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): January 14, 1998
(December 30, 1997)
LASERSIGHT INCORPORATED
-----------------------
Exact name of registrant as specified in its charter
Delaware
--------
State or other jurisdiction of incorporation
0-19671 65-0273162
------- ----------
Commission File Number I.R.S. Employer
Identification No.
12161 Lackland Road, St. Louis, Missouri 63146
----------------------------------------------
Address of Principal Executive Offices
Registrant's telephone number, including area code: (314) 469-3220
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Sale of MEC and LSIA. On December 30, 1997, the Company sold all of the
outstanding stock of MEC Health Care, Inc. ("MEC") and LSI Acquisition, Inc.
("LSIA"), two wholly owned subsidiaries of the Company, to Vision Twenty-One,
Inc. ("Vision 21") in a transaction which was effective as of December 1, 1997.
The total consideration paid by Vision 21 to the Company consisted of $6.5
million in cash paid at closing and 820,085 unregistered shares of Vision 21
common stock, subject to certain post-closing adjustments (such shares, the
"Vision 21 Shares"). The Vision 21 Shares are to be liquidated pursuant to the
following schedule (or sooner at Vision 21's option):
Month Approximate
(1998) Percentage
------ ----------
February . . . . . . . . . . . 21%
March . . . . . . . . . . . . 21%
April . . . . . . . . . . . . 28%
May . . . . . . . . . . . . . 30%
----
Total 100%
Under its agreements with the Company, Vision 21 is to liquidate the Vision 21
Shares by a sale through a market maker designated by Vision 21 pursuant to a
shelf registration statement or a private placement, or through Vision 21
repurchasing the Vision 21 Shares. The Company is entitled to receive a minimum
of $6.5 million and a maximum of $7.475 million from the liquidation of the
Vision 21 Shares. If the Company has not received at least $6.5 million (subject
to certain post-closing adjustments) from the liquidation of the Vision 21
Shares by May 29, 1998, then on such date Vision 21 is to pay the Company such
shortfall in cash. If more than $6.5 million is raised through the liquidation
of the Vision 21 Shares, then such excess shall be used first to pay customary
broker, underwriter and placement agent fees, commissions and discounts related
to the liquidation of the Vision 21 Shares, and the balance of the liquidation
proceeds, if any, shall be paid to the Company, provided that the Company shall
not receive liquidation proceeds in excess of $7.475 million. If Vision 21 fails
to make the payments contemplated by the plan of distribution, the Company can
either require Vision 21 to have a registration statement covering all the
Vision 21 Shares not yet liquidated declared effective by the SEC, or sell the
Vision 21 Shares in a private placement subject only to compliance with
applicable securities laws.
The parties agreed to indemnify each other for certain breaches of
representations, warranties and covenants contained in the Stock Purchase
Agreement for unlawful sale or transfer of the Vision 21 Shares. In addition,
Vision 21 agreed to indemnify the Company for Vision 21's failure to satisfy
obligations and liabilities of MEC and LSIA, and the Company agreed to indemnify
Vision 21 from certain claims of fraudulent inducement related to the execution
<PAGE>
of the services agreement between LSIA and Northern New Jersey Eye Institute,
P.A. ("NNJEI"), breaches of such services agreement by the Company, MEC or LSIA
prior to closing, and the unenforceability of such services agreement due to
actions or inactions of the Company, MEC or LSIA which occurred prior to the
closing.
Post-Closing Adjustments. The final number of the Vision 21 Shares to be
received by the Company is subject to certain post-closing adjustments. The
Company is required to reimburse Vision 21 for operating profits for the month
of December 1997 generated by MEC and LSIA, negative working capital as of
November 30, 1997 of MEC and LSIA less than negative $180,000, if any, and
negative net worth as of November 30, 1997 for MEC and LSIA, if any. In
addition, if prior to December 31, 1998 Vision 21 does not enter into certain
practice management agreements with NNJEI and an affiliated physician, or absent
such agreements, if the benefits Vision 21 derives from existing practice
management agreements for the period ending December 31, 1998 is less than
$133,000, then the Company is required to reimburse Vision 21 for such shortfall
on a dollar-for-dollar basis up to a maximum reimbursement of $500,000.
Reduction in Foothill Borrowing. The Company used $2.0 million of its cash
proceeds from the sale of MEC and LSIA to reduce the principal balance of the
Company's term loan with Foothill Capital Corporation ("Foothill") from $4.0
million to $2.0 million. The Company used approximately $1.5 million of
additional cash proceeds from the sale to repay in full the outstanding balance
under its revolving loan with Foothill.
Restructuring of Foothill Loan Facility. Effective December 30, 1997, the
Company restructured the terms of its agreements with Foothill. The revolving
loan will remain in place in accordance with its previous terms but the maximum
amount available thereunder is reduced to $2.0 million. In addition, the Company
pledged the Vision 21 Shares to Foothill as collateral under the loan facility.
Moreover, after the Company has received $2.5 million from the liquidation of
the Vision 21 Shares, any additional proceeds must first be applied to pay off
the Company's term loan with Foothill, and any further proceeds to retire any
then-outstanding advances under its revolving loan with Foothill. In any event,
the Company's term loan is to be paid in full on June 15, 1998 (rather than in
monthly installments of $1.33 million beginning on May 1, 1998) and all
availability under the Company's revolving loan terminates on June 15, 1998
(rather than declining by $1.33 million per month beginning on August 1, 1998).
Until June 16, 1998, Foothill has waived the Company's compliance with the
financial covenants which were contained in the agreements between the Company
and Foothill.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
Not applicable.
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed combined financial
statements are filed with this report, beginning on page 6:
1) LaserSight Incorporated Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of September 30, 1997.
2) LaserSight Incorporated Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the nine month period ended September
30, 1997.
3) LaserSight Incorporated Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended December 31, 1996.
4) LaserSight Incorporated Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements.
(c) Exhibits
Exhibit 2.(i) Stock Purchase Agreement effective December 1, 1997,
between Vision Twenty-One, Inc., MEC Health Care,
Inc., LSI Acquisition, Inc. and LaserSight
Incorporated.
Exhibit 2.(ii) Stock Distribution Agreement dated as of December 30,
1997, between Vision Twenty-One, Inc. and LaserSight
Incorporated.
Exhibit 2.(iii) Consent and Amendment Number Four to Loan and
Security Agreement dated December 30, 1997, between
LaserSight Incorporated and Foothill Capital
Corporation.
<PAGE>
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.
LaserSight Incorporated
Date: January 14, 1998 By: /s/ Gregory L. Wilson
-----------------------
Gregory L. Wilson
Chief Financial Officer
<PAGE>
<TABLE>
PRO FORMA FINANCIAL INFORMATION
LASERSIGHT INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
Pro Forma
Adjustments
----------------------------------------------------
Historical MEC LSIA Other Pro Forma
---------------- --------------- --------------- --------------- -------------
ASSETS
Current Assets
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,164,158 $ (497,319) (1) $ (33,756) (1) $ 3,000,000 (3) $ 3,633,083
Marketable equity securities - - - 6,200,000 (4) 6,200,000
Accounts receivable - trade, net 3,840,332 (360) (1) (577,592) (1) - 3,262,380
Notes receivable - current portion, net 3,711,675 - - - 3,711,675
Inventories 3,991,541 - - - 3,991,541
Other current assets 1,169,719 (4,843) (1) (234,974) (1) - 929,902
------------- ---------------- --------------- ---------------- -----------
Total Current Assets 13,877,425 (502,522) (846,322) 9,200,000 21,728,581
Restricted cash 3,200,000 - - - 3,200,000
Notes receivable, less current portion, net 3,538,268 - - - 3,538,268
Property and equipment, net 2,214,293 (155,857) (1) (689,906) (1) - 1,368,530
Goodwill, net 14,783,566 (6,004,459) (1) (1,570,459) (1) - 7,208,648
Patents, net 11,462,339 - - - 11,462,339
Other assets, net 5,719,558 (137,500) (1) - - 5,582,058
------------- ---------------- ---------------- ---------------- -----------
Total Assets $ 54,795,449 $(6,800,338) $(3,106,687) $ 9,200,000 $54,088,424
============= ================ ================ ================ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 2,525,677 $ (775,822) (1) $ (44,664) (1) $ - $ 1,705,191
Note payable, less discount 3,677,778 - - (3,500,000) (3) 177,778
Current portion of capital lease obligation 224,549 - (224,549) (1) - -
Accrued expenses 1,748,266 (78,478) (1) (7,188) (1) 400,000 (5) 2,062,600
Accrued commissions 1,110,529 - - - 1,110,529
Income taxes payable - - - 1,558,648 (6) 1,558,648
Other current liabilities 63,998 (18,663) (1) (22,500) (1) - 22,835
------------- ---------------- ---------------- ---------------- ------------
Total Current Liabilities 9,350,797 (872,963) (298,901) (1,541,352) 6,637,581
Refundable deposits 203,000 - - - 203,000
Accrued expenses, less current portion 590,369 - - - 590,369
Deferred income taxes 570,296 - - - 570,296
Long-term obligations 971,018 - (471,018) (1) - 500,000
Redeemable convertible preferred stock 14,374,027 - - - 14,374,027
Stockholders' Equity 28,735,942 (5,927,375) (7) (2,336,768) (7) 10,741,352 (7) 31,213,151
------------- ---------------- ---------------- ---------------- -------------
Total Liabilities and Stockholders' Equity $ 54,795,449 $(6,800,338) $(3,106,687) $ 9,200,000 $ 54,088,424
============= ================ ================ ================ =============
</TABLE>
<PAGE>
<TABLE>
PRO FORMA FINANCIAL INFORMATION
LASERSIGHT INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
Pro Forma
Adjustments
------------------------------------
Historical MEC LSIA Pro Forma
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES, Net $ 18,083,073 $ (6,268,133) (2) $ (2,442,268) (2) $ 9,372,672
COST OF SALES 2,934,001 - - 2,934,001
PROVIDER PAYMENTS 4,450,855 (4,450,855) (2) - -
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 10,698,217 (1,817,278) (2,442,268) 6,438,671
RESEARCH, DEVELOPMENT AND
REGULATORY EXPENSES 1,729,153 - - 1,729,153
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 13,568,380 (1,533,202) (2) (2,244,422) (2) 9,790,756
---------------- ---------------- ---------------- ----------------
LOSS FROM OPERATIONS (4,599,316) (284,076) (197,846) (5,081,238)
OTHER INCOME AND EXPENSES:
Interest and dividend income 292,272 (33,496) (2) (24,106) (2) 234,670
Interest expense (911,966) - 71,675 (2) (840,291)
Gain on sale of subsidiaries - - - -
Other (280,400) - - (280,400)
---------------- ---------------- ---------------- ----------------
NET LOSS BEFORE INCOME TAXES (5,499,410) (317,572) (150,277) (5,967,259)
INCOME TAX EXPENSE - - - -
---------------- ---------------- ---------------- ----------------
NET LOSS (5,499,410) (317,572) (150,277) (5,967,259)
CONVERSION DISCOUNT ON PREFERRED
STOCK (41,573) - - (41,573)
PREFERRED STOCK DIVIDEND
REQUIREMENTS (13,350) - - (13,350)
---------------- ---------------- ---------------- ----------------
LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ (5,554,333) $ (317,572) $ (150,277) $(6,022,182)
================ ================ ================ ================
LOSS PER COMMON SHARE
Primary: $ (0.59) $ (0.64)
Assuming full dilution: $ (0.59) $ (0.64)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
Primary: 9,342,000 9,342,000
Assuming full dilution: 9,390,000 9,390,000
</TABLE>
<PAGE>
<TABLE>
PRO FORMA FINANCIAL INFORMATION
LASERSIGHT INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<CAPTION>
Pro Forma
Adjustments
----------------------------------
Historical MEC LSIA Pro Forma
--------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES, Net $ 21,503,990 $ (6,179,419) (2) $ (1,703,524) (2) $ 13,621,047
COST OF SALES 3,415,276 - - 3,415,276
PROVIDER PAYMENTS 4,221,599 (4,221,599) (2) - -
--------------- ----------------- ----------------- -----------------
GROSS PROFIT 13,867,115 (1,957,820) (1,703,524) 10,205,771
RESEARCH, DEVELOPMENT AND
REGULATORY EXPENSES 1,720,246 - - 1,720,246
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 17,107,218 (1,725,096) (2) (1,562,288) (2) 13,819,834
--------------- ----------------- ----------------- -----------------
LOSS FROM OPERATIONS (4,960,349) (232,724) (141,236) (5,334,309)
OTHER INCOME AND EXPENSES:
Interest and dividend income 314,287 (35,978) (2) (15,454) (2) 262,855
Interest expense (151,634) - 55,075 (2) (96,559)
Gain on sale of subsidiaries - - - -
Other (415,681) 8,299 (2) - (407,382)
--------------- ----------------- ----------------- -----------------
NET LOSS BEFORE INCOME TAXES (5,213,377) (260,403) (101,615) (5,575,395)
INCOME TAX BENEFIT (1,139,008) - - (1,139,008)
--------------- ----------------- ----------------- -----------------
NET LOSS (4,074,369) (260,403) (101,615) (4,436,387)
CONVERSION DISCOUNT ON PREFERRED
STOCK (1,010,557) - - (1,010,557)
PREFERRED STOCK DIVIDEND
REQUIREMENTS (358,618) - - (358,618)
--------------- ----------------- ----------------- -----------------
LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ (5,443,544) $ (260,403) $ (101,615) $ (5,805,562)
=============== ================= ================= =================
LOSS PER COMMON SHARE
Primary: $ (0.69) $ (0.74)
Assuming full dilution: $ (0.61) $ (0.65)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
Primary: 7,893,000 7,893,000
Assuming full dilution: 8,423,000 8,423,000
</TABLE>
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed balance sheet as of September 30, 1997 has
been prepared assuming that the disposition had occurred as of that date. Pro
forma unaudited condensed consolidated statements of operations for the year
ended December 31, 1996 and the nine months ended September 30, 1997 have been
prepared assuming that the disposition had occurred as of the beginning of the
year ended December 31, 1996. The unaudited pro forma condensed consolidated
statements of operations are not necessarily indicative of results that would
have occurred had the disposition been consummated as of the beginning of the
year ended December 31, 1996 or that which might be attained in the future.
Pro forma adjustments are as follows:
1. To eliminate the assets and liabilities included in the balance sheet of
MEC and LSIA as of September 30, 1997.
2. To eliminate revenue and expenses related to MEC and LSIA for the entire
period.
3. To reflect cash proceeds from the transaction of $6.5 million after note
payable pay down of $2.0 million and payoff of $1.5 million in line of
credit borrowings made subsequent to September 30, 1997 that were
outstanding at December 30, 1997.
4. To reflect receipt of $6.5 million in Vision 21 shares net of estimated
purchase price adjustments.
5. To reflect the accrual of estimated transaction costs.
6. To reflect income tax liabilities resulting from the transaction at
statutory rates, which may differ from actual effective tax rates.
7. The pro forma gain on the sale of MEC and LSIA assumes the transaction
occurred on September 30, 1997. Such gain reflects the $13.0 million sale
price less $0.7 million in estimated post-closing adjustments and
transaction costs, for a net selling price of $12.3 million. Deducted from
such net selling price are the net book value at September 30, 1997 of MEC
(approximately $5.9 million) and LSIA (approximately $2.3 million), and the
pro forma income tax liabilities at statutory rates of approximately $1.5
million, resulting in a pro forma gain on the sale of MEC and LSIA of
approximately $2.5 million. Such pro forma gain will vary from the actual
gain based on the actual effective income tax rates, the change in net book
value of MEC and LSIA from September 30, 1997 to November 30, 1997 and the
actual post-closing adjustments and transaction costs. The Company
estimates its gain will approximate $1.5 million.
STOCK PURCHASE AGREEMENT
DATED: As of December 1, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement (this "Agreement"), effective December 1,
1997, is by and among VISION TWENTY-ONE, INC., a Florida corporation (the
"Purchaser"), MEC Health Care, Inc. ("MEC"), a Maryland corporation, LSI
Acquisition, Inc. ("LSI"), a New Jersey corporation (collectively the "Acquired
Companies") and LaserSight Incorporated, a Delaware corporation (the
"Stockholder").
