey
the Shares to Buyer free and clear of all Liens. As of the Closing Date, Buyer
will acquire good and marketable title to the Shares, free and clear of all
Liens. Seller further warrants that the Corporation is no longer organized as a
professional corporation under Ohio law, that the Corporation is now a business
corporation organized under Ohio law, and that the Shares may be legally
transferred to Buyer.
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3.2 EXISTENCE AND GOOD STANDING. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. The Corporation has the power to own its property and to carry on its
business as now being conducted. Ohio is the only jurisdiction in which the
character or location of the properties owned or leased by the Corporation or
the nature of the business conducted by the Corporation makes such qualification
necessary.
3.3 OPTIONS AND OTHER RIGHTS. There are no outstanding options,
warrants, agreements, calls, conversion rights or other rights to subscribe for,
purchase or otherwise acquire any of the Shares or providing for the purchase,
issuance or sale of any shares of capital stock of the Corporation.
3.4 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Seller has the full
legal right, power and capacity, and all authority and approval required to
enter into, execute and deliver this Agreement and to perform and observe fully
Seller's obligations hereunder and to perform the transactions contemplated
hereby. This Agreement has been fully executed and delivered by Seller and is
the valid and binding obligation of Seller enforceable in accordance with its
terms.
3.5 (a) Taxes. Seller has paid, or will pay on or prior to any
applicable due date, all income, employment and other taxes and duties accrued
or owed by Seller in connection with the Shares.
(b) The Corporation has filed all federal, state, local, municipal or
other tax returns ("Tax Returns") that it was required to file. All such Tax
Returns were correct and complete in all material respects. All federal, state,
local, municipal, or other income, employment, and other taxes ("Taxes") owed by
the Corporation (whether or not shown on any Tax Return) through the Closing
Date have been duly paid. All unpaid Taxes of the Corporation will not, as of
the Closing Date, exceed the amount set forth on Schedule 3.15 identified as
"Taxes." The Corporation is not the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where the Corporation does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Liens on any of the
assets of the Corporation that arose in connection with any failure (or alleged
failure) to pay any Tax.
(c) The Corporation has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
3.6 LITIGATION. There are no judgments unsatisfied against Seller or
the Corporation or consent decrees or injunctions to which Seller or the
Corporation is subject. Except as set forth on Schedule 3.6 hereto, neither
Seller nor the Corporation is a party to any pending action, suit, proceeding or
investigation, at law or in equity, or otherwise in, for or by any court or
governmental board, commission, agency, department or officer arising from the
acts of Seller or of the Corporation or initiation thereof by Seller or the
Corporation. Neither Seller nor the
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Corporation is subject to any order, judgment, decree or governmental
restriction which adversely affects the Shares or which would prevent the
transactions contemplated by this Agreement. Neither Seller nor the Corporation
is in violation of any law, order, writ, injunction or decree of any court,
governmental department or instrumentality (including, without limitation,
applicable environmental protection legislation and regulations). There is no
claim, action or proceeding now pending or, to the knowledge of Seller,
threatened against Seller or the Corporation which will, or could, prevent or
delay consummation of the transactions contemplated by this Agreement or have a
material adverse effect on the Corporation. Each of the matters listed on
Schedule 3.6 is covered by insurance, and the responsible insurance company has
not taken a reservation with regard to such claims or made any other indication
that it will not pay any related expenses or judgments. None of the matters
listed on Section 3.6 will have a material adverse effect on the Corporation.
3.7 NO VIOLATION OF CONTRACTS OR OTHER AGREEMENTS. Neither the
execution or delivery of this Agreement nor the consummation of this transaction
will: (i) conflict with, constitute a breach, violation or termination of any
provision of the Articles of Incorporation or Bylaws of the Corporation or of
any contract or other agreement to which either the Seller or the Corporation is
a party or by which either the Seller or the Corporation is bound; (ii) result
in the creation or imposition of any Lien against the Shares or any assets of
the Corporation; or (iii) violate any law, regulation, judgment, rule, order or
any other restriction of any kind or character applicable to the Seller, the
Corporation, or the Shares.
3.8 HEALTHCARE COMPLIANCE. Either the Seller or the Corporation is
participating in or otherwise authorized to receive reimbursement from or is a
party to Medicare, Medicaid, and other third-party payor programs. Except as
listed on Schedule 3.8, all necessary certifications and contracts required for
participation in such programs are in full force and effect and have not been
amended or otherwise modified, rescinded, revoked or assigned as of the date
hereof, and to the best knowledge of Seller no condition exists or event has
occurred which in itself or with the giving of notice or the lapse of time or
both would result in the suspension, revocation, impairment, forfeiture, or
non-renewal of any such third-party payor program. To the best of Seller's
knowledge, Seller and the Corporation are in full compliance with the
requirements of all such third-party payor programs applicable thereto.
3.9 FRAUD AND ABUSE. The Corporation, Seller and persons and entities
providing professional services for Seller have not engaged in any activities
which are prohibited under 42 U.S.C. ss. 1320a-7b, or the regulations
promulgated thereunder pursuant to such statutes, or related state or local
statues or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following:
(a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application
for any benefit or payment;
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(b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(c) failing to disclose knowledge by a claimant of the
occurrence of any event effecting the initial or continued right to any
benefit or payment on his own behalf or on behalf of another, with
intent to fraudulently secure such benefit or payment; or
(d) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate) directly or
indirectly, overtly or covertly, in cash or in kind or offering to pay
or receive such remuneration (i) in return for referring an individual
to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (ii) in return for purchasing, leasing, or
ordering or arranging for or recommending purchasing, leasing, or
ordering any good, facility, service or item for which payment may be
made in whole or in part by Medicaid or Medicare.
3.10 ACCURACY AND MATERIALITY. No representation or warranty of Seller
contained in this Agreement or any other document prepared by Seller or the
Corporation and delivered to Buyer in connection with this Agreement contains
any untrue statement of a material fact, or fails to state any material fact
necessary in order to make the statements made in this Agreement or such
document not misleading. Each of the representations, warranties and covenants
contained in this Section 3 shall be deemed to be material to and have been
relied upon by Buyer, and shall be binding and enforceable, notwithstanding any
independent investigation made by Buyer.
3.11 REVIEW AND CONSULTATION. Seller has had access to and reviewed
such information and has consulted with all legal counsel, tax counsel,
accountants and other experts and advisors deemed necessary by Seller in
connection with the transactions contemplated herein.
3.12 BROKER FEES. Neither Seller nor the Corporation has utilized the
services of a broker in connection with this transaction, and neither Seller nor
the Corporation has any liability or obligation to pay any fee or commission to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
3.13 PRACTICE ASSETS. Attached hereto as Schedule 3.13 is a true and
complete list of all of the non-cash assets, including leases to which the
Corporation is a party, of the Corporation at Closing Date (the "Practice
Assets"). The Corporation has and at the Closing will have good title,
unencumbered by any Lien (except the UCC-1 Financing Statement in favor of Storz
Instrument Co. and the Lease and Service Agreement between Seller and Berger
Hospital dated April 13, 1995, the outstanding amount of which, as of the
Closing Date, shall be paid off by Seller within two (2) days of the Closing),
to all of the Practice Assets. The Practice Assets will be updated at Closing,
and supplies and inventories at Closing will be at levels greater than or equal
to the Closing Date levels.
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3.14 FINANCIAL STATEMENTS. The Corporation has heretofore furnished the
Seller with unaudited financial statements dated December 31, 1996, and July 31,
1997 (the "Compiled Financial Statements") all of which are attached hereto as
Schedule 3.14. The Compiled Financial Statements, including the notes thereto,
except as indicated therein, were prepared as compiled statements, and as such
were consistent with past accounting practices of the Corporation and accurately
reflect the results of operations for the periods noted therein. The balance
sheets of the Corporation heretofore delivered (or to be delivered) by the
Corporation to the Seller and which are included in the Compiled Financial
Statements fairly present the financial condition of the Corporation based upon
a cash basis of accounting at the respective dates thereof, and except as
indicated therein, reflect all claims against and all debts and liabilities of
the Corporation, fixed or contingent, as of the respective dates thereof. Since
July 31, 1997 there has been (i) no material adverse change in the assets or
liabilities, financial or otherwise, or in the results of operations of the
Corporation, and (ii) no fact or condition known to the Corporation or Seller
which exists or is contemplated or threatened which might cause such a change in
the future.
3.15 LIABILITIES. Attached hereto as Schedule 3.15 is a true and
complete list at the Closing Date of the Corporation's debts, liabilities, or
obligations, whether contingent, nonasserted, or nonaccrued, of any type or
nature, including obligations on contracts, leases, written or oral, employee
benefits, or state or federal tax obligations (the "Corporate Liabilities").
Except for the Corporate Liabilities, the Corporation does not have, and at the
Closing Date will not have, any debts or obligations, contingent or otherwise,
related to the conduct of the Corporation's business prior to the Closing Date,
except as may be reserved for on Schedule 3.15.