R E C I T A L S
---------------
A. Stockholder owns all of the issued and outstanding shares of capital
stock of the Acquired Companies.
B. Purchaser desires to purchase from the Stockholder, and the Stockholder
desires to sell to Purchaser, all of the issued and outstanding capital stock of
the Acquired Companies, pursuant to and in accordance with this Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants contained herein, and on the terms and subject to the conditions
herein set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings set forth below:
1.1. AAA. The term "AAA" shall mean the American Arbitration
Association.
1.2. Accounts Receivable. The term "Accounts Receivable" shall have the
meaning set forth in Section 3.35.
1.3. Affiliate. The term "Affiliate" with respect to any person or
entity shall mean a person or entity that directly or indirectly through one or
more intermediaries, controls, or is controlled by or is under common control
with, such person or entity.
1.4. Assets. The term "Assets" shall mean all of the assets of the
Acquired Companies, except as otherwise provided in this Agreement.
1.5. Business. The term "Business" shall have the meaning set forth in
Section 16.1(b)(i).
1.6. Cash Compensation. The term "Cash Compensation" shall have the
meaning set forth in Section 3.11(a).
<PAGE>
1.7. Claim Notice. The term "Claim Notice" shall have the meaning set
forth in Section 14.3(a).
1.8. Closing. The term "Closing" shall mean the consummation of the
transactions contemplated by this Agreement.
1.9. Closing Date. The term "Closing Date" shall mean December 30,
1997, or such other date as mutually agreed upon by the parties.
1.10. Code. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.11. Commitments. The term "Commitments" shall have the meaning set
forth in Section 3.16(a).
1.12. Common Stock. The term "Common Stock" shall mean the common
stock, par value $.01 per share, of Purchaser.
1.13. Company. The term "Company" shall also mean the "Acquired
Companies."
1.14. Company Balance Sheet Date. The term "Company Balance Sheet Date"
shall have the meaning set forth in Section 3.9.
1.15. Company Common Stock. The term "Company Common Stock" shall mean
the common stock of the Acquired Companies.
1.16. Compensation Plans. The term "Compensation Plans" shall have the
meaning set forth in Section 3.11(b).
1.17. Competing Business. The term "Competing Business" shall have the
meaning set forth in Section 16.1(b)(ii).
1.18. Competitor. The term "Competitor" shall mean any person or entity
which, individually or jointly with others, whether for its own account or for
that of any other person or entity, owns or holds any ownership or voting
interest in any person or entity engaged in the business of providing management
services to eye care professionals and of providing managed care services to
health maintenance organizations, preferred provider organizations and other
third party payor entities.
1.19. Controlled Group. The term "Controlled Group" shall have the
meaning set forth in Section 3.12(g).
1.20. Damages. The term "Damages" shall have the meaning set forth in
Section 14.1.
<PAGE>
1.21. Effective Date. The term "Effective Date" shall mean 12:01 a.m.
on December 1, 1997.
1.22. Election Period. The term "Election Period" shall have the
meaning set forth in Section 14.3(a).
1.23. Employee Benefit Plans. The term "Employee Benefit Plans" shall
have the meaning set forth in Section 3.12(a).
1.24. Employee Policies and Procedures. The term "Employee Policies and
Procedures" shall have the meaning set forth in Section 3.11(d).
1.25. Employment Agreements. The term "Employment Agreements" shall
have the meaning set forth in Section 3.11(c).
1.26. Environmental Damages. The term "Environmental Damages" shall
mean all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs and expenses of
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement of judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including without limitation reasonable attorneys' fees and
disbursements and consultants' fees, any of which are incurred at any time as a
result of:
(i) the existence prior to the Closing Date of Hazardous Material
upon, about, beneath the Property or migrating or threatening to migrate to or
from the Property, or the existence of a violation of Environmental Requirements
pertaining to the Property; or
(ii) the release or threatened release of Hazardous Material upon,
about, beneath Off-Site Locations or the existence of a violation of
Environmental Requirements pertaining to the Off-Site Location for which the
Seller or the Seller is a potentially responsible party regardless of whether
the existence of such Hazardous Material or the violation of Environmental
Requirements arose prior to the present ownership or operation of the Property.
1.27. Environmental Requirements. The term "Environmental Requirements"
shall mean all applicable statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises and similar items of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United States, states
and political subdivisions thereof and all applicable judicial, administrative
and regulatory decrees, judgments and orders relating to the protection of human
health or the environment.
<PAGE>
1.28. ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.29. Escrow Agent. The term "Escrow Agent" shall mean Shumaker, Loop &
Kendrick, LLP, an Ohio professional limited liability partnership.
1.30. Escrow Agreement. The term "Escrow Agreement" shall mean any
Escrow Agreement entered into among the Stockholder, Purchaser and the Escrow
Agent at the Closing.
1.31. Exchange Act. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.32. Financial Statements. The term "Financial Statements" shall have
the meaning set forth in Section 3.9.
1.33. GAAP. The term "GAAP" shall mean generally accepted accounting
principles, applied on a consistent basis with prior periods, as set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of the determination.
1.34. Governmental Authority. The term "Governmental Authority" shall
mean any national, state, provincial, local or tribunal governmental, judicial
or administrative authority or agency.
1.35. Hazardous Material. The term "Hazardous Material" shall mean any
substance:
(i) the presence of which requires investigation or remediation
under any Environmental Requirement; or
(ii) which is defined as a "solid waste," "hazardous waste,"
"hazardous substance," "pollutant" or "contaminant" under any federal, state or
local statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss.9601 et seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.); or
<PAGE>
(iii) the presence of which, under any Environmental Requirement
poses a hazard to the health or safety of persons on or about the Property; or
(iv) which contains petroleum, including crude oil or any fraction
thereof.
1.36. Indemnified Party. The term "Indemnified Party" shall have the
meaning set forth in Section 14.3(a).
1.37. Indemnifying Party. The term "Indemnifying Party" shall have the
meaning set forth in Section 14.3(a).
1.38. Indemnity Notice. The term "Indemnity Notice" shall have the
meaning set forth in Section 14.3(d).
1.39. Insurance Policies. The term "Insurance Policies" shall have the
meaning set forth in Section 3.17.
1.40. IRS. The term "IRS" shall mean the Internal Revenue Service.
1.41. Material Adverse Effect. The term "Material Adverse Effect" shall
mean a material adverse effect on the Assets and the Acquired Companies'
business, operations, condition (financial or otherwise) or results of
operations, taken as a whole, considering all relevant facts and circumstances.
1.42. Off-Site Location. The term "Off-Site Location" shall mean any
site or facility to which Hazardous Material generated on the Property prior to
the Closing Date was transported for recycling, reuse, treatment, storage or
disposal.
1.43. Permitted Encumbrances. The term "Permitted Encumbrances" shall
have the meaning set forth in Section 3.14(b).
1.44. Property. The term "Property" shall mean all real property owned,
leased or used by the Acquired Companies.
1.45. Proposed Stock Purchase Consideration Adjustment. The term
"Proposed Stock Purchase Consideration Adjustment" shall have the meaning set
forth in Section 2.5.
1.46. Proprietary Rights. The term "Proprietary Rights" shall have the
meaning set forth in Section 3.18.
<PAGE>
1.47. SEC. The term "SEC" shall mean the Securities and Exchange
Commission.
1.48. Securities. The term "Securities" shall mean the shares of Common
Stock of Purchaser to be delivered to the Stockholder and the Escrow Agent at
the Closing.
1.49. Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
1.50. Stock. The term "Stock" shall have the meaning set forth in
Section 2.1.
1.51. Stock Distribution Agreement. The term "Stock Distribution
Agreement" shall mean the Stock Distribution Agreement entered into between the
Stockholder and the Purchaser.
1.52. Stock Purchase Consideration. The term "Stock Purchase
Consideration" shall mean the consideration set forth in Section 2.3 of this
Agreement.
1.53. Stock Purchase Consideration Adjustment Amount. The term "Stock
Purchase Consideration Adjustment Amount" shall have the meaning set forth in
Section 2.5(a).
1.54. Subsidiaries. The term "Subsidiaries" shall mean the
subsidiaries, if any, of the Acquired Companies identified on Schedule 3.2.
1.55. Tax Returns. The term "Tax Returns" shall have the meaning set
forth in Section 3.19.
1.56. Third Party Claim. The term "Third Party Claim" shall have the
meaning set forth in Section 14.3(a).
2. PURCHASE AND SALE OF STOCK.
2.1. Purchase of Stock. Upon and subject to the terms and conditions of
this Agreement, Purchaser agrees to purchase and accept delivery from the
Stockholder of, and the Stockholder agrees to sell, assign, transfer and deliver
to Purchaser, at the Closing, all of the issued and outstanding shares of common
stock of the Acquired Companies (collectively, the "Stock"), free and clear of
all liens, pledges, security interests, claims, charges, restrictions, equities
or encumbrances of any kind whatsoever.
<PAGE>
2.2. The Closing. The Closing shall take place on the Closing Date at
the offices of Shumaker, Loop & Kendrick, LLP, 101 E. Kennedy Boulevard, Suite
2800, Tampa, Florida 33602 or at such other location as the parties shall
mutually agree.
2.3. Stock Purchase Consideration. As consideration for the Stock,
Purchaser, at the Closing, shall pay to the Stockholder, the aggregate sum of
Thirteen Million Dollars ($13,000,000) (the "Stock Purchase Consideration"),
subject to adjustment as set forth in Section 2.5, in the following manner:
a. Cash. The sum of Six Million Five Hundred Thousand Dollars
($6,500,000) shall be delivered to the Stockholder by wire transfer of
immediately available funds to such account or accounts as shall be designated
by the Stockholder prior to Closing.
b. Common Stock. Eight Hundred Twelve Thousand Five Hundred
(812,500) shares of Common Stock which shares shall be subject to the terms of
the Stock Distribution Agreement and the Escrow Agreement.
c. Additional Shares. Within five business days of the Closing
Date, the Purchaser shall deliver to the Stockholder such additional positive
number of shares of Common Stock (the "Additional Shares") equal to the
difference between (i) that number of shares equal to Six Million Five Hundred
Thousand Dollars ($6,500,000) divided by the average closing price, as quoted on
the NASDAQ National Market System, for the five business days immediately
preceding the Closing Date (the "Valuation Price") less (ii) 812,500. The
Additional Shares shall be subject to the terms of the Stock Distribution
Agreement.
2.4. Fractional Shares. Notwithstanding any other provision herein, no
fractional shares of Common Stock will be issued. Fractional shares shall be
rounded down to the nearest whole number of shares.
2.5. Stock Purchase Consideration Adjustments.
A. A portion of the Common Stock component of Stock Purchase
Consideration consisting of One Hundred Twenty-Five Thousand (125,000) shares of
Common Stock, plus such additional positive number of shares of Common Stock
equal to the difference between (i) that number of shares equal to One Million
Dollars ($1,000,000) divided by the Valuation Price less (ii) 125,000
(collectively, the "Adjustment Shares") shall be subject to the Escrow Agreement
and to adjustment on a dollar for dollar basis as follows (such adjustment to be
referred to as the "Stock Purchase Consideration Adjustment Amount"):
(i) Shareholder shall return to Purchaser that number of
Adjustment Shares equal to the December Operating Results (as defined herein)
<PAGE>
divided by the Valuation Price. For purposes hereof, "December Operating
Results" shall mean the sum of the operating profits of the Acquired Companies
for the month of December 1997 (which shall be calculated in accordance with
GAAP, consistently applied and in accordance with the Stockholder's past
practices, excluding amortization of goodwill), the total of which shall be
reduced by cash receipts from the month of December 1997 which were not utilized
to reduce the Stockholder's revolving loan with Foothill Capital Corporation,
provided that in no event will the adjustment contemplated by this Section
2.5(a)(i) result in the Purchaser having to issue any additional Common Stock;
and
(ii) if the aggregate Net Working Capital (as defined herein)
of the Acquired Companies reflected on the Financial Statements as of the
Company Balance Sheet Date (as defined in Section 3.9) is more negative than
negative $180,000, then the Stockholder shall return to Purchaser that number of
Adjustment Shares equal to the negative dollar amount in excess of $180,000
divided by the Valuation Price. For purposes hereof, Net Working Capital shall
be calculated on an aggregate basis including LSI and MEC and is the total
current assets of LSI and MEC reflected on the Financial Statements as of the
Company Balance Sheet Date less the total current liabilities of LSI and MEC
reflected on the Financial Statements as of the Company Balance Sheet Date;
(iii) if the aggregate Net Worth (as defined herein) of the
Acquired Companies reflected on the Financial Statements as of the Company
Balance Sheet Date is less then zero, then the Stockholder shall return to
Purchaser that number of Adjustment Shares equal to the amount less than zero
divided by the Valuation Price. For purposes hereof, Net Worth shall be
calculated on an aggregate basis including LSI and MEC and shall be as reflected
on the Financial Statements as of the Company Balance Sheet Date; and
(iv) such other adjustments as the Stockholder and the
Purchaser shall mutually agree to in writing.
B. Within ninety (90) days following the Closing Date, the
Stockholder shall present to the Purchaser its proposed Stock Purchase
Consideration Adjustment Amount (the "Proposed Stock Purchase Consideration
Adjustment") calculated in accordance with Section 2.5(a) hereof and consistent
with historical practices and operations. The Purchaser shall, within thirty
(30) days after the delivery by Stockholder of the Proposed Stock Purchase
Consideration Adjustment, complete their review thereof. In the event that the
Purchaser believes that the Proposed Stock Purchase Consideration Adjustment has
not been prepared on the basis set forth above or otherwise contests any item
set forth therein, the Purchaser shall, on or before the last day of such 30 day
period, so object to Stockholder and Escrow Agent in writing, setting forth a
specific description of the nature of the objection and the corresponding
adjustments the Purchaser believes should be made. If no objection is received
<PAGE>
by Stockholder on or before the last day of such 30 day period, then the
Proposed Stock Purchase Consideration Adjustment delivered by Stockholder shall
be final. If an objection has been made and Stockholder and Purchaser are unable
to resolve all of their disagreements with respect to the proposed adjustments
within 15 days following the delivery of the Purchaser's objection, the dispute
shall be submitted to arbitration as provided in Section 17.1 except that the
arbitrator shall be instructed to deliver his determination of the number of
Adjustment Shares to be delivered to the Stockholder to the parties and the
Escrow Agent no later than 30 days after the arbitration hearing. If the
Stockholder and the Purchaser are able to resolve any such disagreements, they
shall jointly notify the Escrow Agent in writing as to the number of Adjustment
Shares to be delivered to the Stockholder. Stockholder shall provide to the
Purchaser and its accountants full access to all relevant books, records and
work papers utilized in preparing the Proposed Stock Purchase Consideration
Adjustment and the Financial Statements.
3. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANIES AND THE
STOCKHOLDER3. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANIES AND THE
STOCKHOLDER. The Acquired Companies and the Stockholder, jointly and severally,
represent and warrant to Purchaser that the following are true and correct on
the date hereof, and shall be true and correct as of the Closing Date as if made
on that date; when used in this Section 3, the term "best knowledge" (or words
of similar import) shall mean such knowledge as shall have been obtained through
due and diligent investigation by those individuals listed on Schedule 3:
3.1. Organization and Good Standing; Qualification. Each of the
Acquired Companies and the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with all requisite corporate power and authority to carry on the
business in which it is engaged, to own the properties it owns, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Each of the Acquired Companies and the subsidiaries is duly qualified and
licensed to do business in each jurisdiction in which the character or location
of the properties owned or leased by the Acquired Companies or the subsidiaries
or the practice of the businesses conducted by the Acquired Companies or the
subsidiaries makes such qualification necessary or desirable, except where the
failure to be so qualified would not have a Material Adverse Effect.
3.2. Subsidiaries. Except as set forth on Schedule 3.2, the Acquired
Companies do not own, directly or indirectly, any of the capital stock of any
other corporation or any equity, profit sharing, participation or other interest
in any corporation, partnership, joint venture or other entity (each, a
"Subsidiary").
3.3. Capitalization. The authorized capital stock of MEC and LSI
consist, respectively, of 5,000 and 1,000 shares of Company Common Stock, of
<PAGE>
which 500 and 1,000 shares, respectively, are issued and outstanding. As of the
Closing Date, the Stockholder owns all of the issued and outstanding Company
Common Stock in the amounts set forth on Schedule 3.3, free and clear of all
liens, pledges, restrictions, voting trusts or other security interests,
encumbrances of any nature whatsoever. Each outstanding share of Company Common
Stock has been legally and validly issued and is fully paid and nonassessable.
No shares of Company Common Stock are owned by the Acquired Companies in
treasury. No shares of Company Common Stock have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
the Stockholder. The Acquired Companies have no bonds, debentures, notes or
other obligations the holders of which have the right to vote (or are
convertible into or exercisable for securities having the right to vote) with
the Stockholder on any matter.
3.4. Transactions in Capital Stock. Except as set forth on Schedule
3.4, there exist no options, warrants, subscriptions or other rights to
purchase, or securities convertible into or exchangeable for, any of the
authorized or outstanding securities of the Acquired Companies, and no option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Acquired Companies to issue any of its authorized but unissued capital
stock. Except as set forth on Schedule 3.4, the Acquired Companies have no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof.
3.5. Corporate Records. Copies of the Certificate of Incorporation and
Bylaws, and all amendments thereto, of the Acquired Companies have been
delivered or made available to Purchaser and are true, correct and complete
copies thereof, as in effect on the date hereof. The minute books of the
Acquired Companies and the Subsidiaries, copies of which have been delivered or
made available to Purchaser, contain all material minutes and consents of the
directors and stockholders of the Acquired Companies and the Subsidiaries since
owned by Stockholder.
3.6. Governmental Consents. Except as disclosed in Schedule 3.6, no
filing or registration with, or authorization, consent or approval of, any
Governmental Entity, to the best knowledge of the Acquired Companies, is
necessary for the consummation of the transactions contemplated by this
Agreement.
3.7. Authorization and Validity. The Acquired Companies have the
corporate power and authority to execute this Agreement and carry out its
obligations hereunder. The execution, delivery and performance by the Acquired
Companies of this Agreement and the other agreements contemplated hereby, and
the consummation of the transactions contemplated hereby and thereby to be
performed by the Acquired Companies, have been duly authorized by the Acquired
Companies. This Agreement has been duly executed and delivered by the Acquired
Companies and constitutes the legal, valid and binding obligation of the
<PAGE>
Acquired Companies, enforceable against the Acquired Companies in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The Acquired Companies have obtained, in accordance with
applicable law and its Certificates of Incorporation and Bylaws, the approval of
its stockholders necessary for the consummation of the transactions contemplated
hereby.
3.8. No Conflict. Except as disclosed on Schedule 3.8, the execution
and delivery of the documents contemplated hereunder and the consummation of the
transactions contemplated thereby by the Acquired Companies will not (i) violate
any provision of the Acquired Companies' organizational documents, (ii) violate
any provision of or result in the breach of or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any obligation
under, any mortgage, lien, lease, material contract, license, permit, instrument
or any other material agreement to which the Acquired Companies or the
Subsidiaries is a party, (iii) result in the creation or imposition of any lien,
charge, pledge, security interest or other encumbrance upon any property of the
Acquired Companies or the Subsidiaries, or (iv) violate or conflict with any
order, award, judgment or decree or other restriction or conflict with any law,
ordinance, rule or regulation to which the Acquired Companies or its property is
subject except for those which would not have a Material Adverse Effect.
3.9. Financial Statements. Purchaser has received the Stockholder's
audited consolidated balance sheets and related audited consolidated statements
of operations and accumulated deficits and of cash flows of the Stockholder at
December 31, 1996 and 1995 and the reports thereon of KPMG Peat Marwick LLP and
the unaudited balance sheets and income statements for each of the Acquired
Companies at December 31, 1996 and 1995 and for the ten month period ending
October 31, 1997 (collectively the "Company Balance Sheets"). The Company
Balance Sheets reflect all adjustments, including normal recurring accruals,
considered necessary for a fair presentation of the financial position of the
Acquired Companies, subject to normal year end adjustments. The Company Balance
Sheets related to the period ended December 31, 1996 and 1995 were the
underlying financial statements utilized in connection with preparing the
Stockholder's consolidated statements of operations.
The Stockholder will also furnish to Purchaser the unaudited interim
balance sheet at November 30, 1997 of each of the Acquired Companies and related
unaudited statements of operations for the fiscal period then ended by January
15, 1998 (the unaudited interim balance sheet and related statement of
operations at November 30, 1997 shall be referred to as the "Financial
Statements"). All of the Financial Statements are complete and correct, have
been prepared on a basis consistent with past practices, and fairly present the
separate financial positions of each of the Acquired Companies at the date
thereof. The Financial Statements reflect all property and assets used in the
business of the Acquired Companies in a manner consistent with past practices.
No statement of income on the Financial Statements contains any extraordinary or
<PAGE>
nonrecurring item or expense and none of the Financial Statements reflects any
revaluation of assets (except as specified therein). Since November 30, 1997
(the "Company Balance Sheet Date") there has been no material adverse change in
the assets or liabilities or in the business or condition, financial or
otherwise, or the results of operations or prospects of the Acquired Companies
or the Subsidiaries, whether as a result of any legislative or regulatory
change, revocation of any license, litigation, administrative action, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise, except as
disclosed and consented to by Purchaser; and to the best knowledge, information
and belief of the Acquired Companies and the Stockholder, no fact or condition
exists or is contemplated or threatened which might cause such a change in the
future.
3.10. No Undisclosed Liabilities. Except as set forth on Schedule 3.10,
the Financial Statements reflect all liabilities of the Acquired Companies and
the Subsidiaries, accrued, contingent or otherwise that would be required to be
reflected thereon, or in the notes thereto, in accordance with GAAP, except for
liabilities and obligations incurred in the ordinary course of business since
the Acquired Companies Balance Sheet Date. Except as set forth in the Financial
Statements or on Schedule 3.10, each of the Acquired Companies and the
Subsidiaries is not liable upon or with respect to, or obligated in any other
way to provide funds in respect of or to guarantee or assume in any manner, any
debt, obligation or dividend of any person, corporation, association,
partnership, joint venture, trust or other entity, and neither the Acquired
Companies nor the Stockholder know of any valid basis for the assertion of any
other claims or liabilities of any nature or in any amount.
3.11. Employee Matters.
A. Cash Compensation. Schedule 3.11(a) contains a complete and
accurate list of the names, titles and annual cash compensation as of the
Closing Date, including without limitation wages, salaries, bonuses
(discretionary and formula) and other cash compensation (the "Cash
Compensation") of all employees of the Acquired Companies and the Subsidiaries.
In addition, Schedule 3.11(a) contains a complete and accurate description of
(i) all increases in Cash Compensation of employees of the Acquired Companies
and the Subsidiaries during the current fiscal year and the immediately
preceding fiscal year and (ii) any promised increases in Cash Compensation of
employees of the Acquired Companies and the Subsidiaries that have not yet been
effected, other than in the reasonable and ordinary course of business.
B. Compensation Plans. Schedule 3.11(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by the Acquired Companies or to which the
Acquired Companies contribute on behalf of its employees, other than Employment
Agreements listed on Schedule 3.11(c) and Employee Benefit Plans listed on
<PAGE>
Schedule 3.12(a). The Compensation Plans include without limitation plans,
arrangements or practices that provide for performance awards, and stock
ownership or stock options. The Acquired Companies have provided or made
available to Purchaser a copy of each written Compensation Plan and a written
description of each unwritten Compensation Plan. Except as set forth on Schedule
3.11(b), each of the Compensation Plans can be terminated or amended at will by
the Acquired Companies.
C. Employment Agreements. Except as set forth on Schedule 3.11(c),
neither the Acquired Companies nor the Subsidiaries are a party to any
employment agreement ("Employment Agreements") with respect to any of its
employees. Employment Agreements include without limitation employee leasing
agreements, employee services agreements and non-competition agreements.
D. Employee Policies and Procedures. Schedule 3.11(d) contains a
complete and accurate list of all employee manuals and all material policies,
procedures and work-related rules (the "Employee Policies and Procedures") that
currently apply to employees of the Acquired Companies. The Acquired Companies
have provided or made available to Purchaser a copy of all written Employee
Policies and Procedures and a written description of all material unwritten
Employee Policies and Procedures.
E. Unwritten Amendments. Except as described on Schedule 3.11(b),
3.11(c) or 3.11(d), no material unwritten amendments have been made, whether by
oral communication, pattern of conduct or otherwise, with respect to any
Compensation Plans or, Employee Policies and Procedures.
F. Labor Compliance. Each of the Acquired Companies and the
Subsidiaries have been and is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, except for any such failures
to be in compliance that, individually or in the aggregate, would not result in
a Material Adverse Effect, and the Acquired Companies are not liable for any
arrearages of wages or penalties for failure to comply with any of the
foregoing. Each of the Acquired Companies and the Subsidiaries have not engaged
in any unfair labor practices or discriminated on the basis of race, color,
religion, sex, national origin, age, disability or handicap in its employment
conditions or practices that would, individually or in the aggregate, result in
a Material Adverse Effect. Except as set forth on Schedule 3.11(f), there are no
(i) unfair labor practice charges or complaints or racial, color, religious,
sex, national origin, age, disability or handicap discrimination charges or
complaints pending or, to the best knowledge of the Acquired Companies and the
Stockholder, threatened against the Acquired Companies or the Subsidiaries
before any federal, state or local court, board, department, commission or
agency (nor, to the best knowledge of the Acquired Companies and the
Stockholder, does any valid basis therefor exist) or (ii) existing or, to the
<PAGE>
best knowledge of the Acquired Companies and the Stockholder, threatened labor
strikes, disputes, grievances, controversies or other labor troubles affecting
the Acquired Companies (nor, to the best knowledge of the Acquired Companies and
the Stockholder, does any valid basis therefor exist).
G. Unions. Each of the Acquired Companies and the Subsidiaries
have never been a party to any agreement with any union, labor organization or
collective bargaining unit. No employees of the Acquired Companies or the
Subsidiaries are represented by any union, labor organization or collective
bargaining unit. Except as set forth on Schedule 3.11(g), to the actual
knowledge of the Acquired Companies, none of the employees of the Acquired
Companies or the Subsidiaries have threatened to organize or join a union, labor
organization or collective bargaining unit.
H. Aliens. All employees of the Acquired Companies and the
Subsidiaries are, to the best knowledge of the Acquired Companies, citizens of,
or are authorized in accordance with federal immigration laws to be employed in,
the United States.
3.12. Employee Benefit Plans.
A. Identification. Schedule 3.12(a) contains a complete and
accurate list of all employee benefit plans (within the meaning of Section 3(3)
of ERISA sponsored by the Acquired Companies and the Subsidiaries or to which
the Acquired Companies and the Subsidiaries contributes on behalf of their
employees and all employee benefit plans previously sponsored or contributed to
on behalf of their employees since the date the Acquired Companies have been
owned by the Stockholder (the "Employee Benefit Plans"). The Acquired Companies
have provided or made available to Purchaser copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. In
addition, the Acquired Companies have provided or made available to Purchaser a
written description of all existing practices engaged in by the Acquired
Companies and the Subsidiaries that constitute Employee Benefit Plans. Except as
set forth on Schedule 3.12(a) and subject to the requirements of the Code and
ERISA, each of the Employee Benefit Plans can be terminated or amended at will
by the Acquired Companies. Except as set forth on Schedule 3.12(a), no unwritten
amendment exists with respect to any Employee Benefit Plan. Except as set forth
on Schedule 3.12(b)-(l), each of the following paragraphs is true and correct.
B. Administration. Each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, result in a Material Adverse Effect. To the
<PAGE>
best of the knowledge of the Acquired Companies, the Acquired Companies and the
Subsidiaries have (i) made all necessary filings with respect to such Employee
Benefit Plans, including the timely filing of Form 5500 if applicable, and (ii)
made all necessary filings, reports and disclosures pursuant to and have
complied with all requirements of the IRS Voluntary Compliance Resolution
Program, if applicable, with respect to all profit sharing retirement plans and
pension plans in which employees of the Acquired Companies and the Subsidiaries
participate.
C. Examinations. Except as set forth on Schedule 3.11(c), the
Acquired Companies have not received any notice that any Employee Benefit Plan
is currently the subject of an audit, investigation, enforcement action or other
similar proceeding conducted by any state or federal agency.
D. Prohibited Transactions. To the best of the knowledge of the
Acquired Companies, no prohibited transactions (within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA) have occurred with respect to
any Employee Benefit Plans.
E. Claims and Litigation. No pending or, to the actual knowledge
of the Acquired Companies and the Stockholder, threatened claims, suits, or
other proceedings exist with respect to any Employee Benefit Plan other than
normal benefit claims filed by participants or beneficiaries.
F. Qualification. As set forth in more detail on Schedule 3.12(f),
the Stockholder has applied for a favorable determination letter or ruling from
the IRS for each of the Employee Benefit Plans intended to be qualified within
the meaning of Section 401(a) of the Code and/or tax-exempt within the meaning
of Section 501(a) of the Code. Except as set forth on Schedule 3.12(f), no
proceedings exist or, to the actual knowledge of the Acquired Companies and the
Stockholder have been threatened that could result in the revocation of any such
favorable determination letter or ruling.
G. Funding Status. Neither the Stockholder nor any member of a
controlled group with the Stockholder (within the meaning of Section
412(n)(6)(B)) sponsors any plans which (1) are subject to the minimum funding
requirements of Code Section 412 or ERISA Section 302 or (2) are subject to
Title IV of ERISA assumptions.
H. Excise Taxes. To the best of the knowledge of the Acquired
Companies, neither the Acquired Companies nor any member of a Controlled Group
has any liability to pay excise taxes with respect to any Employee Benefit Plan
under applicable provisions of the Code or ERISA.
<PAGE>
I. Multiemployer Plans. Neither the Acquired Companies nor any
member of a Controlled Group is or ever has been obligated to contribute to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
J. Pension Benefit Guaranty Corporation. None of the Employee
Benefit Plans are subject to the requirements of Title IV of ERISA.
K. Retirees. Neither the Acquired Companies nor any of the
Subsidiaries has any obligation or commitment to provide medical, dental or life
insurance benefits to or on behalf of any of its employees who may retire or any
of its former employees who have retired except as may be required pursuant to
the continuation of coverage provisions of Section 4980B of the Code and
Sections 501 through 508 of ERISA.
L. Other Compensation. Except as set forth on Schedules 3.11(a),
3.11(b), 3.11(c), 3.11(d) and 3.12(a), neither the Acquired Companies nor the
Subsidiaries is a party to any compensation or debt arrangement with any person
relating to the provision of health care related services.