3.16 INSURANCE; MALPRACTICE CLAIMS. Since January 1, 1993, the
Corporation and its professional employees have been continuously insured for
professional malpractice claims. Attached as Schedule 3.16 is a list and brief
description of all policies or binders of malpractice, fire, liability, product
liability, workers compensation, health and other forms of insurance policies or
binders currently in force insuring against risks which will remain in full
force and effect after the Closing Date. None of Seller, the Corporation or the
Corporation's professional employees is in material default with respect to any
provision contained in any such policy, and none of them has failed to give any
notice or present any claim under any such policy in due and timely fashion.
Included in Schedule 3.16 is a list of all insurance claims filed by the
Corporation or any of its professional employees since December 31, 1993.
Neither the Corporation nor any of its professional employees is in violation or
default of any provision contained in any insurance policy for their benefit,
and neither has failed to give any required notice or timely present any claim
under any such policy.
3.17 GOVERNMENTAL APPROVALS. The Corporation and all professionals
employed by it have all permits and licenses required by all applicable laws and
regulations and are not in violation of any such applicable laws or regulations.
The Corporation is duly licensed, and the Corporation and its clinics, offices
and facilities are lawfully operated, in accordance with the requirements of all
applicable laws and certificates of need and has all necessary authorizations
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and certificates of need for their use and operation, all of which are in full
force and effect. There are no outstanding notices of deficiencies relating to
the Corporation or any physician employed thereby issued by any governmental
authority or third party payor requiring conformity or compliance with any
applicable law or condition for participation of such governmental authority or
third party payor, and after reasonable and independent inquiry and due
diligence and investigation, the Corporation has no knowledge or reason to
believe that such necessary authorizations may be revoked or not renewed in the
ordinary course of business.
3.18 THIRD-PARTY RELATIONS. Neither Seller nor the Corporation is aware
of any problem or disagreements with any third parties with which it does
business and the Corporation will use its best efforts from the date of this
Agreement until the Closing Date to operate its business in such a manner so as
not to adversely affect the goodwill of their patients, suppliers, employees,
associated physicians and other such persons or third parties with which the
Corporation does business.
3.19 TRADE RELATIONS. There exists no actual or, to the best knowledge
of the Seller, threatened, limitation of the business relationship of the
Corporation with any material customer, supplier or landlord or with any person
whose contracts or projected contracts with the Corporation would be material to
the operations of the Corporation. There exists no condition or state of facts
or circumstances which, to the best knowledge of the Seller, could result in the
occurrence of a material adverse effect with respect to the Corporation or
prevent Buyer from conducting its business after the consummation of the
transactions contemplated by this Agreement as such business is conducted or
proposed to be conducted.
3.20 MATERIAL CONTRACTS. Except as set forth on Schedule 3.20, the
Corporation is not bound by (a) any agreement, contract, or commitment relating
to the employment of any person by the Corporation, or any loans, deferred
compensation, incentive compensation, pension, profit sharing, retirement, or
other employee benefit plan, (b) any loan or advance to, or investment in, any
other person or entity, or any agreement, contract, or commitment relating to
the making of any such loan, advance, or investment, (c) any guarantee or other
contingent liability in respect of any indebtedness or obligation of any other
person or entity, (d) any agreement, contract, or commitment limiting the
freedom of the Corporation or any of its physicians to practice medicine in any
location or to compete with any other person or entity, or (e) any other
agreement, contract, or commitment which is material to the business of the
Corporation. Except as set forth in Schedule 3.20, to the best of Seller's
knowledge each contract or agreement set forth in Schedule 3.20 is in full force
and effect, and there exists no default or event of default or event,
occurrence, condition, or act which, with the giving of notice, the lapse of
time, or the happening of any other event or condition, would become a default
or event of default thereunder, which would have a material adverse effect upon
the Corporation. Except as set forth in Schedule 3.20, to the best of Seller's
knowledge, the Corporation has not violated any of the terms or conditions of
any contract or agreement set forth in Schedule 3.20 in any material respect,
and to Seller's best knowledge, all of the covenants to be performed by any
other party thereto have been fully performed. No
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consent of any third party is required to consummate the transactions
contemplated by this Agreement.
3.21 EMPLOYEE BENEFIT PLANS. (a) Schedule 3.21 contains an accurate and
complete list of all employee benefit plans ("Employee Benefit Plans") of the
Corporation within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not any Employee Benefit
Plans are otherwise exempt from the provisions of ERISA, established, maintained
or contributed to by the Corporation (including all employers (whether or not
incorporated) which by reason of common control are treated together with the
Corporation and/or the Seller as a single employer within the meaning of Section
414 of the Code) since September 2, 1974.
(b) The Corporation has never maintained and does not now maintain or
contribute to any Employee Benefit Plan subject to ERISA which is not in
substantial compliance with ERISA, or which has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code, or which has
applied for or obtained a waiver from the Internal Revenue Service of any
minimum funding requirement under Section 412 of the Code or which is subject to
Title IV of ERISA. The Corporation has not incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC") in connection with any Employee Benefit
Plan covering any employees of the Corporation or ceased operations at any
facility or withdrawn from any such Plan in a manner which could subject it to
liability under Section 4062(f), 4063 or 4064 of ERISA, and Stockholder knows of
no facts or circumstances which might give rise to any liability of the
Corporation to the PBGC under Title IV of ERISA which could reasonably be
anticipated to result in any claims being made against the Corporation by the
PBGC. The Corporation has not incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
4201 and 4202 of ERISA, to any Employee Benefit Plan which is a Multiemployer
Plan (as defined in Section 4001 of ERISA), and no event has occurred, and there
exists no condition or set of circumstances, which represent a material risk of
the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which would result in any
liability of the Corporation.
(c) Full payment has been made of all amounts which the Corporation is
required, under applicable law or under any Employee Benefit Plan or any
agreement relating to any Employee Benefit Plan to which the Corporation is a
party, to have paid as contributions thereto as of the last day of the most
recent plan year of such Employee Benefit Plan ended prior to the date hereof.
The Corporation has made adequate provision for reserves to meet contributions
that have not been made because they are not yet due under the terms of any
Employee Benefit Plan or related agreements. Benefits under all Employee Benefit
Plans are as represented and have not been increased subsequent to the date as
of which documents have been provided.
(d) Each Employee Benefit Plan intended to be qualified under Section
401(a) of the Code has been determined to be so qualified by the Internal
Revenue Service, and nothing has occurred
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since the date of the last such determination which resulted or is likely to
result in the revocation of such determination.
(e) The Corporation has not engaged in any transaction with respect to
the Employee Benefit Plans which would subject it to a material tax, penalty or
liability for prohibited transactions under ERISA or the Code nor have any of
its directors, officers or employees to the extent they or any of them are
fiduciaries with respect to such plans, breached any of their responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA which would
result in any material claim being made under or by or on behalf of any such
plans by any party with standing to make such claim.
(f) The Corporation presently does not maintain any Employee Benefit
Plans or any other foreign pension, welfare or retirement benefit plans other
than those listed on Schedule 3.21.
(g) The Corporation has delivered or caused to be delivered to Buyer
true and complete copies of (i) all Employee Benefit Plans as in effect,
together with all amendments thereto which will become effective at a later
date, as well as the latest IRS determination letter obtained with respect to
any such Employee Benefit Plan qualified under Section 401 or 501 of the Code,
and (ii) the most recently filed Form 5500 for each Employee Benefit Plan
required to file such form.
3.22 INVESTMENT INTENT. Seller and the Corporation acknowledge that the
Omega Stock has not been registered under the 1933 Act, and that the Omega Stock
may not be sold, pledged or otherwise transferred absent such registration, or
unless an exemption from registration is available. The Seller is acquiring the
Omega Stock for his own account, for investment purposes only and not with a
view to distribution of such Omega Stock within the meaning of Section 2(11) of
the 1933 Act. The Seller qualifies as an "accredited investor," as defined in
Rule 501(a) pursuant to the 1933 Act. The Seller has received from Omega a copy
of Omega's Form 10-K for 1995 and 1996, Omega's 10-Q for the quarter ended
September 30, 1997, Omega's Proxy Statement in connection with its Annual
Meeting held August 8, 1997, and Omega's 1995 and 1996 Annual Report to
Shareholders. The Seller has had the opportunity to ask questions of and receive
answers and other additional information from Omega senior management concerning
Omega and the terms and conditions of this investment by the Seller.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer and Omega, jointly and severally, represent, warrant and agree
with Seller that:
4.1 CONTRACTS OR OTHER AGREEMENTS. Neither the execution or delivery of
this Agreement nor the consummation of this transaction will: (i) conflict with,
constitute a breach, violation or termination of any provision of the Articles
of Incorporation or Bylaws of either Buyer or Omega or any contract or other
agreement to which Buyer or Omega is a party or by which it
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<PAGE> 11
is bound; or (ii) violate any law, regulation, judgment, rule, order or any
other restriction of any kind or character applicable to Buyer or Omega.
4.2 REVIEW AND CONSULTATION. Buyer has had access to and reviewed such
information and has consulted with all legal counsel, tax counsel, accountants
and other experts and advisors deemed necessary by Buyer in connection with the
transactions contemplated herein.
4.3 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Each of Omega and Buyer
has the full legal right, power and capacity, and all authority and approval
required to enter into, execute and deliver this Agreement and to perform and
observe fully its obligations hereunder and to perform the transactions
contemplated hereby. This Agreement has been fully executed and delivered by
each of Omega and Buyer and is the valid and binding obligation of Buyer
enforceable in accordance with its terms.
4.4 OWNERSHIP. Buyer is a wholly-owned subsidiary of Omega.
4.5 LITIGATION. Other than that set forth on Schedule 4.5, there is no
suit, action, proceeding at law or in equity, arbitration, administrative
proceeding or other proceeding by any governmental entity pending or to the best
of Buyer's knowledge, threatened against, or affecting Buyer, and to the best of
Buyer's knowledge there is no basis for any of the foregoing.
4.6 AUTHORITY TO ISSUE OMEGA STOCK. Omega has the full legal right,
power and capacity, and all authority and approval required to issue the Omega
Stock.
4.7 SECURITIES FILINGS. All reports and statements filed with respect
to Omega pursuant to the Securities Act of 1933 (the "Securities Act") or the
Securities Exchange of 1934 (the "Exchange Act") conform to the requirements of
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder and did not include at the time of filing such document
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
4.8 GOVERNMENTAL APPROVALS. Buyer has all permits and licenses required
by all applicable laws and regulations and is not in violation of any such
applicable laws or regulations. Buyer is duly licensed, and Buyer and its
clinics, offices and facilities are lawfully operated, in accordance with the
requirements of all applicable laws and certificates of need and has all
necessary authorizations and certificates of need for their use and operation,
all of which are in full force and effect. There are no outstanding notices of
deficiencies relating to Buyer issued by any governmental authority or third
party payor requiring conformity or compliance with any applicable law or
condition for participation of such governmental authority or third party payor,
and after reasonable and independent inquiry and due diligence and
investigation, Buyer has no
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<PAGE> 12
knowledge or reason to believe that such necessary authorizations may be revoked
or not renewed in the ordinary course of business.
4.9 Buyer does not have any liability or obligation to pay any fees to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement other than to Mark Wagner.
SECTION 5. CONDITIONS AND ADDITIONAL AGREEMENTS.
5.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The Closing and all
obligations of Buyer pursuant to this Agreement shall be conditioned upon the
following:
(a) All representations and warranties contained in Section 3
shall be true and correct as of the date of this Agreement and as of
the Closing Date;
(b) There shall have been no material change in the Practice
Assets, Corporate Liabilities, financial condition or business of the
Corporation from the date of this Agreement through the Closing Date;
(c) Seller shall have executed and delivered to the Buyer the
stock certificates pursuant to Section 1.3 of this Agreement;
(d) Seller shall have performed all of his obligations under
this Agreement required to be performed as of the Closing Date,
including, but not limited to delivery of all documents set forth in
Section 5.4;
(e) Seller shall have executed and delivered to the Buyer
originals of the Management Agreement, the Employment Agreement, the
Stock Pledge and Escrow Agreement, the Noncompetition and
Nonsolicitation Agreement and the Stock Restriction Agreement;
(f) Any licenses required by law for the operation of the
Corporation shall be in good standing and all regulatory requirements
shall have been met in connection with the sale of the Shares to ensure
the continued operation of the Corporation following the sale of the
Shares;
(g) Seller and the Corporation shall have caused to be
transferred to the Practice all of the assets listed on Schedule 5.1
attached hereto, including, without limitation, all Employee Benefit
Plans (which plans must be transferred or terminated prior to the
Closing); and
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<PAGE> 13
(h) Buyer shall be satisfied with its "due diligence" review
of the Corporation.
In the event Buyer reasonably believes prior to the Closing Date that
any of the foregoing conditions is not satisfied, then Buyer shall notify Seller
in writing and Seller shall cure such to the reasonable satisfaction of Buyer.
If Seller does not cure in thirty (30) days, then Buyer may, at its option,
terminate this Agreement, in which event Buyer shall be relieved of all
obligations hereunder, and this Agreement shall be deemed null, void and of no
force or effect.
5.2 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. Closing and all
obligations of Seller pursuant to this Agreement shall be conditioned upon the
following:
(a) All representations and warranties contained in Section 4
shall be true and correct as of the date of this Agreement and as of
the Closing Date;
(b) Buyer shall have delivered the Purchase Price recited in
Section 2.1 hereof;
(c) Buyer shall have performed all of its obligations under
this Agreement required to be performed as of the Closing Date,
including, but not limited to delivery of all documents set forth in
Section 5.3;
(d) Buyer shall have executed and delivered to the Seller
originals of the Management Agreement, the Employment Agreement, the
Stock Pledge and Escrow Agreement, the Noncompetition and
Nonsolicitation Agreement and the Stock Restriction Agreement.
In the event Seller reasonably believes prior to the Closing Date that
any of the foregoing conditions is not satisfied, then Seller shall notify Buyer
in writing and Buyer shall cure such to the reasonable satisfaction of Seller.
If Buyer does not cure in thirty (30) days then Seller may, at its option,
terminate this Agreement in which event Seller shall be relieved of all
obligations hereunder and this Agreement shall be deemed null, void and of no
force or effect.
5.3 BUYER'S DELIVERIES. At or prior to the Closing, Buyer or Omega, as
the case may be, shall deliver to Seller the following documents:
(a) Corporate Resolutions of Buyer. A copy of directors' resolutions of
Buyer, certified by its corporate secretary or assistant secretary as having
been duly and validly adopted and as being in full force and effect on the
Closing Date, authorizing the execution and delivery by Buyer of this Agreement,
the other instruments to be executed and delivered by Buyer as provided herein,
and the performance by Buyer of the transactions contemplated hereby;
(b) Corporate Resolutions of Omega. A copy of directors' resolutions of
Omega, certified by its corporate secretary or assistant secretary as having
been duly and validly adopted
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and as being in full force and effect on the Closing Date, authorizing the
execution and delivery by Omega of this Agreement, the other instruments to be
executed and delivered by Omega as provided herein, and the performance by Omega
of the transactions contemplated hereby;
(c) Consideration. The consideration described in Section 2.1,
including the Omega Stock;
(d) Opinion of Counsel for Buyer. An opinion of counsel from Buyer
dated as of the Closing, in form and substance reasonably satisfactory to
Seller's counsel, and where appropriate with reliance upon a certificate from
Buyer or the owner of Buyer to the effect that:
(1) Buyer is (i) duly incorporated, validly existing, and in
good standing under the laws of the State of Ohio, (ii) not required to
be so qualified in any other jurisdiction, and (iii) duly empowered and
authorized to hold and own its properties and carry on its business as
now conducted and as proposed to be conducted. Buyer has the corporate
power and authority to execute, deliver and perform this Agreement and
all other agreements contemplated hereby.
(2) Buyer has the full power and authority to execute,
deliver, and perform this Agreement and all other agreements and
documents necessary to consummate the contemplated transaction, and,
upon the requisite approvals thereof, all corporate actions of Buyer
necessary for such execution, delivery and performance will have been
duly taken.
(3) The Omega Stock to be issued pursuant to this Agreement
has been duly authorized and is validly issued, fully paid and
nonassessable.
(4) This Agreement and all agreements related to this
Agreement have been duly executed and delivered by Buyer and constitute
the legal, valid, and binding agreement of Buyer enforceable in
accordance with their terms (subject as to enforcement of remedies to
the discretion of the courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws effecting the rights of creditors generally). The
execution and delivery by Buyer of this Agreement, and the performance
of its obligations hereunder, do not require any action or consent of
any party other than Buyer pursuant to any contract, agreement or other
understanding of Buyer, or pursuant to any order or decree to which
Buyer is a party or to which its properties or assets are subject and
will not violate any provision of law, the articles of incorporation or
bylaws of Buyer or any order of any court or other agency of the
government.
(5) To the best of such counsel's knowledge, with respect to
Buyer there are no actions, suits, claims, proceedings or
investigations pending or, to such counsel's knowledge, threatened
against Buyer at law or in equity, or before or by a federal, state,
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<PAGE> 15
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any professional
licensing or disciplinary authority which would adversely affect the
transactions contemplated herein or any party's right to enter into
this Agreement; and
(6) Buyer is not in default with respect to any order, writ,
injunction or decree of any court or of any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which would effect the rights of
Buyer to enter into and perform this Agreement.
(e) Officer's Certificate. A Certificate of Buyer's President and
Secretary confirming the matters in Section 5.2(a); and
(f) Other Purchase Documents. All such documents and instruments Seller
and its counsel may reasonably request in connection with the consummation of
the transactions contemplated by this Agreement.
5.4 SELLER'S DELIVERIES. At or prior to the Closing, Seller shall
deliver to Buyer the following documents:
(a) Stock Certificates. Certificates, representing the Shares duly
endorsed by Seller for transfer or accompanied by duly executed stock powers;
(b) Executed Contracts. Copies of all executed contracts or other
material agreements entered into by or on behalf of the Corporation;
(c) Copy of Leases. Copies of all real estate and equipment leases
pertaining to the Corporation;
(d) Opinion of Counsel for Seller. Buyer shall have received an opinion
from counsel for Seller dated as of the Closing, in form and substance
reasonably satisfactory to Buyer's counsel and on which NationsCredit Commercial
Corporation may rely with respect to item (2) below, and where appropriate with
reliance upon a certificate from Seller or the Corporation, to the effect that:
(1) The Corporation is (i) duly formed and validly existing as
a business corporation under the Ohio General Corporation Act, (ii)
duly empowered and authorized to hold and own its own properties and
carry on its business as now conducted and as proposed to be conducted;
and (iii) is no longer organized as a service corporation under Ohio
law, and that the Corporation is now a business corporation organized
under Ohio law.