3.13. Absence of Certain Changes. Except as set forth on Schedule 3.13
or as contemplated in this Agreement, since the Acquired Companies Balance Sheet
Date, the Acquired Companies and the Subsidiaries have not:
A. suffered a Material Adverse Effect, whether or not caused by
any deliberate act or omission of the Acquired Companies or the Subsidiaries;
B. contracted for the purpose of acquiring any capital asset
having a cost in excess of $20,000 or made any single expenditure for a capital
asset in excess of $20,000;
C. incurred any indebtedness for borrowed money in excess of
$20,000 (other than short-term borrowings in the ordinary course of business),
or issued or sold any debt securities;
D. incurred or discharged any material liabilities or obligations
except in the ordinary course of business;
E. paid any amount on any indebtedness prior to the due date,
forgiven or cancelled any claims or any debt in excess of $20,000, or released
or waived any rights or claims except in the ordinary course of business;
F. mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets (other than
<PAGE>
statutory liens arising in the ordinary course of business or other liens that
do not materially detract from the value or interfere with the use of such
properties or assets);
G. suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has, individually or in the
aggregate, resulted in a Material Adverse Effect;
H. acquired or disposed of any assets having an aggregate value in
excess of $20,000, except in the ordinary course of business;
I. written up or written down the carrying value of any of its
assets, other than accounts receivable in the ordinary course of business;
J. changed the costing system or depreciation methods of
accounting for its assets in any material respect;
K. lost or terminated any employee, patient, customer or supplier
that has, individually or in the aggregate, resulted in a Material Adverse
Effect;
L. increased the compensation of any director, officer, key
employee or consultant, except as disclosed on Schedule 3.11(a);
M. increased the compensation of any employee (except for
increases in the ordinary course of business consistent with past practice) or
hired any new employee who is expected to receive annualized compensation of at
least $20,000;
N. formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
O. redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock, paid
any dividend or made any distribution or payment on any of its capital stock, or
agreed to change the terms and conditions of any such capital stock;
P. entered into any agreement providing for total payments in
excess of $20,000 in any twelve (12) month period with any person or group, or
modified or amended in any material respect the terms of any such existing
agreement, except in the ordinary course of business whereupon the sum of total
payments shall not exceed $20,000 in any twelve (12) month period;
Q. entered into, adopted or amended any Employee Benefit Plan,
except as contemplated hereby or the other agreements contemplated hereby; or
<PAGE>
R. entered into any other commitment or transaction or experienced
any other event that would materially interfere with its performance under this
Agreement or any other agreement or document executed or to be executed pursuant
to this Agreement, or otherwise has, individually or in the aggregate, resulted
in a Material Adverse Effect.
3.14. Title to Assets and Properties.
A. Real Property. The Acquired Companies and the Subsidiaries do
not own any interest (other than leasehold interests referred to on Schedule
3.14(c)) in real property. The leased real property referred to on Schedule
3.14(c) constitutes the only real property necessary for the conduct of the
Acquired Companies' business.
B. Personal Property. Except as set forth on Schedule 3.14(b), the
Acquired Companies and/or the Subsidiaries have valid and marketable title to
all the personal property constituting the Assets. The personal property
constituting the Assets is adequate for the conduct of the Acquired Companies's
and the Subsidiaries businesses in the manner in which they are currently
conducted and contemplated to be conducted by the Stockholder. Upon consummation
of the transactions contemplated hereby, such interest in the Assets shall be
transferred to Purchaser free and clear of all security interests, liens, claims
and encumbrances, other than those set forth on Schedule 3.14(b) (the "Permitted
Encumbrances") and statutory liens arising in the ordinary course of business or
other liens that do not materially detract from the value or interfere with the
use of such properties or assets.
C. Leases. Schedule 3.14(c) sets forth a true, correct and
complete list and brief description of (i) all leases of real property, and (ii)
leases of personal property involving rental payments within any twelve (12)
month period in excess of $12,000, in either case to which the Acquired
Companies or the Subsidiaries is a party, either as lessor or lessee, are set
forth on Schedule 3.14(c). To the best knowledge of the Acquired Companies, all
such leases are valid and enforceable in accordance with their respective terms
and no event has occurred which, with the giving of notice, the lapse of time or
both, would constitute an event of default thereunder, including the execution
of this Agreement or the consummation of the transactions contemplated hereby.
3.15. Condition of Fixed Assets. Except as set forth in Schedule 3.15,
all of the fixtures, structures, machinery and equipment reflected in the
Financial Statements and used by the Acquired Companies and the Subsidiaries in
its business are in good operating condition and repair, subject to normal wear
and tear, and conform in all material respects with all applicable ordinances,
regulations and other laws, and the Acquired Companies have no actual knowledge
of any latent defects therein.
<PAGE>
3.16. Commitments.
A. Commitments; Defaults. Except as set forth on Schedule 3.16 or
as otherwise disclosed pursuant to this Agreement, neither the Acquired
Companies nor any of the Subsidiaries is a party to nor bound by, nor are any of
the shares of Company Common Stock subject to, nor are the Assets or the
businesses of the Acquired Companies or the Subsidiaries bound by, whether or
not in writing, any of the following (collectively, "Commitments"):
I) partnership or joint venture agreement;
II) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
III) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent to
another;
IV) contract to purchase real property;
V) agreements or arrangements with eye care professionals;
VI) agreements with suppliers of eye care and related
products;
VII) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys (other than
in connection with this Agreement and the transactions contemplated hereby)
involving total payments within any twelve (12) month period in excess of
$20,000 and which is not terminable on thirty (30) days' notice or without
penalty;
VIII) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of the Acquired Companies or the Stockholder;
IX) agreement for the acquisition of services, supplies,
equipment, inventory, fixtures or other property involving more than $20,000 in
the aggregate, except in the ordinary course of business.
X) powers of attorney;
XI) contracts containing non-competition covenants;
<PAGE>
XII) agreement providing for the purchase from a supplier of
all or substantially all of the requirements of the Acquired Companies of a
particular product or services, except as is consistent with the Acquired
Companies previous purchasing history and which does not involve more than a
twelve month commitment on behalf of the Acquired Companies;
XIII) agreements with health maintenance organizations,
preferred provider organization, managed care entities and similar entities; or
XIV) any other agreement or commitment in excess of $20,000
not made in the ordinary course of business or that is material to the business,
operations, condition (financial or otherwise) or results of operations of the
Acquired Companies.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Purchaser. To the best knowledge of the Acquired
Companies and the Stockholder, there are no existing events of default or
events, occurrences, acts or omissions that, with the giving of notice or lapse
of time or both, would constitute defaults by the Acquired Companies or any of
the Subsidiaries or, to the best knowledge of the Acquired Companies and the
Stockholder, any other party to a material Commitment, and no penalties have
been incurred nor are amendments pending, with respect to the material
Commitments. The Commitments are in full force and effect and are valid and
enforceable obligations of the Acquired Companies or the Subsidiaries, and to
the best knowledge of the Acquired Companies and the Stockholder, are valid and
enforceable obligations of the other parties thereto, in accordance with their
respective terms, and no defenses, off-sets or counterclaims have been asserted,
nor has the Acquired Companies waived any material rights thereunder. No
consents or approvals are required under the terms of any Commitment in
connection with the transactions contemplated herein.
B. No Cancellation or Termination of Commitment. Except as
disclosed pursuant to this Agreement and except where such default would not
have a Material Adverse Effect, (i) neither the Acquired Companies nor the
Subsidiaries has received notice of any plan or intention of any other party to
any Commitment to exercise any right to cancel or terminate any Commitment, and
the Acquired Companies do not know of any fact that would justify the exercise
of such a right; and (ii) neither the Acquired Companies nor the Subsidiaries
currently contemplates, or has reason to believe any other person currently
contemplates, any amendment or change to any Commitment.
3.17. Insurance. The Acquired Companies and the Subsidiaries carry
property, liability, malpractice, workers' compensation and such other types of
<PAGE>
insurance pursuant to the insurance policies listed and briefly described on
Section 3.17 (the "Insurance Policies"). The Insurance Policies are all of the
insurance policies of the Acquired Companies and the Subsidiaries relating to
the business of the Acquired Companies and the Assets. All of the Insurance
Policies are issued by insurers of recognized responsibility and, to the best
knowledge of the Acquired Companies, are valid and enforceable policies, except
as may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. All
Insurance Policies shall be maintained in force without interruption up to and
including the Closing Date. True, complete and correct copies of all Insurance
Policies have been provided or made available to Purchaser. Except as set forth
on Schedule 3.17, neither the Acquired Companies nor the Subsidiaries has
received any notice or other communication from any issuer of any Insurance
Policy cancelling such policy, materially increasing any deductibles or retained
amounts thereunder, and to the best knowledge of the Acquired Companies and the
Stockholder, no such cancellation or increase of deductibles, retainages or
premiums is threatened. Except as set forth on Schedule 3.17, neither the
Acquired Companies nor any of the Subsidiaries has any outstanding claims,
settlements or premiums owed against any Insurance Policy, and the Acquired
Companies have given all notices or has presented all potential or actual claims
under any Insurance Policy in due and timely fashion. Schedule 3.17 also sets
forth a list of all claims under any Insurance Policy in excess of $10,000 per
occurrence filed by the Acquired Companies since the Acquired Companies have
been owned by the Stockholder.
3.18. Proprietary Rights and Information. Set forth on Schedule 3.18 is
a true and correct description of the following ("Proprietary Rights"):
A. all trademarks, trade names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, and all patents and copyrights and applications therefor currently
owned, in whole or in part, by the Acquired Companies or the Subsidiaries, and
all licenses, royalties, assignments and other similar agreements relating to
the foregoing to which the Acquired Companies or the Subsidiaries is a party
(including the expiration date thereof if applicable); and
B. all agreements relating to technology, know-how or processes
that the Acquired Companies and the Subsidiaries are licensed or authorized to
use by others (other than technology, know-how or processes generally available
to other lens grinding businesses), or which it licenses or authorizes others to
use.
The Acquired Companies and the Subsidiaries own or have the legal right to use
the Proprietary Rights, and to the best knowledge of the Acquired Companies and
the Stockholder such ownership or use does not conflict, infringe or violate the
rights of any other person. Except as disclosed on Schedule 3.18, no consent of
<PAGE>
any person will be required for the use of any Proprietary Rights by Purchaser
upon consummation of the transactions contemplated hereby and the Proprietary
Rights are freely transferable. No claim has been asserted by any person to the
ownership of or for infringement by the Acquired Companies or the Subsidiaries
of the proprietary right of any other person, and the Acquired Companies do not
know of any valid basis for any such claim. To the best knowledge of the
Acquired Companies and the Stockholder, the Acquired Companies and the
Subsidiaries have the right to use, free and clear of any adverse claims or
rights of others, all trade secrets, customer lists and proprietary information
required for the marketing of all merchandise and services formerly or presently
sold or marketed by it.
3.19. Taxes.
A. Filing of Tax Returns. Each of the Acquired Companies and the
Subsidiaries have duly and timely filed and prior to the Closing Date will duly
and timely file (in accordance with any extensions duly granted by the
appropriate governmental agency, if applicable) with the appropriate
governmental agencies all federal, state, local or foreign income, excise,
corporate, franchise, property, sales, use, payroll, withholding, provider,
value added and other tax returns and reports (collectively the "Tax Returns")
required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns or reports
are complete and accurate in all material respects and properly reflect the
taxes of the Acquired Companies and the Subsidiaries for the periods covered
thereby.
B. Payment of Taxes. Except for such items as the Acquired
Companies or the Subsidiaries may be disputing in good faith by proceedings in
compliance with applicable law, which are described on Schedule 3.19, (i) the
Acquired Companies and the Subsidiaries have paid all taxes, penalties,
assessments and interest that have become due with respect to any Tax Returns
that they have filed and have properly accrued on their books and records for
all of the same that have not yet become due, and (ii) the Acquired Companies
and the Subsidiaries are not delinquent in the payment of any tax, assessment or
governmental charge.
C. No Pending Deficiencies, Delinquencies, Assessments or Audits.
Except as set forth on Schedule 3.19, neither the Acquired Companies nor the
Subsidiaries have received any notice that any tax deficiency or delinquency has
been asserted against the Acquired Companies or any of the Subsidiaries. There
is no unpaid assessment, proposal for additional taxes, deficiency or
delinquency in the payment of any of the taxes of the Acquired Companies or any
of the Subsidiaries that could be asserted by any taxing authority. There is no
taxing authority audit of the Acquired Companies or any of the Subsidiaries
pending, or to the best knowledge of the Acquired Companies and the Stockholder,
threatened, and the results of any completed audits are properly reflected in
<PAGE>
the Financial Statements. The Acquired Companies and the Subsidiaries have not
violated any federal, state, local or foreign tax law.
D. No Extension of Limitation Period. Neither the Acquired
Companies nor the Subsidiaries have granted an extension to any taxing authority
of the limitation period during which any tax liability may be assessed or
collected.
E. All Withholding Requirements Satisfied. All monies required to
be withheld by the Acquired Companies and the Subsidiaries and paid to
governmental agencies for all income, social security, unemployment insurance,
sales, excise, use and other taxes have been collected or withheld and paid to
the respective governmental agencies.
F. Foreign Person. Neither the Acquired Companies, any of the
Subsidiaries nor the Stockholder is a foreign person, as such term is referred
to in Section 1445(f)(3) of the Code.
G. Safe Harbor Lease. None of the Assets constitutes property that
the Acquired Companies, the Subsidiaries, Purchaser, or any Affiliate of
Purchaser, will be required to treat as being owned by another person pursuant
to the "Safe Harbor Lease" provisions of Section 168(f)(8) of the Code prior to
repeal by the Tax Equity and Fiscal Responsibility Act of 1982.
H. Tax Exempt Entity. None of the Assets are subject to a lease to
a "tax exempt entity" as such term is defined in Section 168(h)(2) of the Code.
I. Collapsible Corporation. The Acquired Companies and the
Subsidiaries have not at any time consented, and the Stockholder will not permit
the Acquired Companies nor the Subsidiaries to elect, to have the provisions of
Section 341(f)(2) of the Code apply to any of them.
J. Boycotts. Neither the Acquired Companies nor the Subsidiaries
have at any time participated in or cooperated with any international boycott as
defined in Section 999 of the Code.
K. Parachute Payments. No payment required or contemplated to be
made by the Acquired Companies or the Subsidiaries will be characterized as an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code.
L. S Corporation. Neither the Acquired Companies nor the
Subsidiaries have made an election to be taxed as an "S" corporation under
Section 1362(a) of the Code.
<PAGE>
M. Personal Service Corporation. Neither the Acquired Companies
nor the Subsidiaries are a personal service corporation subject to the
provisions of Section 269A of the Code.
N. Personal Holding Company. Neither the Acquired Companies nor
the Subsidiaries are or has been a personal holding company within the meaning
of Section 542 of the Code.
O. Tax Sharing Agreements. Neither the Acquired Companies nor the
Subsidiaries are party to any tax sharing agreement with any other person or
entity.
P. Section 338 Election. Purchaser may elect under Section 338(g)
and Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the
"Code"), after the Closing Date to adjust the tax basis in the assets of the
Acquired Companies pursuant to Section 338(a) of the Code. The Stockholder
agrees that, after the Closing Date, at Purchaser's request, it shall join with
Purchaser in a timely election made pursuant to Sections 338(g) and 338(h)(10)
of the Code, and the Stockholder and Purchaser agree, at Purchaser's option, to
make any elections comparable to the elections under Sections 338(g) and
338(h)(10) under any applicable state or local laws. The Stockholder agrees to
take all steps necessary to perfect a joint election under Section 338(h)(10) of
the Code pursuant to the procedures specified in Treas. Reg. Section
1.338(h)(10)-1(d)(2), including executing an Internal Revenue Service Form 8023
and agreeing to the amount of and allocation of the Deemed Sale Price determined
by the Purchaser pursuant to the procedures specified in Treas. Reg. Section
1.338(h)(10)-1(f). Stockholder agrees to pay all taxes which result from the
election contemplated by this Section 3.19(p).
3.20. Governmental Authorizations. The Acquired Companies and the
Subsidiaries possess all necessary licenses, franchises, permits and other
governmental authorizations, including, but not limited to all licenses,
franchises, permits and authorizations for the conduct of the Acquired
Companies' and the Subsidiaries' businesses as now conducted, all of which are
listed (with expiration dates, if applicable) on Schedule 3.20. Except as set
forth on Section 3.20, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded by any such licenses, franchises, permits or
authorizations which, singly or in the aggregate, would not have a Material
Adverse Effect. All such licenses, franchises, permits and other authorizations
are valid and in full force and effect, the Acquired Companies and the
Subsidiaries are in current compliance therewith and neither the Acquired
Companies nor any Subsidiary have received any notice that any governmental
authority is considering challenging, revoking, cancelling, restricting,
conditioning or not renewing any such license, franchise, permit or other
authorization.