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<PAGE> 16
(2) This Agreement and all agreements related to this
Agreement to which Seller is a party have been duly executed and
delivered by Seller and constitute the valid and binding agreement of
Seller enforceable in accordance with their terms (subject as to
enforcement of remedies to the discretion of the courts in awarding
equitable relief and to applicable bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium and similar laws
effecting the rights of creditors generally). To the best of such
counsel's knowledge, the execution and delivery by Seller of this
Agreement, and the performance of its obligations thereunder, do not
require, any action or consent of any party other than Seller pursuant
to any contract, agreement or other understanding of Seller, or
pursuant to any order or decree to which Seller is a party or to which
his properties or assets are subject and will not violate any
provisions of the articles of association or bylaws of either the
Corporation or any order of any court or other agency of the
government.
(3) To the best of such counsel's knowledge, with respect to
Seller (except for the matters included in Schedule 3.6 hereto), there
are no actions, suits, claims, proceedings or investigations pending or
threatened against Seller at law or in equity, or before or by a
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any
professional licensing or disciplinary authority which would adversely
effect the transactions contemplated herein or any party's right to
enter into this Agreement.
(4) To the best of such counsel's knowledge, Seller is not in
default with respect to any order, writ, injunction or decree of any
court or of any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign which would effect the rights of Seller to enter
into and perform this Agreement.
(e) Seller's Certificate. A certificate from Seller confirming the
matters in Section 5.1 hereof, including, without limitation, that the assets
and plans, listed on Schedule 5.1, have been transferred or terminated, as the
case may be.
(f) Letter from Seller and Corporation's professional liability
insurance carrier containing a list of all professional liability claims known
to such carrier to be currently pending or threatened against Seller, the
Corporation or any of the Corporation's professional employees.
(g) Other Purchase Documents. All such documents and instruments Buyer
and its counsel may reasonably request in connection with the consummation of
the transactions contemplated by this Agreement.
5.5 MALPRACTICE CLAIMS. The Practice agrees to assume all liabilities
and obligations relating to (i) the matters listed on Schedule 3.6 and (ii) any
other claim for malpractice that may be brought after the Closing but that is
based on events occurring on or prior to the Closing Date,
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which liabilities and obligations shall include, but not be limited to, damages,
judgments, expenses, settlements, etc. The Practice further agrees to administer
the defense of such claims and handle all matters related thereto.
5.6 TRADE PAYABLES AND OTHER OBLIGATIONS. The Practice agrees to assume
all trade payables, taxes and other Obligations identified on Schedule 3.15 and
which arose on or prior to the Closing Date. The Practice agrees to pay promptly
any such obligations as and when submitted by Buyer or otherwise received.
SECTION 6. INDEMNIFICATION; SET-OFF.
6.1 INDEMNIFICATION OF BUYER. Seller shall indemnify, defend and hold
Buyer and its officers, directors, shareholders, agents, employees,
representatives, successors and assigns harmless from and against any and all
damage, loss, cost, obligation, claims, demands, assessments, judgments or
liability (whether based on contract, tort, product liability, strict liability
or otherwise), including taxes, and all expenses (including interest, penalties
and reasonable attorneys' and accountants' fees and disbursements) (collectively
referred to as "Damages") incurred by any of the above-named persons, resulting
from or in connection with any one or more of the following:
(a) Misrepresentations, breach of warranties, or failure to perform any
covenant or agreement of the Corporation or Seller contained herein;
(b) Debts, commitments, obligations of the Corporation or Seller for
any transaction, event or act that occurred on or prior to the Closing that
materially adversely affects the value of the Practice Assets;
(c) Claims, actions or suits (i) by former employees of the Corporation
or (ii) relating to claims of malpractice which arose or were based on events
occurring on or prior to the Closing; or
(d) The Corporation's or Seller's failure to discharge federal, state
or local tax liabilities or pension or benefit plan obligations incurred on or
prior to the Closing.
Buyer agrees to give prompt notice to Seller of the assertion of any claim, or
the threat or commencement of any suit, action, proceeding or other matter in
respect of which indemnity may be sought under this Section 6.1. Seller may
participate in the defense of any such suit, action, proceeding or other matter
at Seller's expense. Seller shall not be liable under this Section 6.1 for any
settlement effected without Seller's consent of any claim, suit, action,
proceeding or other matter in respect of which indemnity may be sought under
this Section 6.1, which consent shall not be unreasonably withheld.
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<PAGE> 18
6.2 INDEMNIFICATION OF SELLER. Buyer and Omega shall indemnify, defend
and hold Seller harmless from (i) any and all Damages, incurred by Seller,
resulting from or in connection with misrepresentations, breach of warranties or
failure to perform any covenant or Agreement of Buyer or Omega contained herein
and (ii) any and all Damages incurred by Seller after the Closing Date and
related to (A) Lease Agreement between the Corporation and Berger Health System
("Berger") dated December 16, 1997 for the lease of 210 Sharon Road, Suite B,
Circleville, Ohio, (B) Lease and Service Agreement between Seller and Berger
dated April 13, 1995 for the lease of 210 Sharon Road, Suite C, Circleville,
Ohio, (C) Lease between Seller and the Beerman Corporation dated June 19, 1996
for 1080 North Bridge Street, Unit #31, Zane Plaza Shopping Center, Chillicothe,
Ohio, and (D) Lease between Bank One, Columbus, N.A. and Seller dated June 30,
1993 for Suites 201, 205, and 207 at 123 South Broad Street, Lancaster, Ohio.
Seller agrees to give prompt notice to Buyer of the assertion of any claim, or
the threat or commencement of any suit, action, proceeding or other matter in
respect of which indemnity may be sought under this Section 6.2. Buyer may
participate in the defense of any such suit, action, proceeding or other matter
at Buyer's expense. Buyer shall not be liable under this Section 6.2 for any
settlement effected without Buyer's consent of any claim, suit, action,
proceeding or other matter in respect of which indemnity may be sought under
this Section 6.2, which consent shall not be unreasonably withheld.
6.3 SECURITY FOR INDEMNITY. To secure the indemnity under this
Agreement and certain other agreements, Buyer is entitled to exercise its rights
set forth in that certain Stock Pledge and Escrow Agreement, dated as of
December 16, 1997, to which both Buyer and Seller are parties.
6.4 LIMITATIONS. Seller shall not be liable to Buyer for any claims
against Seller under Section 6.1 unless and until the aggregate of all claims
against Seller exceeds the sum of $25,000.00, whereupon Buyer shall be entitled
to recover the full amount of all claims, including the initial $25,000.00.
Seller's obligation to indemnify Buyer hereunder shall be limited to an amount
equal to $8,525,000 plus the amount of Contingent Consideration actually paid.
7. AMENDMENT AND WAIVER.
The parties hereto may by mutual agreement amend this Agreement in any
respect. Any party hereto may extend the time for the performance of any of the
obligations of the other, waive any inaccuracies and representations by the
other contained in this Agreement or in any document delivered pursuant hereto
which inaccuracies would constitute a breach of this Agreement, waive compliance
by the other with any of the covenants contained in this Agreement and
performance of any obligations by the other, waive the fulfillment of any
condition that is precedent to the performance by the party so waiving any of
its obligations under this Agreement. Any agreement on the part of any party for
any such amendment, extension or waiver must be in writing and signed by the
party agreeing to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
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<PAGE> 19
8. TERMINATION AND ABANDONMENT.
8.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer, if all of the conditions set forth in Section
5.1 of this Agreement shall not have been satisfied or waived on or
prior to the Closing; or
(c) by Seller if all of the conditions set forth in Section
5.2 of this Agreement shall not have been satisfied or waived on or
prior to the Closing.
The following provisions notwithstanding, this Agreement will terminate if a
Closing has not occurred on or prior to December 31, 1997, unless an extension
of time is mutually agreed to, as evidenced by written consent of Seller and
Buyer. If this Agreement is terminated pursuant to this Section 8.1, it shall
become null and void and of no further force or effect, except as provided in
Section 8.2.
8.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment of this Agreement by Seller or Buyer pursuant to Section 8.1 hereof,
written notice thereof shall forthwith be given to the other party or parties as
provided herein and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by Seller or
Buyer, and Seller and Buyer shall each return to the other party any documents
or copies thereof in possession of such party furnished by such other party in
connection with the transaction contemplated by this Agreement. If this
Agreement is terminated as provided herein, no party to this Agreement shall
have any liability or further obligation to any other party to this Agreement
with respect to this Agreement or the transactions contemplated hereby except as
provided in this Section 8.2; provided, however, that no termination of this
Agreement pursuant to the provisions of this Section 8 shall relieve any party
of liability for breach of any provision of this Agreement occurring prior to
such termination; and provided, further, that any and all confidential or
proprietary information obtained from either party must be returned to that
party, and each party hereto agrees to maintain any and all confidential or
proprietary information obtained from the other party in strictest confidence
and not to divulge such information to any third party, except as may be
permitted or required by law.
SECTION 9. PATIENT REFERRALS.
The parties agree that nothing in this Agreement is intended to violate
state or federal health care laws or regulations including, but not limited to,
those listed in Section 3.9 herein, nor shall any portion of the consideration
be construed as a payment for or inducement of the referral
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<PAGE> 20
of patients. Seller shall be free to refer patients to whomever it sees fit in
the exercise of professional judgment, according to the convenience or
preference of the patient, or otherwise.
SECTION 10. GENERAL PROVISIONS.
10.1 PARTIES IN INTEREST AND ASSIGNMENT.
(a) This Agreement is binding upon, and is for the benefit of,
the parties hereto and their respective successors and authorized
assigns. Except as otherwise expressly provided, nothing in this
Agreement, express or implied, is intended or shall be construed to
confer upon any person other than the parties hereto, any right,
remedy, or claim, legal or equitable, under or by reason of this
Agreement or any provision thereof.
(b) Neither this Agreement nor any of the rights or duties of
any party hereto may be transferred or assigned to any person except by
a written agreement executed by each of the parties hereto, except that
Buyer reserves the right to assign this Agreement to any affiliate or
successor of itself, and in such event, shall not be relieved of any of
its obligations hereunder.
10.2 CHOICE OF LAW; VENUE. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Ohio. Any mediation or binding arbitration brought with respect to this
Agreement shall be conducted in Franklin County, Ohio.
10.3 ENTIRE AGREEMENT. This Agreement shall embody the entire agreement
between the parties hereto with respect to acquisition of the Shares and cancels
and supersedes all other previous agreements and understandings relating to the
subject matter of this Agreement, written or oral, between the parties hereto.
There are no agreements, representations or warranties between the parties
hereto as to the subject matter hereof other than those set forth or provided
herein. All Schedules called for by this Agreement and delivered to the parties
shall be considered a part hereof with the same force and effect as if the same
had been specifically set forth in this Agreement.
10.4 SURVIVAL. Except as provided for herein, all of the
representations and warranties of the Seller contained in Section 3 above, and
of the Buyer in Section 4 above, and any cause of action arising out of or
related to a breach of said representations and warranties shall survive the
Closing hereunder and shall continue in full force and effect for a period of
three (3) years thereafter, except that (i) the representations and warranties
(and any cause of action arising out of or related to a breach of such
representations and warranties) contained in Sections 3.1, 3.5, 3.8, 3.9, and
3.21 of this Agreement shall survive the Closing and continue in full force and
effect for a period equal to any applicable statute of limitations and (ii) any
matters involving fraud shall have no time limitation (any of such periods
referred to herein as the "Indemnification Period").
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<PAGE> 21
Any matter to which an indemnification pertains and with respect to which a
claim has been asserted or threatened following the Closing Date, and prior to
the expiration of the Indemnification Period, shall continue to be subject to
the indemnifications under this Section 10 until finally terminated, settled,
resolved, or adjudicated; and all terms, conditions and stipulations of this
Section 10 shall likewise continue to apply.
10.5 SECTION HEADINGS. The subject headings contained in this Agreement
are included for purposes of convenience only, and shall not affect the
construction or interpretation of its provisions.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
10.7 CONFIDENTIALITY. The parties agree to maintain confidential the
terms and conditions of this Agreement and not to disclose any of such terms and
conditions to any third-party without the prior written consent of the other
party.
10.8 GENDER. Masculine pronouns used in this Agreement shall be
construed to include feminine and neuter pronouns, and words in the singular
shall include the plural, unless the context requires otherwise.
10.9 NOTICES. Any notices hereunder shall be deemed to have been given
by one party to the other if it is in writing and it is (a) delivered or
tendered in person, or (b) deposited in the United States Mail in a sealed
envelope, with postage prepaid, in either case addressed as follows:
If to Buyer: Omega Health Systems of Ohio, Inc.
5100 Poplar Avenue, Suite 2100
Memphis, Tennessee 38137
Attn: Thomas P. Lewis
With a copy to: Baker, Donelson, Bearman & Caldwell
2000 First Tennessee Building
Memphis, Tennessee 38103
Attn: Robert Walker
If to Seller: Harmeet Chawla, M.D.
Eye Associates, Inc.
210 Sharon Road
Circleville, OH 43113
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With a copy to: Stark & Knoll
Ohio Edison Building
76 South Main St.
Suite 1512
Akron, OH 44308
Michael L. Stark
or to such other address as the parties shall have previously designated by
notice to the serving party, given in accordance with this Section 10.9. Notices
shall be deemed to have been given on the date of delivery if delivered
personally, or on the third day after mailing as provided above; provided,
however, that a notice not given as above shall, if it is in writing, be deemed
given if and when actually received by a party.
10.10 MEDIATION AND ARBITRATION. In the event a dispute arises out of
or relating to this Agreement, or the breach thereof, and if said dispute cannot
be settled through negotiation, the parties agree to attempt in good faith to
settle the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association. Unless the parties reach an agreement reduced
to writing, this mediation will be non-binding, but the parties must participate
in good faith in non-binding mediation, before resorting to binding arbitration.
Any controversy or claim arising out of or relating to this Agreement, or its
breach, not satisfied through either negotiation or mediation, shall be settled
by arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. As soon as
reasonably practicable after submission of a demand for binding arbitration,
Buyer and Seller shall select one arbitrator, agreeable to both parties. This
arbitrator will be selected from lists prepared by the American Arbitration
Association. From the American Arbitration Association list the parties will
submit to the American Arbitration Association a ranked list of arbitrators
which are acceptable. The highest ranking acceptable candidate will be selected
by the American Arbitration Association. If no arbitrators from the list
composed by the American Arbitration Association are acceptable by either of the
parties, the American Arbitration Association will compile a second list. This
procedure will be followed until the parties have selected an arbitrator. The
results of the arbitrator's finding will be binding on the parties.
10.11 PREVAILING PARTY. The parties agree that if either party should
institute arbitration proceedings to enforce or interpret any provisions of this
Agreement, the prevailing party in such arbitration shall be entitled to
receive, in addition to any other relief awarded such party, reasonable
attorneys' fees and expenses for the prosecution or defense of such arbitration.
10.12 EXPENSES. Except as otherwise provided herein, each of the
parties shall pay its own costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in consummating the transactions
contemplated by this Agreement.
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<PAGE> 23
IN WITNESS THEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
OMEGA HEALTH SYSTEMS OF OHIO, INC.
By: /s/ RONALD L. EDMONDS
----------------------------
Ronald L. Edmonds,
Vice President
OMEGA HEALTH SYSTEMS, INC.
By: /s/ RONALD L. EDMONDS
----------------------------
Ronald L. Edmonds,
Executive Vice President
SELLER:
/s/ HARMEET S. CHAWLA
---------------------------------
HARMEET S. CHAWLA, M.D.
- 23 -
<PAGE> 24
JOINDER
The undersigned, EYE ASSOCIATES, INC. hereby joins in this Agreement
for the purposes of acknowledging and agreeing to its obligations set forth in
Section 5.5 hereof.
EYE ASSOCIATES, INC.
By: /s/ HARMEET S. CHAWLA
----------------------------
Harmeet S. Chawla, M.D.,
President
- 24 -
<PAGE> 1
STOCK PLEDGE AND ESCROW AGREEMENT
THIS STOCK PLEDGE AND ESCROW AGREEMENT dated this the 16th day of
December, 1997, by and among HARMEET S. CHAWLA, M.D., an individual residing in
the State of Ohio (the "Pledgor"); in favor of OMEGA HEALTH SYSTEMS OF OHIO,
INC., an Ohio corporation ("Omega Ohio"), and OMEGA HEALTH SYSTEMS, INC., a
Delaware corporation ("Omega") (collectively, the "Secured Party"); and UNION
PLANTERS NATIONAL BANK (the "Escrow Agent").
W I T N E S S E T H:
That for good and valuable considerations, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby mutually agree as follows:
1. PLEDGE AND GRANT OF SECURITY INTEREST. As collateral security for
the Indemnities (as defined in Section 2 hereof) given to the Secured Party, the
Pledgor hereby (i) transfers and assigns to the Escrow Agent, (ii) pledges to
the Secured Party, and (iii) grants to the Secured Party a continuing security
interest in Two Hundred Forty Thousand (240,000) shares of common stock of Omega
represented by Certificate No. OH 4101 (the "Pledged Collateral").
2. SECURITY FOR OBLIGATIONS. The security interest created hereby in
the Pledged Collateral constitutes continuing collateral security to secure the
indemnities (the "Indemnities") contained in that certain Stock Purchase
Agreement, dated as of December 16, 1997, between Pledgor, Omega and Omega Ohio
(the "Acquisition Agreement").
3. DELIVERY OF THE PLEDGED COLLATERAL. (a) All certificates
representing the Pledged Collateral shall be delivered to the Escrow Agent
simultaneously with the execution and delivery of this Agreement, accompanied by
stock powers executed in blank by Pledgor.