<PAGE>
3.21. Compliance with Applicable Laws. The Acquired Companies and each
of the Subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities material to the business of the
Acquired Companies or such Subsidiary, as the case may be, including, without
limitation, applicable state corporation, insurance and health regulatory
authorities, and other Governmental Entities regulating exclusive provider
organizations, preferred provider organizations, medical utilization review
organizations, medical service organizations, lay intermediaries, secondary
contractors, or third party administrators (the "Company Permits"). The Acquired
Companies and the Subsidiaries are in current compliance with the terms of the
Acquired Companies Permits, except for such failures to comply which, singly or
in the aggregate, would not have a Material Adverse Effect. Except as disclosed
in Section 3.21, the Acquired Companies and each of the Subsidiaries are in
compliance with all laws, including applicable Medicare and Medicaid laws,
ordinances and regulations of any Governmental Entity, including, without
limitation, applicable state corporation, insurance and health regulatory
authorities and other Governmental Entities regulating exclusive provider
organizations, preferred provider organizations, medical utilization review
organizations, medical service organizations, lay intermediaries, secondary
contractors or third-party administrators and all Medicare and Medicaid provider
agreements to which it is a party, except where the failure to comply would not
have a Material Adverse Effect. Except as disclosed in Section 3.21, to the best
knowledge of the Acquired Companies and the Stockholder, no investigation or
review by any Governmental Entity, including, without limitation, applicable
state corporation, insurance and health regulatory authorities with respect to
the Acquired Companies or any of the Subsidiaries is pending, or threatened, nor
has any Governmental Entity, including, without limitation, applicable state
corporation, insurance and health regulatory authority indicated an intention to
conduct the same, other than those the outcome of which would not be material to
the business of the Acquired Companies or such Subsidiary, as the case may be.
3.22. Litigation. Except as described on Section 3.22 or otherwise
disclosed pursuant to this Agreement, the Acquired Companies have not been
notified of any legal actions or administrative proceedings or investigations
which affect or could affect the Acquired Companies Common Stock, the Assets or
the operation, business, condition (financial or otherwise), or results of
operations of the Acquired Companies or the Subsidiaries which (i) if successful
could, individually or in the aggregate, have a Material Adverse Effect or (ii)
could adversely affect the ability of the Acquired Companies to effect the
transactions contemplated hereby. Neither the Acquired Companies nor the
Subsidiaries are (a) subject to any continuing court or administrative order,
judgment, writ, injunction or decree applicable specifically to the Assets, the
Acquired Companies or to its business, assets, operations or employees, or (b)
in default with respect to any such order, judgment, writ, injunction or decree.
Neither the Acquired Companies nor the Stockholder have any knowledge of any
valid basis for any such action, proceeding or investigation. Except as set
forth on Schedule 3.22, all claims asserted, general liability incidents and
<PAGE>
incident reports have been submitted to the Acquired Companies' insurer
therefor. All claims made or threatened against the Acquired Companies or the
Subsidiaries in excess of its deductible are covered under its Insurance
Policies.
3.23. Banking Relations. Set forth on Schedule 3.23 is a complete and
accurate list of all borrowing and investing arrangements that the Acquired
Companies and the Subsidiaries have with any bank or other financial
institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.), the location thereof and the person or persons authorized in
respect thereof.
3.24. Ownership Interests of Interested Persons; Affiliations. Except
as set forth on Schedule 3.24, no officer, supervisory employee or director of
the Acquired Companies or the Subsidiaries, or their respective spouses,
children or Affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier of the Acquired
Companies or the Subsidiaries or any organization that has a material contract
or arrangement with the Acquired Companies or the Subsidiaries.
3.25. Investments in Competitors. Except as disclosed on Schedule 3.25,
the Acquired Companies do not own directly or indirectly any interests or have
any investment in any person that is a Competitor of the Acquired Companies or
the Subsidiaries.
3.26. Environmental Matters.
A. Except as set forth on Schedule 3.26, neither the Acquired
Companies nor the Subsidiaries have, in violation of any Environmental
Requirement, engaged in or permitted any operations or activities upon, or any
use or occupancy of the Property, or any portion thereof, for the purpose of or
in any way involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal of any Hazardous
Materials (whether legal or illegal, accidental or intentional) on, under, in or
about the Property, or transported any Hazardous Materials to, from or across
the Property, nor, to the best knowledge of the Acquired Companies and the
Stockholder, are any Hazardous Materials presently constructed, deposited,
stored or otherwise located on, under, in or about the Property, nor, to the
best knowledge of the Acquired Companies and the Stockholder, have any Hazardous
Materials migrated from the Property upon or beneath other properties have any
Hazardous Materials migrated or threatened to migrate from other properties
upon, about or beneath the Property.
B. Except as set forth on Schedule 3.26, for so long as the
Acquired Companies or the Subsidiaries have owned or used the Property, the use,
maintenance and operation of the Property, and all activities and conduct of
<PAGE>
business related thereto, have at all times complied in all material respects
with all Environmental Requirements.
C. Neither the Acquired Companies nor the Subsidiaries have
received written notice or other communication concerning any alleged violation
of Environmental Requirements, whether or not corrected to the satisfaction of
the appropriate authority, nor notice or other communication concerning alleged
liability for Environmental Damages both in connection with the Property and in
connection with an Off-Site Location and there exists no writ, injunction,
decree, order or judgment outstanding, nor any lawsuit, claim, proceeding,
citation, directive, summons or investigation, pending or, to the best knowledge
of the Acquired Companies and the Stockholder, threatened, relating to the
ownership, use, maintenance or operation of the Property or Off-Site Location by
any person, or from alleged violation of Environmental Requirements, or from the
suspected presence of Hazardous Material on the Property.
D. Except as set forth on Schedule 3.26, for so long as the
Acquired Companies or the Subsidiaries have owned or used the Property, no
Hazardous Material has been generated at the Property and transported to an
Off-Site Location.
E. To the best knowledge of the Acquired Companies, any
underground tanks located on the Property (i) currently are being and to the
best knowledge of the Acquired Companies and the Stockholder always have been
operated in compliance in all material respects with all applicable
Environmental Requirements, and (ii) are covered by a current and effective
Certificate of Coverage.
3.27. Certain Payments. Neither the Acquired Companies, the
Subsidiaries nor any director, officer or employee of the Acquired Companies or
the Subsidiaries acting for or on behalf of the Acquired Companies, have paid or
caused to be paid, directly or indirectly, in connection with the business of
the Acquired Companies or the Subsidiaries:
A. to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
B. any contribution to any political party or candidate (other
than from personal funds of directors, officers or employees not reimbursed by
their respective employers or as otherwise permitted by applicable law).
3.28. Medicare and Medicaid Programs. The Acquired Companies and the
Subsidiaries are qualified for participation in the Medicare and Medicare
programs and are party to provider agreements for such programs which are in
full force and effect with no events of default having occurred thereunder. The
Acquired Companies and the Subsidiaries have timely filed all claims or other
<PAGE>
reports required to be filed on or before the date hereof, and will timely file
all claims and reports required to be filed on or prior to the Closing Date,
with respect to the purchase of services by third-party payors ("Payors"),
including but not limited to Medicare and Medicaid programs, except where the
failure to file would not, individually or in the aggregate, result in a
Material Adverse Effect. All such filed claims or reports are, and all such
claims and reports to be filed on or before the Closing Date will be, complete
and accurate in all material respects. The Acquired Companies and the
Subsidiaries have paid or have properly recorded on the Financial Statements all
actually known and undisputed refunds, discounts or adjustments which have
become due pursuant to such claims, and neither the Acquired Companies nor the
Subsidiaries have any material liability to any Payor with respect thereto,
except as has been reserved for in the Acquired Companies Balance Sheet. There
are no pending appeals, overpayment determinations, adjustments, challenges,
audits, litigation, or notices of intent to reopen Medicare and/or Medicaid
claims determinations or other reports required to be filed by the Acquired
Companies or the Subsidiaries in order to be paid by a Payor for services
rendered. Neither the Acquired Companies, the Subsidiaries, nor any of its
directors, officers, employees, consultants or the Stockholder has been
convicted of, or pled guilty or nolo contendere to, patient abuse or neglect, or
any other Medicare or Medicaid program-related offense. Neither the Stockholder,
the Acquired Companies, the Subsidiaries, nor their respective directors,
officers, employees or consultants, has committed any offense which may serve as
the basis for suspension or exclusion from the Medicare and Medicaid programs,
including but not limited to, defrauding a federal, state or local government
program, loss of a license to provide health services, and failure to provide
quality care.
3.29. Fraud and Abuse. Neither the Acquired Companies, the
Subsidiaries, nor their respective officers and directors have engaged in any
activities which are prohibited under 42 U.S.C. ss.ss. 1320-7, 7a or 7b or 42
U.S.C. ss.1395nn (subject to the exceptions set forth in such legislation), or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following:
A. knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
B. knowingly and willfully making or causing to be made a false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
C. failing to disclose knowledge by a Medicare or Medicaid
claimant of the occurrence of any event affecting the initial or continued right
<PAGE>
to any benefit or payment on its own behalf or on behalf of another, with intent
to fraudulently secure such benefit or payment;
D. knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind (i) in return for
referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or (ii) in return for purchasing, leasing, or
ordering, or arranging for or recommending purchasing, leasing, or ordering any
good, facility, service, or item for which payment may be made in whole or in
part by Medicare or Medicaid; and
E. referring a patient for designated health services (as defined
in 42 U.S.C. ss.1395nn) to or providing designated health services to a patient
upon a referral from an entity or person with which the Stockholder or an
immediate family member has a financial relationship, and to which no exception
under 42 U.S.C. ss.1395nn applies.
3.30. Customers and Suppliers. Schedule 3.30 sets forth a true, correct
and complete list of the names and addresses of each payor which has contracted
with the Acquired Companies and the Subsidiaries, which accounted for more than
3% of the revenues of the Acquired Companies or any Subsidiary in the three (3)
previous fiscal years and each material supplier of the Acquired Companies or
any Subsidiary. Except as set forth on Schedule 3.30, the Acquired Companies and
the Subsidiaries have good relations with their payors and suppliers and no
material customer or supplier has notified the Acquired Companies or any
Subsidiary that it intends to discontinue its relationship with the Acquired
Companies or such Subsidiary.
3.31. [RESERVED]
3.32. Investment Company Status. Neither the Acquired Companies nor any
of the Subsidiaries is currently, or has ever been, an "investment company" as
that term is defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.33. Insolvency Proceedings. Neither the Acquired Companies nor any of
the Subsidiaries are currently under the jurisdiction of a Federal or state
court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
3.34. Positive Net Worth. On the Closing Date the book value of the
assets of the Acquired Companies and the Subsidiaries will equal or exceed the
sum of the liabilities of the Acquired Companies and the Subsidiaries.
3.35. Accounts Receivable/Payable.
<PAGE>
A. The accounts receivable of the Acquired Companies and the
Subsidiaries relating to the operation of the Acquired Companies reflected on
the Acquired Companies Balance Sheet, to the extent uncollected on the date
hereof, are, and the accounts receivable of the Acquired Companies and the
Subsidiaries relating to the operation of the Acquired Companies to be reflected
on the books of the Acquired Companies on the Closing Date (the "Accounts
Receivable") will be, valid, existing and collectible (taking into consideration
the allowance for doubtful accounts set forth in the Financial Statements) using
reasonably diligent collection methods taking into account the size and nature
of the receivable, and represent amounts due for goods sold and delivered or
services performed. The Acquired Companies are in compliance with all third
party payor and eye care professional arrangements relating to the Accounts
Receivable. There are not, and on the date of Closing there will not be, any
refunds, discounts, set-offs, defenses, counterclaims or other adjustments
payable or assessable with respect to the Accounts Receivable. The Acquired
Companies and the Subsidiaries have collected Accounts Receivable only in the
ordinary course and has not changed collection procedures or methods nor
accelerated the pace of such collection efforts in anticipation of the
transactions contemplated in this Agreement. The Acquired Companies and the
Subsidiaries have paid accounts payable in the ordinary course and has not
changed payment procedures or methods nor delayed the timing of such payments in
anticipation of the transactions contemplated in this Agreement.
B. Since the Acquired Companies Balance Sheet Date, neither the
Acquired Companies nor any of the Subsidiaries have changed any material
principle or practice with respect to the recordation of accounts receivable or
the calculation of reserves therefor, or any material collection, discount or
write-off policy or procedure. The Acquired Companies and each of the
Subsidiaries are in compliance with the material terms and conditions of all
third-party payor arrangements relating to its accounts receivable. Without
limiting the generality of the foregoing, each of the Acquired Companies and the
Subsidiaries, are in compliance with all Medicare and Medicaid provider
agreements to which it is a party.
3.36. Insurance Reserves. The Acquired Companies have established and
maintains all required insurance company reserves in all of those states that it
is required to do so and has established and maintains all required deposits and
bonds as are necessary in such state.
3.37. Finder's Fee. Except as set forth on Schedule 3.37, neither the
Acquired Companies nor the Stockholder have incurred any obligation for any
finder's, brokers or agent's fee in connection with the transactions
contemplated hereby.
3.38. Projections. There is no fact, development or threatened
development with respect to the markets, products, services, customers,
facilities, personnel, vendors, suppliers, operations, assets or prospects of
<PAGE>
the Acquired Companies or the Subsidiaries which are known to the Acquired
Companies or the Stockholder which would materially adversely affect the
projected fiscal year 1997 earnings of the Acquired Companies and the
Subsidiaries disclosed to Purchaser by the Stockholder, other than such
conditions as may affect as a whole the economy.
3.39. Disclosure. To the best of the Acquired Companies's and the
Stockholder's knowledge, no representation, warranty or statement made by the
Acquired Companies or the Stockholder in this Agreement or any of the exhibits
or schedules hereto, or any agreements, certificates, documents or instruments
delivered or to be delivered to Purchaser in accordance with this Agreement or
the other documents contemplated herein, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Acquired Companies
and the Stockholder do not know of any fact or condition (other than general
economic conditions or legislative or administrative changes in health care
delivery) which materially adversely affects, or in the future may materially
affect, the condition (financial or otherwise), properties, assets, liabilities,
business, operations or prospects of the Acquired Companies or the Subsidiaries,
which has not been set forth herein or in the Schedules provided herewith.
3.40. Managed Care Contracts. On December 1, 1997, the number of
enrollees covered under the MEC's managed care contracts as reported by the
clients of MEC is substantially as set forth in Schedule 3.40. As of October 31,
1997, the per member per month fee payable to MEC was increased to $1.21 in
connection with the agreement between MEC and Free State which relates to a
Medicare HMO product. MEC has not received any written or verbal notice from the
discounted fee for service eye care providers who contract with MEC that such
eye care providers are terminating their relationship with MEC as a result of
MEC's recently announced reduction in reimbursement for cataract surgeries and
YAG procedures which will be effective January 1, 1998.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents and warrants to Purchaser that the following are true and correct on
the date hereof, and shall be true and correct as of the Closing Date as if made
on that date:
4.1. Organization; Stockholder Authority. The Stockholder is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware with all requisite corporate power and authority to carry on the
business in which it is engaged, to own the properties it owns, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by the Stockholder of this Agreement and
the other agreements contemplated hereby and the consummation of the
<PAGE>
transactions contemplated hereby and thereby to be performed by the Stockholder
have been duly authorized by the Stockholder. This Agreement and each other
agreement contemplated hereby have been, or will be as of the Closing Date, duly
executed and delivered by the Stockholder and constitute or will constitute
legal, valid and binding obligations of the Stockholder, enforceable against the
Stockholder in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
4.2. No Violation. Except as set forth on Schedule 4.2, neither the
execution, delivery or performance of this Agreement or the other agreements to
be executed and delivered by the Stockholder in connection herewith, nor the
consummation of the transactions contemplated hereby or thereby, will (a)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, indenture or other
instrument under which the Stockholder is bound or to which any of their
property or shares of Company Common Stock are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon any of their property or shares of Company Common Stock or (b) to the best
knowledge of the Stockholder, violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
4.3. Consents. Except as set forth on Schedule 4.3, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, or any other person is required to authorize, or is
required in connection with, the execution, delivery and performance of this
Agreement or the agreements contemplated hereby on the part of the Stockholder.