(b) If the Pledgor shall receive, by virtue of Pledgor being or having
been an owner of the Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate issued in connection with any increase or
reduction of capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spinoff or split-off), promissory note or
other instrument or (ii) option or right, whether as an addition to,
substitution for, or in exchange for the Pledged Collateral, or otherwise; the
Pledgor shall receive such stock certificate, promissory note, instrument,
option, or right and shall segregate it from the Pledgor's other property and
shall deliver it forthwith to the Escrow Agent in the exact form received, with
any necessary endorsement and appropriate stock powers duly executed in blank,
to be held by the Escrow Agent as Pledged Collateral.
<PAGE> 2
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants
as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for the security interest created by this Agreement.
(b) The exercise by the Secured Party of its rights and remedies
hereunder will not contravene any law or governmental regulation or any
contractual restriction binding on or affecting the Pledgor or any of the
Pledgor's properties and will not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to any of
the Pledgor's properties.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required either
(i) for the pledge hereunder by the Pledgor of, or the grant by the Pledgor of
the security interest created hereby in, the Pledged Collateral or (ii) except
as may be required by laws affecting the offering and sale of securities
generally, for the exercise by the Secured Party of its rights and remedies
hereunder.
(d) This Agreement creates a valid security interest in favor of the
Secured Party in the Pledged Collateral. The taking possession by the Escrow
Agent of the certificates representing the Pledged Shares and all other
certificates, instruments and cash constituting Pledged Collateral from time to
time will perfect, and establish the first priority of, the Secured Party's
security interest hereunder in the Pledged Collateral. Except as set forth in
this Section 4(d), no action is necessary or desirable to perfect or otherwise
protect such security interest.
5. ADDITIONAL PROVISIONS CONCERNING THE PLEDGED COLLATERAL. (a) The
Pledgor hereby agrees to take any reasonable action and to execute any
instruments which may be necessary or advisable to accomplish the purposes of
this Agreement.
(b) The Pledgor hereby irrevocably appoints the Escrow Agent as the
Pledgor's attorney-in-fact and proxy, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise, from time to time in
the Escrow Agent's discretion, to take any action and to execute any instrument
which the Escrow Agent may deem necessary or advisable to accomplish the
purposes of this Agreement.
(c) During the term of this Agreement, and so long as the Pledgor is
not in default under Section 6 of this Agreement, the parties acknowledge that
the Pledgor has all rights of ownership in the Pledged Collateral, including the
right to vote the shares of the Pledged Collateral, to issue proxies, and to
receive dividends, except where prohibited under this Agreement and subject to
any restrictions contained in the Stock Restriction and Registration Rights
Agreement, dated as of December 16, 1997, between Pledgor and the Secured Party.
- 2 -
<PAGE> 3
6. DEFAULT. In the event that Pledgor shall fail to make full and
prompt payment of any amount in connection with any Indemnities owed to the
Secured Party under the provisions of the Acquisition Agreement, according to
its terms, or upon any default by Pledgor in the full and prompt payment or
performance of any of the Indemnities to be paid pursuant to the provisions
hereof or of the Acquisition Agreement, the Secured Party shall give notice of
such failure to Pledgor and Escrow Agent by certified mail, return receipt
requested, or delivered to Pledgor and Escrow Agent in hand, and if such failure
shall continue for thirty (30) days after such notice, the Secured Party shall
give further notice to Pledgor and Escrow Agent in like manner of its intention
to exercise the remedies upon default as provided herein. A copy of all notices
pursuant to this Section 6 shall be sent to Dr. Harmeet S. Chawla at 210 Sharon
road, Circleville, Ohio 43113, with a copy to Mr. Michael L. Stark at Stark &
Knoll, 76 South Main Street, Suite 1512, Akron, Ohio 44308.
7. REMEDIES UPON DEFAULT. Upon the occurrence of a Default (after
expiration of any applicable cure period, as described in Section 6 hereof):
(a) The Secured Party may deliver to the Escrow Agent (with a copy to
the Pledgor) a notice (the "Release Notice") stating the section number of the
Acquisition Agreement pursuant to which the Release Notice is given and the
dollar amount due to Secured Party. In addition, the Release Notice shall state
the number of shares of the Pledged Collateral whose value, based on the
"Valuation Price" (as hereinafter defined), is equal to the dollar amount due to
Secured Party. For purposes of this Stock Pledge and Escrow Agreement, the
Valuation Price shall be the amount per share as determined pursuant to Section
2.1 of the Acquisition Agreement.
(b) The Secured Party shall have the sole right to exercise such
voting, option and other consensual rights and to receive and retain any
dividends declared with respect to said Pledged Collateral transferred to
Pledgor pursuant to the Release Notice after the occurrence of Default; and
(c) Without limiting the generality of the foregoing, with the consent
of Pledgor or pursuant to an arbitration determination pursuant to Paragraph 8
hereof: (i) the number of shares of the Pledged Collateral required under the
Release Notice may be released by the Escrow Agent to Secured Party and may be
registered in the name of the Secured Party or its nominee, and (ii) the Secured
Party at its option may exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to said
shares of the Pledged Collateral as if it were the absolute owner thereof.
8. CONTROVERSY BETWEEN THE PARTIES. (a) Mediation. In the event a
dispute arises out of or relating to this Agreement, or the breach thereof, and
if said dispute cannot be settled through negotiation, the parties agree to
attempt in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the American Arbitration Association. Unless the
- 3 -
<PAGE> 4
parties reach an agreement reduced to writing, this mediation will be
non-binding, but the parties must participate in good faith in non-binding
mediation, before resorting to binding arbitration.
(b) Binding Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or its breach, not satisfied through either
negotiation or mediation, shall be settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
As soon as reasonably practical after submission of a demand for
binding arbitration, the parties shall select one arbitrator, agreeable to all
parties. This arbitrator will be selected from lists prepared by the American
Arbitration Association. From the American Arbitration Association list the
parties will submit to the American Arbitration Association a ranked list of
arbitrators which are acceptable. The highest ranking acceptable candidate will
be selected by the American Arbitration Association. If no arbitrators from the
list composed by the American Arbitration Association are acceptable by either
of the parties, the American Arbitration Association will compile a second list.
This procedure will be followed until the parties have selected an arbitrator.
The results of the arbitrator's finding will be binding on the parties, and the
prevailing party in such arbitration shall be entitled to recover reasonable
attorney's fees and costs from the losing party.
9. ADMINISTRATION. The Escrow Agent undertakes to perform only the
duties expressly set forth herein. The Escrow Agent's duties begin upon the date
of receipt of the Pledged Collateral. The Escrow Agent may rely, and shall be
authorized to act or refrain from acting upon, any written notice, demand,
instruction or request (including a photocopy or telecopy of an original
document) furnished to it as provided herein which Escrow Agent believes in good
faith to be genuine and to have been signed and presented by the proper party.
10. LIMITATION OF LIABILITY OF ESCROW AGENT. The Secured Party and
Pledgor agree to indemnify and hold Escrow Agent harmless from any acts or
omissions of Escrow Agent taken or to be taken in connection with its
performance of services pursuant to this Stock Pledge and Escrow Agreement,
except acts or omissions which constitute gross, willful, or wanton negligence
or misconduct.
11. REMOVAL AND RESIGNATION. (a) The Escrow Agent may be removed at any
time, with or without cause, upon written agreement of the Secured Party and the
Pledgor. In such event a successor escrow agent shall be appointed by the
Secured Party and the Pledgor and the Pledged Collateral shall be promptly
transferred to said successor.
(b) The Escrow Agent may resign from its appointment hereunder upon
five (5) days prior written notice to the Secured Party and the Pledgor. In such
event the Secured Party and the Pledgor shall appoint a successor escrow agent.
However, in the event the Secured Party and
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<PAGE> 5
the Pledgor are unable to agree on a successor within said five (5) day period,
the Escrow Agent shall appoint a national bank or other similar institution as
successor escrow agent to serve pursuant to the terms and conditions of this
Stock Pledge and Escrow Agreement.
12. ESCROW AGENT FEES. In consideration for the services to be rendered
hereunder by the Escrow Agent, the Escrow Agent shall be paid a fee of $1,000
upon execution of this Agreement. The Pledgor shall pay 50% of the Escrow Agent
Fee and the Secured Party will pay 50% of the fee.
13. FEES OF LEGAL COUNSEL. In the event any party to this Stock Pledge
and Escrow Agreement shall employ legal counsel to protect its rights hereunder,
or to enforce any term or provision hereof, the party prevailing in any such
action shall have the right to recover from the other party all of its
reasonable attorneys' fees and expenses incurred in connection therewith. In the
event Escrow Agent employs counsel for purposes of an interpleader or other
action, the Secured Party and the Pledgor shall reimburse Escrow Agent for all
reasonable attorneys' fees and expenses incurred in good faith in connection
with such action.
14. MISCELLANEOUS. (a) No amendment or waiver of any provision of this
Agreement, and no consent to any departure by the parties therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No failure on the part of the Secured Party to exercise, and no
delay in exercising, any right hereunder or under the Acquisition Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall be binding on the Pledgor and Pledgor's
successors and permitted assigns and shall inure, together with all rights and
remedies of the Secured Party hereunder, to the benefit of the Secured Party and
its successors, transferees and assigns. Without limiting the generality of the
foregoing, the Secured Party may assign or otherwise transfer all or part of its
rights to all or any part of the Acquisition Agreement to any of the Secured
Party's Affiliates (as hereinafter defined), and such other person or entity
shall thereupon become vested with all of the benefits in respect thereof
granted to the Secured Party herein or otherwise. None of the rights or
obligations of the Pledgor hereunder may be assigned or otherwise transferred
without the prior written consent of the Secured Party, except as otherwise
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<PAGE> 6
permitted under the Acquisition Agreement. For purposes of this Section 13(d),
"Affiliates" means subsidiaries of Omega or of Omega Ohio.
(e) On December 15, 1999, this Agreement and the security interest
created hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor. The Escrow Agent shall thereupon, at Pledgor's request
and at the expense of the Secured Party, (i) return to the Pledgor the then
remaining Pledged Collateral; and (ii) execute and deliver to the Pledgor such
documents as Pledgor may reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee.
(g) The captions or headings of the Sections of this Agreement are
inserted merely for convenience of reference and shall not be deemed to limit or
modify the terms and provisions hereof.
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<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by its officers thereunto duly authorized on the date
first above written.
PLEDGOR:
/s/ HARMEET S. CHAWLA
---------------------------------
HARMEET S. CHAWLA, M.D.
ESCROW AGENT: SECURED PARTY:
UNION PLANTERS NATIONAL OMEGA HEALTH SYSTEMS, INC.
BANK
By: /s/ By: /s/ RONALD L. EDMONDS
- ---------------------------------- ---------------------------------
Title: Ronald L. Edmonds, Executive Vice
President
OMEGA HEALTH SYSTEMS OF OHIO, INC.
By: /s/ RONALD L. EDMONDS
---------------------------------
Ronald L. Edmonds, Vice President
- 7 -
<PAGE> 1
STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made as of December 16, 1997, between HARMEET S. CHAWLA, M.D., a
citizen and resident of Ohio ("Stockholder") and OMEGA HEALTH SYSTEMS, INC, a
Delaware corporation (the "Company").
R E C I T A L S
A. Stockholder, the Company, and Omega Ohio have executed that certain
Stock Purchase Agreement dated as of December 16, 1997 (the "Stock Purchase
Agreement"), pursuant to which the Omega Ohio will purchase from Stockholder all
of the Stockholder's stock in Central Ohio Eye Institute, Inc., an Ohio
corporation.
B. As partial consideration for the Acquisition (as defined in Section
1 herein below), the Company will issue to Stockholder shares of Common Stock
(as defined in Section 1 hereinbelow) of the Company, which will be subject to
certain restrictions under the Securities Act of 1933 and this Agreement.
C. In connection with the issuance of the Common Stock in the
Acquisition, the Company desires to provide to Stockholder the right to register
the shares of Common Stock issued at Closing (the "Shares") under the Securities
Act of 1933, as amended, according to the terms of this Agreement.
In consideration of the recitals made above and the mutual covenants
and agreements stated herein, the parties agree as follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Acquisition" shall mean the acquisition of all of the
Stockholder's stock in Central Ohio Eye Institute, Inc. by Omega Ohio. In
respect of the Acquisition, the term "Closing" shall mean the closing of the
Acquisition held in accordance with the Stock Purchase Agreement, pursuant to
which the Acquisition shall be consummated.
(b) "Best Efforts" means the taking of all commercially
reasonable steps to cause or prevent any event or condition which would have
been taken in similar circumstances by a reasonably prudent business person
engaged in a similar business for the advancement or protection of his own
economic interest in light of the consequences of failure to cause or prevent
the occurrence of such event or condition.
(c) "Closing Date" shall mean the date of the closing of the
Acquisition held in accordance with the Stock Purchase Agreement.
(d) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(e) "Common Stock" shall mean the common stock of the Company,
or such classes of the Company's capital stock that may be substituted therefor
in the event of any recapitalization or reorganization of the Company.
(f) "Company" shall mean Omega Health Systems, Inc., a
Delaware corporation.
<PAGE> 2
(g) "Form S-3" shall mean Form S-3 adopted by the Commission
under the Securities Act or any substantially similar form from time to time in
effect.
(h) "Material Adverse Event" shall mean an occurrence having a
consequence that either (a) is materially adverse as to the business,
properties, prospects or financial condition or the market for the securities of
the Company or (b) is reasonably foreseeable, has a reasonable likelihood of
occurring, and if it were to occur might materially adversely affect the
business, properties, prospects or financial condition of the Company.
(i) "Omega Ohio" shall mean Omega Health Systems of Ohio,
Inc., an Ohio corporation.
(j) The terms "Register", "Registered" and "Registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
(k) "Registrable Securities" shall mean Shares issued to
Stockholder in connection with the Acquisition, including Shares issued pursuant
to stock splits, stock dividends and other distributions with respect to or in
exchange for or in replacement of said Shares.
(l) "Registration Expenses" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement and in complying with
Section 3 and Section 4 of this Agreement, including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees, escrow fees and disbursements of counsel for the Company and of
special counsel for the Stockholder (if different from the Company), blue sky
fees and expenses, and the expense of any regular or special audits incident to
or required by any such registration.
(m) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(n) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement.
(o) "Shares" shall mean the shares of Common Stock issued to
Stockholder as consideration for the Acquisition.
(p) "Stockholder" shall mean Harmeet S. Chawla, M.D.
(q) "Underwritten Offering" shall mean a registered public
offering of Registrable Securities pursuant to a firm commitment underwriting
agreement with an investment banking firm reasonably acceptable to the Company.
(r) "1998 Rights" mean registration rights in respect of
securities of the Company granted by the Company after December 16, 1998, and
shall include the registration rights granted herein.
2. RESALE RESTRICTIONS.
Stockholder agrees that, for a period of two (2) years from
the Closing Date, Stockholder will not sell, assign, pledge, encumber or
transfer (collectively, a "Transfer") in any manner whatsoever any of the
Shares, and Stockholder further agrees that, for a period of five (5) years from
the Closing Date, Stockholder will not Transfer 100,000 of the Shares; provided,
however, that notwithstanding the foregoing, (i) Stockholder shall be permitted
to Transfer (A) up to 100,000 of the Shares at anytime after one year from the
Closing Date provided that such Transfers are effected in compliance with the
requirements of Securities and Exchange Commission Rule 144 or (B) such number
of Shares as may be permitted to be included in a Registration of the Common
Stock of the
- 2 -
<PAGE> 3
Company pursuant to the terms of this Agreement, and (ii) Stockholder shall not
be permitted to Transfer any shares pledged to the Company or Omega Ohio
pursuant to the terms of the Stock Pledge and Escrow Agreement by and between
Stockholder, Omega Ohio, the Company and Union Planters National Bank dated
December 16, 1997 until the expiration or termination of that Agreement.
3. PIGGYBACK REGISTRATION.
3.1. NOTICE OF PIGGYBACK REGISTRATION AND INCLUSION OF REGISTRABLE
SECURITIES.
Subject to the terms of this Agreement, if the Company decides
to Register any of its securities during the period December 16, 1998 through
December 16, 2002, either for its own account or the account of a security
holder or holders, (other than a registration on Securities Act Form S-8, Form
S-4, any successor form or such other form that does not permit secondary sales)
the Company will: (i) promptly give Stockholder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable Blue Sky or other state
securities laws) and (ii) include in such Registration (and any related
registration and/or qualification under Blue Sky laws or other compliance), and
in any underwriting involved therein, all the Registrable Securities specified
in a written request delivered to the Company by Stockholder within twenty (20)
days after delivery of such written notice from the Company.
3.2. UNDERWRITING IN PIGGYBACK REGISTRATION.
3.2.1 NOTICE OF UNDERWRITING IN PIGGYBACK REGISTRATION.
If the Registration of which the Company gives notice is for a
Registered public offering involving an underwriting, the Company shall so
advise the Stockholder as a part of the written notice given pursuant to Section
3.1. In such event, the right of the Stockholder to Registration shall be
conditioned upon such underwriting and the inclusion of the Stockholder's
Registrable Securities in such underwriting to the extent provided in this
Section 3. If the Stockholder proposes to distribute his securities through such
underwriting, he shall (together with the Company and any other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
Underwriter ("Underwriter's Representative") for such offering. The Stockholder
shall have no right to participate in the selection of underwriters for an
offering pursuant to this Section.
3.2.2 MARKETING LIMITATION IN PIGGYBACK REGISTRATION.
In the event the Underwriter's Representative advises the
Stockholder seeking Registration of Registrable Securities pursuant to Section 3
in writing that market factors (including, without limitation, the aggregate
number of shares of Common Stock requested to be Registered, the general
condition of the market, and the status of the persons proposing to sell
securities pursuant to the Registration) require a limitation of the number of
shares to be underwritten, the Underwriter's Representative (subject to the
allocation priority set forth in Section 3.2.3) may limit (or reduce to zero)
the number of shares of Registrable Securities to be included in such
Registration and underwriting; provided however, that any Registrable Securities
so excluded shall retain any and all Registration rights set forth in Section 3
hereof.