4.4. Certain Payments. The Stockholder has not paid or caused to be
paid, directly or indirectly, in connection with the business of the Acquired
Companies or the Subsidiaries:
A. to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
B. any contribution to any political party or candidate (other
than from personal funds not reimbursed by the Acquired Companies or as
otherwise permitted by applicable law).
4.5. Ownership of Interested Persons; Affiliations. Except as set forth
on Schedule 4.5, neither the Stockholder nor its Affiliates, owns directly or
indirectly, any interest in, has a compensation or other financial arrangement
with, or serves as an officer or director of, any customer or supplier of the
Acquired Companies or any organization that has a material contract or
arrangement with the Acquired Companies. Neither the Stockholder nor any of
their Affiliates is, or within the last three (3) years was, a party to any
<PAGE>
contract, lease, agreement or arrangement, including, but not limited to, any
joint venture or consulting agreement with any physician, hospital, pharmacy,
home health agency or other person which is in a position to make or influence
referrals to, or otherwise generate business for, the Acquired Companies.
4.6. Investments in Competitors. Except as disclosed on Schedule 4.6,
the Stockholder does not own directly or indirectly any interests or have any
investment in any person that is a Competitor of the Acquired Companies.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to the Acquired Companies and the Stockholder that the following are
true and correct on the date hereof and shall be true and correct as of the
Closing Date as if made on such date; when used in this Section 5, the term
"best knowledge" (or words of similar import) shall mean such knowledge, as
shall have been obtained after conducting due and diligent inquiry, of those
individuals listed on Schedule 5:
5.1. Organization and Good Standing; Qualification. Each of the
Purchaser and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, with
all requisite corporate power and authority to carry on the business in which it
is engaged, to own the properties it owns, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. Each of the Purchaser
and its subsidiaries is duly qualified and licensed to do business in each
jurisdiction in which the character or location of the properties owned or
leased by Purchaser or its subsidiaries or the practice of the businesses
conducted by Purchaser or its subsidiaries makes such qualification necessary or
desirable, except where the failure to be so qualified would not have a Material
Adverse Effect.
5.2. Subsidiaries. Except as set forth on Schedule 5.2, Purchaser does
not own, directly or indirectly, any of the capital stock of any other
corporation or any equity, profit sharing, participation or other interest in
any corporation, partnership, joint venture or other entity. With respect to
each corporation that is owned, directly or indirectly, beneficially or of
record by Purchaser (each, a "Purchaser Subsidiary"), Schedule 5.2 sets forth a
true, correct and complete list of (i) the name and jurisdiction of
incorporation of each Purchaser Subsidiary, (ii) the jurisdiction in which each
Purchaser Subsidiary is qualified or licensed to do business as a foreign
corporation, (iii) the authorized capital stock of each Purchaser Subsidiary,
(iv) the number of shares of each class thereof issued and outstanding, and (v)
the number of shares and percentage of outstanding capital stock owned by
Purchaser. All outstanding shares of capital stock of each Purchaser Subsidiary
have been duly authorized and validly issued, are fully paid and non-assessable,
and are owned by Purchaser free and clear of all liens, pledges, security
interests, restrictions, voting trusts or other encumbrances of any nature
whatsoever.
<PAGE>
5.3. Capitalization. The authorized capital stock of Purchaser consists
of 50,000,000 shares of Common Stock and 10,000,000 shares of preferred stock,
of which 11,830,166 shares of Common Stock were issued and outstanding on
December 29, 1997. Schedule 5.3 sets forth an accurate and complete list of all
outstanding options and warrants to acquire shares of Common Stock. The issuance
and delivery of the shares of Common Stock to be issued by Purchaser in
connection with this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Purchaser. The Common Stock being
transferred by Purchaser hereunder shall be free and clear of all liens,
pledges, restrictions, voting trusts, security interests or other encumbrances
of any nature whatsoever, except as set forth herein, or in the Stock
Distribution Agreement. Each outstanding share of Common Stock and the shares to
be issued hereunder have been legally and validly issued and are fully paid and
nonassessable. No shares of Common Stock have been, and the shares of Common
Stock to be issued pursuant to this Agreement will not be, issued or disposed of
in violation of the preemptive rights, rights of first refusal or similar rights
of any of Purchaser's stockholders.
5.4. Governmental Consents. Except as disclosed on Schedule 5.4, no
filing or registration with, or authorization, consent or approval of, any
Governmental Entity, to the best knowledge of Purchaser, is necessary for the
consummation of the transactions contemplated by this Agreement.
5.5. Authorization and Validity. Purchaser has the corporate power and
authority to execute this Agreement and carry out its obligations hereunder. The
execution, delivery and performance by Purchaser of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby to be performed by Purchaser, have been duly
authorized by Purchaser. This Agreement and the other agreements contemplated
hereby to be executed by Purchaser have been, or will be as of the Closing, duly
executed and delivered by Purchaser and constitute the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
5.6. No Conflict. The execution and delivery of this Agreement and the
documents contemplated hereunder and the consummation of the transactions
contemplated thereby by Purchaser will not (i) violate any provision of
Purchaser's organizational documents, (ii) violate any provision of or result in
the breach of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation under, any mortgage, lien,
lease, material contract, license, permit, instrument or any other material
agreement to which Purchaser or the Purchaser Subsidiaries is a party, (iii)
result in the creation or imposition of any lien, charge, pledge, security
interest or other encumbrance upon any property of Purchaser or the Purchaser
<PAGE>
Subsidiaries, or (iv) violate or conflict with any order, award, judgment or
decree or other restriction or any law, ordinance, rule or regulation to which
Purchaser or its property is subject except for those which would not have a
Material Adverse Effect.
5.7. Finder's Fee. Except as disclosed on Schedule 5.7, Purchaser has
not incurred any obligation for any finder's, broker's or agent's fee in
connection with the transactions contemplated hereby.
5.8. Purchaser Documents. Purchaser has furnished the Acquired
Companies and the Stockholder with a true and complete copy of each report and
registration statement filed by it with the SEC (the "Purchaser Documents")
since its initial public offering, which are all the documents that it was
required to file with the SEC since such date. As of their respective dates, the
Purchaser Documents did not contain any untrue statements of material facts or
omit to state material facts required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the Purchaser Documents
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
under such statutes. The financial statements contained in the Purchaser
Documents, together with the notes thereto, have been prepared in accordance
with GAAP, reflect all liabilities of Purchaser required to be stated therein
and present fairly the financial condition of Purchaser at such date and the
results of operations and cash flows of Purchaser for the period then ended. The
Purchaser Documents do not contain any untrue statements of material facts or
omit to state any material facts required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading as of the date hereof except for such facts as are
disclosed herein and except for the transactions contemplated hereby.
5.9 Physician Dispute. The Stockholder has notified Purchaser and
Purchaser has acknowledged the existence of a dispute among the Stockholder,
LSI, Bernard Spier, M.D. and Charles Crane, M.D. in connection with the Service
Agreement effective July 1, 1996 between LSI and Northern New Jersey Eye
Institute, P.A. (the "Service Agreement"). Purchaser has had an opportunity to
discuss such dispute with all relevant parties.
5.10 Governmental Authorizations. Purchaser possesses all necessary
licenses, franchises, permits and other governmental authorizations, including,
but not limited to all licenses, franchises, permits and authorizations for the
conduct of the Purchaser's businesses as now conducted, all of which are listed
(with expiration dates, if applicable) on Schedule 5.10. Except as set forth on
Section 5.10, the transactions contemplated by this Agreement will not result in
a default under or a breach or violation of, or adversely affect the rights and
benefits afforded by any such licenses, franchises, permits or authorizations
<PAGE>
which, singly or in the aggregate, would not have a Material Adverse Effect. All
such licenses, franchises, permits and other authorizations are valid and in
full force and effect, the Purchaser is in current compliance therewith and has
not received any notice that any governmental authority is considering
challenging, revoking, cancelling, restricting, conditioning or not renewing any
such license, franchise, permit or other authorization.
5.11 Compliance with Applicable Laws. Purchaser holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities material to the business of the Purchaser including, without
limitation, applicable state corporation, insurance and health regulatory
authorities, and other Governmental Entities regulating exclusive provider
organizations, preferred provider organizations, medical utilization review
organizations, medical service organizations, lay intermediaries, secondary
contractors, or third party administrators (the "Purchaser Permits"). The
Purchaser is in current compliance with the terms of the Purchaser Permits,
except for such failures to comply which, singly or in the aggregate, would not
have a Material Adverse Effect. Except as disclosed in Section 5.11, the
Purchaser is in compliance with all laws, including applicable Medicare and
Medicaid laws, ordinances and regulations of any Governmental Entity, including,
without limitation, applicable state corporation, insurance and health
regulatory authorities and other Governmental Entities regulating exclusive
provider organizations, preferred provider organizations, medical utilization
review organizations, medical service organizations, lay intermediaries,
secondary contractors or third-party administrators and all Medicare and
Medicaid provider agreements to which it is a party, except where the failure to
comply would not have a Material Adverse Effect. Except as disclosed in Section
5.11, to the best knowledge of the Purchaser, no investigation or review by any
Governmental Entity, including, without limitation, applicable state
corporation, insurance and health regulatory authorities with respect to the
Purchaser is pending, or threatened, nor has any Governmental Entity, including,
without limitation, applicable state corporation, insurance and health
regulatory authority indicated an intention to conduct the same, other than
those the outcome of which would not be material to the business of the
Purchaser.
<PAGE>
6. SECURITIES LAW MATTERS
6.1. Investment Representations and Covenants. Subject to the terms of
the Stock Distribution Agreement, the Stockholder represents, warrants and
covenants as follows:
A. The Stockholder understands that the Securities will not be
registered under the Securities Act or any state securities laws on the grounds
that the issuance of the Securities is exempt from registration pursuant to
Section 4(2) of the Securities Act and applicable state securities laws, and
that the reliance of Purchaser on such exemptions is predicated in part on the
Stockholder's representations, warranties, covenants and acknowledgements set
forth in this Section.
B. The Stockholder represents and warrants that the Securities to
be acquired by it upon consummation of the transactions described in this
Agreement will be acquired by the Stockholder for its own account, not as a
nominee or agent, and without a view to resale or other distribution within the
meaning of the Securities Act and the rules and regulations thereunder, and that
the Stockholder will not distribute any of the Securities in violation of the
Securities Act.
C. The Stockholder (i) acknowledges that the Securities issued to
it at the Closing must be held indefinitely by it unless subsequently registered
under the Securities Act or an exemption from registration is available, (ii) is
aware that any routine sales of Securities made pursuant to Rule 144 under the
Securities Act may be made only in limited amounts and in accordance with the
terms and conditions of that Rule and that in such cases where the Rule is not
applicable, compliance with some other registration exemption will be required,
(iii) is aware that Rule 144 is not currently available for use for resale of
any of the Securities to be acquired by Stockholder upon consummation of the
transactions described in this Agreement, and (iv) acknowledges and agrees that
the transfer of the Securities shall be further restricted by provisions
contained in the Stock Distribution Agreement.
D. The Stockholder represents and warrants to Purchaser that it
has such knowledge and experience in financial and business matters such that it
is capable of evaluating the merits and risks of an investment in the Securities
and is able to sustain a complete loss of such investment.
E. The Stockholder confirms that it has had the opportunity to ask
questions of and receive answers from Purchaser concerning the terms and
conditions of its investment in the Securities, and that it has received, to its
satisfaction, such information about Purchaser's operations as it has requested.
F. In order to ensure compliance with the provisions of paragraph
(c) hereof, the Stockholder agrees that after the Closing it will not sell or
<PAGE>
otherwise transfer or dispose of any of the Securities or any interest therein
except in compliance with the terms of the Stock Distribution Agreement.
G. The Stockholder acknowledges and agrees that the certificates
or instruments representing the Securities to be issued to it pursuant to this
Agreement shall contain a restrictive legend noting the restrictions on transfer
described in this Section and required by federal and applicable state
securities laws, and that appropriate "stop-transfer" instructions will be given
to Purchaser's transfer agent in the event such provisions and applicable
federal and state securities laws are not complied with by any Stockholder.
H. The Stockholder represents and warrants that Stockholder is an
"accredited investor" as defined under the Securities Act and state "Blue Sky"
laws.
I. The Stockholder acknowledges that it has received the Purchaser
Documents described in Section 5.8 and has had an opportunity to review the
Purchaser Documents.
7. COVENANTS OF THE ACQUIRED COMPANIES AND THE STOCKHOLDER. The Acquired
Companies and the Stockholder, jointly and severally, agree that between the
date hereof and the Closing (with respect to the Acquired Companies' covenants,
the Stockholder agrees to use its best efforts to cause the Acquired Companies
to perform):
7.1. Consummation of Agreement. The Acquired Companies and the
Stockholder shall use their reasonable best efforts to cause the consummation of
the transactions contemplated hereby in accordance with their terms and
conditions.
7.2. Business Operations. The Acquired Companies and the Subsidiaries
shall operate their businesses in the ordinary course and substantially in the
manner conducted as of the date hereof. The Acquired Companies and the
Stockholder shall use their reasonable best efforts to preserve the business of
the Acquired Companies and the Subsidiaries intact, to keep available to
Purchaser the services of their officers, agents and independent contractors and
to preserve for Purchaser their relationships with their suppliers, licensees,
distributors, eye care professionals, customers and others having business
relationships with it. Neither the Acquired Companies nor the Stockholder shall
take any action that would, individually or in the aggregate, result in a
Material Adverse Effect.
7.3. Access. The Acquired Companies and the Stockholder shall, at
reasonable times during normal business hours and on reasonable notice, permit
Purchaser and its authorized representatives, access to, and make available for
inspection, all of the assets and properties of the Acquired Companies and the
Subsidiaries, including their employees, customers and suppliers, and permit
<PAGE>
Purchaser and its authorized representatives to inspect and, at Purchaser's sole
cost and expense, make copies of all documents, records and information with
respect to the affairs of the Acquired Companies and the Subsidiaries as
Purchaser and its representatives may request.
7.4. Notification of Certain Matters. The Acquired Companies and the
Stockholder shall promptly inform Purchaser in writing of (a) any notice of, or
other communication relating to, a default or event that, with notice or lapse
of time or both, would become a default, received by any of them subsequent to
the date of this Agreement and prior to the Closing Date under any Commitment
material to the Acquired Companies' condition (financial or otherwise),
operations, assets, liabilities or business and to which it is subject; or (b)
any material adverse change in the Acquired Companies' condition (financial or
otherwise), operations, assets, liabilities or business.
7.5. Approvals of Third Parties. As soon as practicable after the date
hereof, the Acquired Companies and the Stockholder shall secure all necessary
approvals and consents of Governmental Authorities to the consummation of the
transactions contemplated hereby and shall use their best efforts to secure all
necessary approvals and consents of other third parties to the consummation of
the transactions contemplated hereby.
7.6. Employee Matters. Except as set forth in Schedule 3.11 or as
otherwise contemplated by this Agreement, the Acquired Companies shall not,
without the prior written approval of Purchaser, except as required by law or in
the ordinary course of business:
A. increase the cash compensation of any directors, officers or
employees of the Acquired Companies or the Subsidiaries (other than in the
ordinary course of business and consistent with past practice);
B. adopt, amend or terminate any (i) Compensation Plan; (ii)
Employment Agreement; (iii) Employee Policies and Procedures; or (iv) Employee
Benefit Plan;
C. take any action that could deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
D. fail to pay any premium or contribution due or with respect to
any Employee Benefit Plan;
E. fail to file any return or report with respect to any Employee
Benefit Plan;
<PAGE>
F. institute, settle or dismiss any employment litigation except
as could not, individually or in the aggregate, result in a Material Adverse
Effect;
G. enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit; or
H. take or fail to take any action with respect to any past or
present employee of the Acquired Companies or the Subsidiaries that would,
individually or in the aggregate, result in a Material Adverse Effect.
7.7. Contracts. The Acquired Companies shall not, without the prior
written approval of Purchaser, assume or enter into any contract, lease,
license, obligation, indebtedness, commitment, purchase or sale in excess of
$20,000, except in the ordinary course of business nor shall it waive any
material right or cancel any material contract, debt or claim, nor shall it
alter any Commitment in any material respect.
7.8. Capital Assets; Payments of Liabilities. The Acquired Companies
shall not, without the prior written approval of Purchaser (a) acquire or
dispose of any capital asset having a fair market value of $20,000 or more, or
acquire or dispose of any capital asset outside of the ordinary course of
business or (b) discharge or satisfy any lien or encumbrance or pay or perform
any obligation or liability other than (i) liabilities and obligations reflected
in the Financial Statements or (ii) current liabilities and obligations incurred
in the usual and ordinary course of business since the Acquired Companies
Balance Sheet Date and, in either case (i) or (ii) above, only as required by
the express terms of the agreement or other instrument pursuant to which the
liability or obligation was incurred.
7.9. Mortgages, Liens and Guaranties. The Acquired Companies shall not,
without the prior written approval of Purchaser, enter into or assume any
mortgage, pledge, conditional sale or other title retention agreement, permit
any security interest, lien, encumbrance or claim of any kind to attach to any
of its assets (other than statutory liens arising in the ordinary course of
business and other liens that do not materially detract from the value or
interfere with the use of such assets), whether now owned or hereafter acquired,
or guarantee or otherwise become contingently liable for any obligation of
another, except obligations arising by reason of endorsement for collection and
other similar transactions in the ordinary course of business, or make any
capital contribution or investment in any person.
7.10. [RESERVED]
7.11. Distributions and Repurchases. No distribution, payment or
dividend of any kind will be declared or paid by the Acquired Companies with
<PAGE>
respect of its capital stock, nor will any repurchase of any of the Acquired
Companies' capital stock be approved or effected.
7.12. Stock Options. All outstanding options to purchase or acquire
shares of Company Common Stock shall be cancelled and any agreements with
respect to such options shall be terminated.
7.13. Retained Equity. The Acquired Companies shall not, and the
Stockholder shall not permit the Acquired Companies to, make payment of all or
any portion of any retained equity of the Acquired Companies at any time prior
to Closing.
7.14. Termination of Retirement Plans. Prior to Closing, the
Stockholder shall cause the Acquired Companies to take all steps necessary to
discontinue benefit accruals under any Employee Benefit Plan and to terminate
their participation in all such plans effective as of Closing or as soon
thereafter as may be practical.
7.15. Delivery of Schedules. The Acquired Companies and the Stockholder
shall deliver to Purchaser all Schedules required to be delivered by them prior
to the Closing.
7.16. Approval of Lender and Release. The Acquired Companies and the
Stockholder shall secure the consent and approval of its senior lender, Foothill
Capital Corporation, to the transactions contemplated hereby and the release of
all liens held by such lender on the assets and capital stock of the Acquired
Companies.
8. COVENANTS OF PURCHASER8. Purchaser agrees that between the date hereof
and the Closing:
8.1. Consummation of Agreement. Purchaser shall use its best efforts to
cause the consummation of the transactions contemplated hereby in accordance
with their terms and conditions.
8.2. Approvals of Third Parties. Purchaser shall use its best efforts
to secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
8.3. Access. Purchaser shall, at reasonable times during normal
business hours and on reasonable notice, permit Stockholder and its authorized
representatives, access to, and make available for inspection, all of the assets
and properties of Purchaser, including their employees, customers and suppliers,
and permit Stockholder and its authorized representatives to inspect and, at
Stockholder's sole cost and expense, make copies of all documents, records and
information with respect to the affairs of the Purchaser as Stockholder and its
representatives may request.
<PAGE>
8.4. Notification of Certain Matters. Purchaser shall promptly inform
Purchaser in writing of (a) any notice of, or other communication relating to, a
default or event that, with notice or lapse of time or both, would become a
default, received by any of them subsequent to the date of this Agreement and
prior to the Closing Date under any obligation material to the Purchaser's
condition (financial or otherwise), operations, assets, liabilities or business
and to which it is subject; or (b) any material adverse change in the
Purchaser's condition (financial or otherwise), operations, assets, liabilities
or business.
8.5. 401(k) Contributions. If pursuant to the terms of the
Stockholder's 401(k) plan the Stockholder matches contributions made by the
Stockholders' employees pursuant to such plan, then the Stockholder shall give
the Purchaser written notice of the amount of such matching contribution and the
Purchaser shall reimburse the Stockholder for such matching contributions
related to 1997 for those employees of the Acquired Companies who were
participating in such plan prior to the Closing Date. The Stockholder represents
and the Purchaser acknowledges that the amount of the matching contributions
through November 30, 1997 is $22,876.92. In the event any of such contributions
reimbursed by the Purchaser are forfeited by an employee of the Acquired
Companies, the Stockholder agrees to reimburse the Purchaser for the amount paid
by it promptly upon the forfeiture thereof.
9. COVENANTS OF PURCHASER, THE ACQUIRED COMPANIES AND THE STOCKHOLDER.
Purchaser, the Acquired Companies and the Stockholder agree as follows:
<PAGE>
9.1. Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
attach, supplement or amend promptly the Schedules with respect to any matter
that would have been or would be required to be set forth or described in the
Schedules in order to not breach any representation, warranty or covenant of
such party contained herein; provided that no amendment or supplement to a
Schedule that constitutes or reflects a material adverse change to the Acquired
Companies or the Assets may be made unless Purchaser consents to such amendment
or supplement, and no amendment or supplement to a Schedule that constitutes or
reflects a material adverse change to Purchaser may be made unless the Acquired
Companies and the Stockholder consent to such amendment or supplement. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 10.1 and 11.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 9.1. In the event that the Acquired
Companies are required to amend or supplement a Schedule in accordance with this
Section 9.1 and Purchaser does not consent to such amendment or supplement, or
Purchaser is required to amend or supplement a Schedule in accordance with this
Section 9.1 and the Acquired Companies and the Stockholder do not consent, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
15.1(d) or Section 15.1(e) as appropriate.
9.2. Fees and Expenses. Each of the parties shall pay the costs and
expenses of their own advisors with respect to legal, accounting and other
professional services rendered in connection with the preparation, negotiation
and consummation of this Agreement, provided, however, all such costs and
expenses incurred by the Acquired Companies shall be paid for by the
Stockholder.
9.3. Tax Matters.
A. Returns. The Acquired Companies and the Subsidiaries shall duly
and timely file all Tax Returns required to be filed on or before the Closing
Date and duly and timely pay all taxes shown on such Tax Returns to be due.
B. Tax Sharing Agreements. Any tax sharing agreement between the
Acquired Companies or any of the Subsidiaries and any other party shall be
terminated as of the Closing Date and shall have no further effect for any
taxable year (whether the current year, a future year or a past year).
C. Audits. The Stockholder will allow Purchaser and its counsel to
participate, at their expense, in any audits of the consolidated federal income
tax returns of the Acquired Companies and the Subsidiaries. The Stockholder will
not settle any such audit without the prior written consent of Purchaser.
<PAGE>
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. Except as may be
waived in writing by Purchaser, the obligations of Purchaser hereunder are
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions precedent:
10.1. Representations and Warranties. The representations and
warranties of the Acquired Companies and the Stockholder contained herein shall
have been true and correct in all material respects when initially made and
shall be true and correct in all material respects as of the Closing Date.
10.2. Covenants. The Acquired Companies and the Stockholder shall have
performed and complied with all covenants required by this Agreement to be
performed and complied with by the Acquired Companies or the Stockholder prior
to the Closing Date.
10.3. Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
10.4. No Material Adverse Change. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of the Acquired Companies shall have occurred since the Acquired Companies
Balance Sheet Date, whether or not such change shall have been caused by the
deliberate act or omission of the Acquired Companies or the Stockholder. For
purposes hereof, the termination of the employment relationship of Bernard
Spier, M.D. and Charles Crane, M.D. with Northern New Jersey Eye Institute, P.A.
will not be considered a material adverse change.
10.5. Government Approvals and Required Consents. The Acquired
Companies, the Stockholder and Purchaser shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Acquired Companies or any of
its employees are a party).
10.6. Closing Deliveries. Purchaser shall have received all documents
and agreements, duly executed and delivered in form reasonably satisfactory to
Purchaser, referred to in Section 12.1.
10.7. Exemption Under Securities Laws. The transfer of Purchaser's
Securities to the Stockholder as contemplated in this Agreement shall qualify
for one or more exemptions from registration under state and federal securities
<PAGE>
laws. Purchaser shall pay all filing fees in connection with any filing required
to qualify the transfer of the Securities for such exemption(s).
10.8. Approval of Purchaser's Board of Directors. Purchaser shall have
received the approval of its Board of Directors.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED COMPANIES AND THE
STOCKHOLDER Except as may be waived in writing by the Acquired Companies and the
Stockholder, the obligations of the Acquired Companies and the Stockholder
hereunder are subject to fulfillment at or prior to the Closing Date of each of
the following conditions precedent:
11.1. Representations and Warranties. The representations and
warranties of Purchaser contained herein shall be true and correct in all
material respects when initially made and shall be true and correct in all
material respects as of the Closing Date.
11.2. Covenants. Purchaser shall have performed and complied with all
covenants and conditions required by this Agreement to be performed and complied
with by it prior to the Closing Date.
11.3. Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
11.4. Government Approvals and Required Consents. The Acquired
Companies the Stockholder and Purchaser shall have obtained all necessary
government and other third-party approvals and consents (other than consents
technically required as a result of the transactions contemplated hereby under
the terms of managed care contracts to which the Acquired Companies or any of
its employees are a party).
11.5. Closing Deliveries. The Acquired Companies and the Stockholder
shall have received all documents, instruments and agreements, duly executed and
delivered in form reasonably satisfactory to the Acquired Companies, referred to
in Section 12.2.
11.6. No Material Adverse Change. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of the Purchaser shall have occurred since the Effective Date, whether or not
such change shall have been caused by the deliberate act or omission of
Purchaser.
<PAGE>
11.7. Consent of Lender. The Acquired Companies and Stockholder shall
have received the approval of its senior lender, Foothill Capital Corporation
and a release of all of such lender's liens against the Acquired Companies.
11.8. Approval of Stockholder's Board of Directors. The Stockholder
shall have received the approval of its Board of Directors.
12. CLOSING DELIVERIES.
12.1. Deliveries of the Acquired Companies and the Stockholder. At
Closing, the Acquired Companies or the Stockholder, as appropriate, shall
deliver to Purchaser the following, all of which shall be in a form reasonably
satisfactory to Purchaser:
A. certificates representing all of the issued and outstanding
shares of Company Common Stock, duly endorsed in blank by the Stockholder or
accompanied by duly endorsed stock powers in blank, with all necessary transfer
tax and other revenue stamps, acquired at the Stockholder's expense, affixed and
cancelled. The Stockholder agrees to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
the Acquired Companies Common Stock or with respect to the stock powers
accompanying any Company Common Stock;
B. a copy of resolutions of the Boards of Directors of the
Acquired Companies authorizing the execution, delivery and performance of this
Agreement and all other documents and agreements to be executed in connection
herewith, certified by the Secretary of the Acquired Companies as being true and
correct copies of the originals thereof subject to no modifications or
amendments;
C. a certificate of an officer of the Acquired Companies and the
Stockholder, dated the Closing Date, certifying the truth and accuracy of their
respective representations and warranties contained herein, on and as of the
Closing Date;
D. a certificate of an officer of the Acquired Companies and the
Stockholder, dated the Closing Date certifying (i) the performance of and
compliance by them with all covenants contained herein on and as of the Closing
Date and (ii) that all conditions precedent of the Acquired Companies and the
Stockholder to the Closing have been satisfied;
E. a certificate of an officer of the Acquired Companies dated the
Closing Date, certifying the incumbency and signatures of each officer who has
executed documents delivered pursuant to the Agreement on behalf of the Acquired
Companies;
<PAGE>
F. a certificate, dated within fifteen (15) days prior to the
Closing Date, of the Secretary of State of the state of incorporation for the
Acquired Companies and each of the Subsidiaries establishing that such
corporations are in existence, have paid all franchise or similar taxes, and are
in good standing to transact business in their respective states of
organization;
G. certificates, if applicable, dated within fifteen (15) days
prior to the Closing Date, of the Secretaries of State of the states in which
the Acquired Companies and each of the Subsidiaries are qualified to do
business, to the effect that such corporations are qualified to do business and
in good standing as foreign corporations in each of such states;
H. an opinion of counsel to the Acquired Companies and
Stockholder, dated as of the Closing Date, in substantially the form attached
hereto as Exhibit 12.1(h), (which may be relied upon by Purchaser, its counsel
and its underwriters in connection with any registration statement filed by
Purchaser);
I. if applicable, all authorizations, consents, permits and
licenses referenced in Section 3.6;
J. the resignations of the directors and officers of the Acquired
Companies and each of the Subsidiaries effective immediately upon Closing;
K. an executed Stock Distribution Agreement between Purchaser and
the Stockholder in substantially the form attached hereto as Exhibit 12.1(k);
L. an executed Escrow Agreement, if applicable, in substantially
the form attached hereto as Exhibit 12.1(l);
M. an executed Employment Agreement between Purchaser and each of
Mark Gordon, Ellen Gordon and Howard Levin in substantially the form attached
hereto as Exhibit 12.1(m);
N. a new lease or leases or assignments of existing leases between
the landlords under each lease for real property described on Schedule 3.15(c)
and Purchaser in form and substance reasonably satisfactory to Purchaser;
O. the consent of Foothill Capital Corporation to the transaction
and its release of all liens on the assets and capital stock of the Acquired
Companies;
P. a termination agreement executed between the Stockholder and
each of Mark Gordon, O.D., Ellen Gordon and Howard Levin, O.D., which
<PAGE>
termination agreement shall terminate such individuals' employment agreements
with the Stockholder and permit such individuals to participate in the Business;
and
Q. such other instrument or instruments of transfer prepared by
Purchaser as shall be necessary or appropriate, as Purchaser or its counsel
shall reasonably request, to carry out and effect the purpose and intent of this
Agreement.
12.2. Deliveries of Purchaser. At Closing, Purchaser shall deliver to
the Stockholder the following, all of which shall be in a form reasonably
satisfactory to the Stockholder:
A. the Stock Purchase Consideration;
B. a copy of the resolutions of the Board of Directors of
Purchaser authorizing the execution, delivery and performance of this Agreement
and all other documents and agreements to be executed in connection herewith,
certified by the Secretary of Purchaser as being true and correct copies of the
originals thereof subject to no modifications or amendments;
C. a certificate of an officer of Purchaser, dated the Closing
Date, certifying the truth and accuracy of the representations and warranties of
Purchaser contained herein, on and as of the Closing Date;
D. a certificate of an officer of Purchaser, dated the Closing
Date, certifying (i) the performance and compliance by Purchaser with all
covenants contained herein on and as of the Closing Date and (ii) that all
conditions precedent of Purchaser to the Closing have been satisfied;
E. a certificate of an officer of Purchaser, dated the Closing
Date, certifying the incumbency and signatures of each officer who has executed
documents delivered pursuant to the Agreement on behalf of Purchaser;
F. a certificate, dated within fifteen (15) days prior to the
Closing Date, of the Secretary of State of the State of Florida establishing
that Purchaser is in existence, has paid all franchise or similar taxes, if any,
and is in good standing to transact business in such state;
G. certificates, dated within fifteen (15) days prior to the
Closing Date, of the Secretary of State of each state in which Purchaser is
qualified to do business, to the effect that Purchaser is qualified to do
business and is in good standing as a foreign corporation in each of such
states;
<PAGE>
H. an opinion of Shumaker, Loop & Kendrick, LLP, counsel to
Purchaser, dated as of the Closing Date, in substantially the form attached
hereto as Exhibit 12.2(h);
I. an executed Stock Distribution Agreement;
J. an executed Escrow Agreement, if applicable;
K. an executed Employment Agreement between Purchaser and each of
Mark Gordon, Ellen Gordon and Howard Levin; and
L. such other instrument or instruments of transfer, prepared by
the Acquired Companies or the Stockholder as shall be necessary or appropriate,
as the Acquired Companies, the Stockholder or their counsel shall reasonable
request, to carry out and effect the purpose and intent of this Agreement.