3.2.3 ALLOCATION OF SHARES IN PIGGYBACK REGISTRATION.
In the event that the Underwriter's Representative limits the
number of shares to be included in a Registration pursuant to Section 3.2.2, the
number of shares to be excluded from such Registration shall be allocated in the
following order of priority: (i) Common Stock held by persons who are not
contractually entitled to include shares in such Registration; (ii) Common Stock
held by persons who possess the 1998 Rights; and (iii) Common Stock held by
persons who possess registration rights granted prior to the 1998 Rights. If
Registrable
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<PAGE> 4
Securities and other securities possessing the 1998 Rights shall be only
partially excluded from such Registration and underwriting (and assuming that
all securities bearing registration rights prior to the 1998 Rights that are
requested to be registered are so registered and included in the underwriting),
then the number of shares of Common Stock that may be included in the
Registration and underwriting by all holders of the 1998 Rights (including the
Registrable Securities) shall be allocated among the Stockholder and other such
holders in proportion, as nearly as practicable, to the respective amounts of
securities (including Registrable Securities) which such Stockholder and such
other holders would otherwise be entitled to include in such Registration. No
Registrable Securities or other securities excluded from the underwriting by
reason of this Section 3.2.3 shall be included in the Registration Statement.
3.3. WITHDRAWAL IN PIGGYBACK REGISTRATION.
If the Stockholder disapproves of the terms of any such underwriting,
he may elect to withdraw therefrom by written notice to the Company and the
underwriter delivered at least seven days prior to the effective date of the
Registration Statement. Any Registrable Securities or other securities excluded
or withdrawn from such underwriting shall be withdrawn from such Registration.
3.4. BLUE SKY IN PIGGYBACK REGISTRATION.
In the event of any Registration of Registrable Securities pursuant to
Section 3, the Company will use its best efforts to register and/or qualify the
securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that notwithstanding
anything in this Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling shareholders, the Stockholder shall pay his pro rata share of
such expenses.
4. EXPENSES OF REGISTRATION.
All Registration Expenses incurred in connection with Registration
pursuant to Section 3 and any related registration qualification or compliance,
shall be borne by the Company. Selling Expenses in a piggyback registration
pursuant to Section 3 shall be allocated pro rata between the Company, the
Stockholder and other selling shareholders based on the number of shares of
Common Stock included in such Registration.
5. REGISTRATION PROCEDURES.
If Stockholder's Registrable Securities are included in any
Registration pursuant to this Agreement, the Company will keep the Stockholder
advised in writing as to the initiation and completion of such Registration. At
its expense, the Company shall: (a) furnish such number of prospectuses
(including preliminary prospectuses) and other documents as the Stockholder from
time to time reasonably may request; (b) prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement; (c)
notify the Stockholder at any time when a prospectus relating to the sale of
Registrable Securities is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing, and at the request of the Stockholder,
prepare and furnish to the Stockholder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or incomplete in the light of the circumstances then existing; (d)
cause all such Registrable Securities registered pursuant hereunder
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to be listed on each securities exchange or automated quotation service
(including the National Market of The Nasdaq Stock Market) on which similar
securities issued by the Company are then listed; (e) provide a transfer agent
and registrar for all Registrable Securities registered pursuant to such
registration statement and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such registration; and (f)
otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act.
6. INFORMATION FURNISHED BY THE STOCKHOLDER.
It shall be a condition precedent to the Company's obligations under
this Agreement if the Stockholder has Registrable Securities included in any
Registration, that he furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be reasonably required.
7. INDEMNIFICATION.
7.1. COMPANY'S INDEMNIFICATION OF THE STOCKHOLDER.
The Company shall indemnify and hold harmless the Stockholder, and each
underwriter, with respect to which Registration, qualification or compliance of
Registrable Securities has been effected pursuant to this Agreement against all
claims, losses, damages, expenses or liabilities (or actions in respect thereof)
to the extent such claims, losses, damages, expenses or liabilities (or actions,
proceedings or settlements in respect thereto) arise out of or are based upon
any untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus or other document (including any related Registration
Statement notification or the like) incident to any such Registration,
qualification or compliance, or are based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company of
the Securities Act or any rule or regulation promulgated under the Securities
Act applicable to the Company and relating to action or inaction required of the
Company in connection with any such Registration, qualification or compliance;
and the Company will reimburse each such indemnified party and each Controlling
Person, for any legal and any other expenses reasonably incurred in connection
with investigating, defending or settling any such claim, loss, damage,
liability or action; provided, however, that the indemnity contained in this
Section 7.1 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if settlement is effected without the consent
of the Company; and provided, further, that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based upon any untrue statement or omission based
upon written information furnished to the Company by such Stockholder, and
stated to be specifically for use therein.
7.2. INDEMNIFICATION PROCEDURE.
Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof
and generally summarize such action. The indemnifying party shall have the right
to participate in and to assume the defense of such claim; provided, however,
that the indemnifying party shall be entitled to select counsel for the defense
of such claim with the approval of any parties entitled to indemnification,
which approval shall not be unreasonably withheld; provided further, however,
that if either party reasonably determines that there may be a conflict between
the position of the Company and the Stockholder in conducting the defense of
such action, suit or proceeding by reason of recognized claims for indemnity
under this Section 7, then counsel for such party shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be necessary
to protect the interest of such party. The failure to
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notify an indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party, to the extent so prejudiced, of any
liability to the indemnified party under this Section 7, but the omission so to
notify the indemnifying party will not relieve such party of any liability that
such party may have to any indemnified party otherwise other than under this
Section 7.
8. LIMITED TRANSFER OF RIGHTS.
The rights to cause the Company to register the Registrable Securities
granted to Stockholder hereunder may not be transferred or assigned by the
Stockholder or one or more of the members of Stockholder's immediate family;
provided that Stockholder may transfer such rights solely for estate planning
purposes in connection with a transfer of the Shares in whole, or in part, to a
trust established for Stockholder's benefit or the benefit of one or more of the
members of the Stockholder's immediate family, to a family partnership (general
or limited) established by Stockholder or one or more of the members of
Stockholder's immediate family, or to any other entity that is owned by
Stockholder.
9. MARKET STAND-OFF.
In consideration of the granting to the Stockholder of the registration
rights pursuant to this Agreement, the Stockholder agrees that, for so long as
the Stockholder holds Shares, except as permitted by Section 3 hereof, such
Stockholder will not sell, transfer or otherwise dispose of, including, without
limitation, through the use of any put or call option, short sale or other
derivative arrangement, shares of Common Stock in the ten days prior to the
effectiveness of any registration statement (other than a registration statement
on Form S-8 or Form S-4, or any successor form) with respect to shares of Common
Stock pursuant to which such Common Stock will be offered for sale to the
public, and for up to one hundred-eighty (180) days (or such greater period as
may be requested by the underwriter) following the effectiveness of such
registration statement, provided that the underwriters of any such offering
shall reasonably request that the Stockholder be bound by such restrictions.
10. MISCELLANEOUS.
10.1. WAIVER.
Waiver of any term or condition contained in this Agreement shall not
be construed as a waiver of a subsequent breach or failure of the same term or
condition or a waiver of any other term or condition contained in this
Agreement. Delay or failure to exercise any right or remedy hereunder shall not
impair such right, power or remedy or be construed as a waiver thereof or as
acquiescence to a default.
10.2. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS.
This Agreement constitutes the entire contract between the Company and
the Stockholder relative to the subject matter hereof. Any previous agreement
between or among any of the parties concerning registration rights is superseded
by this Agreement. Subject to the exceptions specifically set forth in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective executors, administrators, heirs,
successors and assigns of the parties.
Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated, except by a written instrument signed by the Company
and the Stockholder.
10.3. NOTICES.
Any notice or other communication required or permitted hereunder shall
be in writing and shall be deemed to have been duly given on the date of service
if served personally, by express courier or by facsimile, or five (5) days after
the date of mailing if mailed by first class mail, registered or certified,
postage prepaid. Notices shall be addressed to the Stockholder at the address
set forth in the Stock Purchase Agreement, with a copy to Michael L. Stark, Esq.
at the address set forth in the Stock Purchase Agreement, and to the Company and
its counsel
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<PAGE> 7
at the addresses set forth in the Stock Purchase Agreement or to such other
address as a party has designated by notice in writing to the other party in the
manner provided by this Section.
10.4. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
10.5. SEVERABILITY.
If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
fullest extent possible.
10.6. RULE 144 REPORTING.
With a view to making available the benefits of certain rules and
regulations of the Commission that may permit the sale of the Restricted
Securities to the public without registration, the Company agrees to use its
best efforts to:
(a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the Closing;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
(c) So long as the Stockholder owns any Restricted Securities,
furnish to the Stockholder forthwith upon written request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144,
and of the Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed as the Stockholder may reasonably request in availing itself of any rule
or regulation of the Commission allowing the Stockholder to sell any such
securities without registration.
10.7. HEADINGS.
The headings appearing at the beginning of several sections contained
herein have been inserted for the convenience of the parties, and shall not be
used to determine the construction or interpretation of this Agreement.
10.8. COUNTERPARTS.
This Agreement has been prepared and may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * * * *
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<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Stock Restriction
and Registration Rights Agreement as of the day and year first above written.
COMPANY:
OMEGA HEALTH SYSTEMS, INC.
/s/ RONALD L. EDMONDS
------------------------------------
Ronald L. Edmonds
Executive Vice President
STOCKHOLDER:
/s/ HARMEET S. CHAWLA
------------------------------------
Harmeet S. Chawla, M.D.
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