13. POST CLOSING MATTERS.
13.1. Further Instruments of Transfer. From and after the Closing Date,
at the request of Purchaser and at the Stockholder's sole cost and expense, the
Stockholder shall deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate to carry out the purpose
and intent of this Agreement.
13.2. Disclosure. From and after the Closing, at the request of
Purchaser, the Stockholder agrees to provide all information which Purchaser may
from time to time request concerning themselves, the Acquired Companies and the
transactions contemplated hereby for inclusion in any registration statement or
other filing made by Purchaser under the Securities Act or the Exchange Act at
no additional cost to Purchaser. The Stockholder covenants and agrees that all
such information shall be true and correct when made and shall not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein contained not misleading.
13.3. Accountants' Consent. From and after the Closing, at the request
of Purchaser, the Stockholder agrees to request KPMG Peat Marwick LLP to consent
to the inclusion of the financial statements of the Acquired Companies and the
Subsidiaries for the fiscal years ended December 31, 1995, 1996 and 1997 in any
registration statement or other filing made by Purchaser under the Securities
Act or the Exchange Act; provided, however, the Stockholder shall not be
responsible for any fees of KPMG Peat Marwick LLP with respect to any work
performed on any such financial statements, which specifically relates to the
inclusion of such financial statements in any such registration statement or
other filing made by Purchaser.
<PAGE>
13.4. Release of Stockholder Guaranty. Within the ninety (90) day
period immediately following the Closing Date, Purchaser agrees to use its
reasonable best efforts to assist Stockholder in obtaining a release of
Stockholder's guarantee of that certain Master Lease Agreement between Hillside
Finance International LLC and LSI dated June 27, 1996, including Purchaser's
agreement to provide a guarantee of such obligation.
14. REMEDIES.
14.1. Indemnification by the Stockholder. Subject to the terms and
conditions of this Agreement, the Stockholder agrees to indemnify, defend and
hold Purchaser and its directors, officers, members, managers, employees,
agents, attorneys and affiliates harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
reasonable attorneys' fees and expenses (collectively, "Damages") asserted
against or incurred by Purchaser or any of such individuals (including, but not
limited to, any reduction in payments to or revenues of the Acquired Companies),
arising out of or resulting from:
A. a breach of any representation, warranty or covenant of the
Acquired Companies or the Stockholder contained herein or in any schedule or
certificate delivered hereunder, disregarding for purposes hereof any
materiality qualifications contained therein to the extent such materiality
qualifications, when taken as a whole, represent a material breach of this
Agreement by the Acquired Companise or the Stockholder;
B. any liability under the Securities Act, the Exchange Act or any
other federal or state "Blue Sky" or securities law or regulation, at common law
or otherwise, (i) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to the Stockholder, the Acquired
Companies or the Subsidiaries and provided to Purchaser or its counsel by them
specifically for inclusion in a registration statement or any prospectus forming
a part thereof, or any amendment thereof or supplement thereto, or any other
filing made pursuant to the Exchange Act, or (ii) arising out of or based upon
any omission or alleged omission to state therein a material fact relating to
the Stockholder, the Acquired Companies or the Subsidiaries required to be
stated therein or necessary to make the statements therein not misleading, and
not provided to Purchaser or its counsel by the Acquired Companies or the
Stockholder;
C. any liability arising from any alleged unlawful sale or offer
to sell or transfer any of the Common Stock by the Stockholder; or
D. notwithstanding anyting herein to the contrary, any liability
arising from any claim by Northern New Jersey Eye Institute, P.A. or any
stockholder of or physician employed by Northern New Jersey Eye Institute, P.A.
<PAGE>
that such entity, stockholder or physician was fraudulently induced into
entering into the Services Agreement, and any liability incurred or arising from
any breach by the Acquired Companies of the Services Agreement and which breach
arose on or before the Closing Date, and any liability incurred or arising from
the unenforceability of the Services Agreement due to actions or inactions by
the Stockholder or the Acquired Companies which occurred on or before the
Closing Date.
14.2. Indemnification by Purchaser. Subject to the terms and conditions
of this Agreement, Purchaser hereby agrees to indemnify, defend and hold the
Stockholder harmless from and against all Damages asserted against or incurred
by them arising out of or resulting from:
A. a breach by Purchaser of any representation, warranty or
covenant of Purchaser contained therein or in any schedule or certificate
delivered hereunder;
B. except as specifically set forth herein, Purchaser's failure to
satisfy obligations and liabilities of the Acquired Companies; and
C. any liability under the Securities Act, the Exchange Act or any
other federal or state "Blue Sky" or securities law or regulation, at common law
or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to Purchaser, contained in any
preliminary prospectus, registration statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, arising out of or based
upon any omission or alleged omission to state therein a material fact relating
to Purchaser (including the subsidiaries), required to be stated therein or
necessary to make the statements therein not misleading.
14.3. Conditions of Indemnification. All claims for indemnification
under this Agreement shall be asserted and resolved as follows:
A. A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (and, in any event, at least ten (10) days
prior to the due date for any responsive pleadings, filings or other documents)
(i) notify the party from whom indemnification is sought (the "Indemnifying
Party") of any third-party claim or claims asserted against the Indemnified
Party ("Third Party Claim") that could give rise to a right of indemnification
under this Agreement and (ii) transmit to the Indemnifying Party a written
notice ("Claim Notice") describing in reasonable detail the nature of the Third
Party Claim, a copy of all papers served with respect to such claim (if any), an
estimate of the amount of damages attributable to the Third Party Claim and the
basis of the Indemnified Party's request for indemnification under this
Agreement. Except as set forth in Section 14.6, the failure to promptly deliver
a Claim Notice shall not relieve the Indemnifying Party of its obligations to
the Indemnified Party with respect to the related Third Party Claim except to
<PAGE>
the extent that the resulting delay is materially prejudicial to the defense of
such claim. Within thirty (30) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified Party
(i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article 16 with respect to such Third Party Claim
and (ii) whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Third Party
Claim.
If the Indemnifying Party notifies the Indemnified Party within
the Election Period that the Indemnifying Party elects to assume the defense of
the Third Party Claim, then the Indemnifying Party shall have the right to
defend, at its sole cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 14.3. The Indemnifying Party
shall have full control of such defense and proceedings, including any
compromise or settlement thereof. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is entitled to indemnification hereunder), to file, during the Election
Period, any motion, answer or other pleadings that the Indemnified Party shall
deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is adverse to the Indemnifying
Party, the Indemnifying Party shall be relieved of its obligations hereunder
with respect to such Third Party Claim). If requested by the Indemnifying Party,
the Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to
Section 14.3(b) and shall bear its own costs and expenses with respect to such
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and
upon written notification thereof, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of the Indemnified Party;
provided further that the Indemnifying Party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
<PAGE>
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party.
B. If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 14.3(b), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 14.3(b) but fails
diligently and promptly to prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article 14 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnifying Party's defense pursuant to this Section
or of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control any defense or settlement controlled by the
Indemnified Party pursuant to this Section 14.3(b), and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to the Indemnified Party, then the
Indemnifying Party may employ separate counsel and upon written notification
thereof, the Indemnified Party shall not have the right to assume the defense of
such action on behalf of the Indemnifying Party.
C. In the event any Indemnified Party should have a claim against
any Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable detail the nature of the claim, an
estimate of the amount of damages attributable to such claim and the basis of
the Indemnified Party's request for indemnification under this Agreement. If the
Indemnifying Party does not notify the Indemnified Party within sixty (60) days
from its receipt of the Indemnity Notice that the Indemnifying Party disputes
such claim, the claim specified by the Indemnified Party in the Indemnity Notice
shall be deemed a liability of the Indemnifying Party hereunder. If the
Indemnifying Party has timely disputed such claim, as provided above, such
<PAGE>
dispute shall be resolved by mediation or arbitration as provided in Section
18.1 if the parties do not reach a settlement of such dispute within thirty (30)
days after notice of a dispute is given.
D. Payments of all amounts owing by an Indemnifying Party pursuant
to this Article 14 relating to a Third Party Claim shall be made within thirty
(30) days after the latest of (i) the settlement of such Third Party Claim, (ii)
the expiration of the period for appeal of a final adjudication of such Third
Party Claim or (iii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement. Payments of all amounts owing by an Indemnifying Party
pursuant to Section 14.3(d) shall be made within thirty (30) days after the
later of (i) the expiration of the sixty (60) day Indemnity Notice period or
(ii) the expiration of the period for appeal, if any, of a final adjudication or
arbitration of the Indemnifying Party's liability to the Indemnified Party under
this Agreement.
14.4. Exclusivity of Remedies. The remedies provided in this Agreement
shall be exclusive of any other rights or remedies available to one party
against the other, either at law or in equity; provided however such remedies
shall not be exclusive as to any claim based on fraud or any claim under Section
16 of this Agreement. This Article 14 regarding indemnification shall survive
Closing.
14.5. Costs, Expenses and Legal Fees. Each party hereto agrees to pay
the costs and expenses (including attorneys' fees and expenses) incurred by the
other parties in successfully (a) enforcing any of the terms of this Agreement,
or (b) proving that another party breached any of the terms of this Agreement.
14.6. Indemnification Limitations. Notwithstanding the provisions of
Sections 14.1 and 14.2, no party shall be required to indemnify another notice
of party with respect to a breach of a representation, warranty or covenant
unless the notice of claim for indemnification is delivered within eighteen (18)
months after the Closing Date, except that a claim for indemnification for a
breach of the representations and warranties contained in Sections 3.3 and 4.1,
may be made at any time, and a claim for indemnification for a breach of the
representations and warranties contained in Section 3.19 may be made at any time
within the applicable statute of limitations.
14.7. Tax Benefits; Insurance Proceeds. The total amount of any
indemnity payments owed by one party to another party to this Agreement shall be
reduced by any correlative tax benefit received by the party to be indemnified
or the net proceeds received by the party to be indemnified with respect to
recovery from third parties or insurance proceeds and such correlative insurance
benefit shall be net of the insurance premium, if any, that becomes due as a
result of such claim.
14.8. Indemnification Basket. No duty of indemnification shall arise
under Section 14 of this Agreement unless and until the amount of Damages of the
Indemnified Party exceeds one percent (1%) of the aggregate Stock Purchase
<PAGE>
Consideration and then such liability shall be limited to Damages in aggregate
in excess of one percent (1%) of the aggregate Stock Purchase Consideration.
15. TERMINATION.
15.1. Termination. This Agreement may be terminated:
A. at any time prior to the Closing Date by mutual written
agreement of all parties;
B. at any time prior to the Closing Date by Purchaser, by written
notice to the Stockholder, if any representation or warranty of the Acquired
Companies or the Stockholder contained in this Agreement or in any certificate
or other document executed and delivered by the Acquired Companies or the
Stockholder pursuant to this Agreement is or becomes untrue or breached in any
material respect or if the Acquired Companies or the Stockholder fail to comply
in any material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
C. at any time prior to the Closing Date by the Stockholder, by
written notice to Purchaser, if any representation or warranty of Purchaser
contained in this Agreement is or becomes untrue in any material respect or if
Purchaser fails to comply in any material respect with any covenant or agreement
contained herein, and any such misrepresentation, noncompliance or breach is not
cured, waived or eliminated within twenty (20) days after receipt or written
notice thereof;
D. by Purchaser, by written notice to the Stockholder, in the
event the conditions precedent set forth in Article 11 of this Agreement have
not been satisfied or waived by December 31, 1997;
E. by the Stockholder, by written notice to the Purchaser, in the
event the conditions precedent set forth in Article 10 of this Agreement have
not been satisfied or waived by December 31, 1997; or
F. by either party, by written notice to the other, if the Closing
shall not have occurred on or prior to ten business days following the
satisfaction or waiver of all conditions precedent to Closing.
<PAGE>
15.2. Effect of Termination. In the event this Agreement is terminated
pursuant to Section 15.1, this Agreement shall be null and void and of no
further force and effect except that Purchaser, the Acquired Companies and the
Stockholder shall each be entitled to pursue, exercise and enforce any and all
remedies, rights, powers and privileges available at law or in equity, subject
to the limitations set forth in Section 14.1.
16. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.
16.1. The Stockholder's Non-Competition Covenant.
A. The Stockholder recognizes that their covenants contained in
this Section 16.1 are an essential part of this Agreement and that, but for the
agreement of the Stockholder to comply with such covenants, Purchaser would not
have entered into this Agreement. The Stockholder acknowledges and agrees that
their covenant not to compete is necessary to ensure the continuation of the
Business (as defined below) and is necessary to protect the reputation of
Purchaser, and that irreparable and irrevocable harm and damage will be done to
Purchaser if the Stockholder competes with Purchaser. The Stockholder
accordingly agrees that for a period of five (5) years from the Closing Date, it
shall not:
I) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee, employer,
advisor, stockholder, partner or in any other individual or representative
capacity whatsoever, either for their own benefit or for the benefit of any
other person or entity knowingly (A) hire, attempt to hire, contact or solicit
with respect to hiring any employee of Purchaser (or of any of its direct or
indirect subsidiaries) or (B) induce or otherwise counsel, advise or encourage
any employee of Purchaser (or of any of its direct or indirect subsidiaries) to
leave the employment of Purchaser;
II) act or serve, directly or indirectly, as a principal,
agent, independent contractor, consultant, director, officer, employee, employer
or advisor or in any other position or capacity with or for, or acquire a direct
or indirect ownership interest in or otherwise conduct (whether as stockholder,
partner, investor, joint venturer, or as owner of any other type of interest),
any Competing Business as such term is defined herein; provided, however, that
this clause (ii) shall not prohibit Stockholder from being the owner of up to 1%
of any class of outstanding securities of any company or entity if such class of
securities is publicly traded; or
III) directly or indirectly, either as principal, agent,
independent, contractor, consultant, director, officer, employee, employer,
advisor, stockholder, partner or in any other individual or representative
capacity whatsoever, either for their own benefit or for the benefit of any
<PAGE>
other person or entity, call upon or solicit any customers or clients of the
Business for the purpose of providing management services to eye care
professionals or providing managed care services to third party payors or eye
care professionals.
B. For the purposes of this Section 16.1, the following terms
shall have the meanings set forth below:
I) "Business" shall mean providing management services to eye
care professionals and providing managed care services to third party payors or
eye care professionals.
II) "Competing Business" shall mean an individual, business,
corporation, association, firm, undertaking, company, partnership, joint
venture, organization or other entity that either (A) conducts a business
substantially similar to the Business within any State where the Acquired
Companies or the Subsidiaries engage in business, or (B) provides or sells a
service which is the same or substantially similar to, or otherwise competitive
with the services provided by the Business within any State where the Acquired
Companies or the Subsidiaries engage in business.
C. Should any portion of this Section 16.1 be deemed unenforceable
because of the scope, duration or territory encompassed by the undertakings of
the Stockholder hereunder, and only in such event, then the Stockholder and
Purchaser consent and agree to such limitation on scope, duration or territory
as may be finally adjudicated as enforceable by a court of competent
jurisdiction after the exhaustion of all appeals.
D. This covenant shall be construed as an agreement ancillary to
the other provisions of this Agreement, and the existence of any claim or cause
of action of a Stockholder against Purchaser, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Purchaser of this covenant. Without limiting other possible remedies to
Purchaser for breach of this covenant, the Stockholder agrees that injunctive or
other equitable relief will be available to enforce the covenants of this
provision, such relief to be without the necessity of posting a bond, cash or
otherwise. The Stockholder and Purchaser further expressly acknowledge that the
damages that would result from a violation of this non-competition covenant
would be impossible to predict with any degree of certainty, and agree that
liquidated damages in the amount of Stock Purchase Consideration is reasonable
in light of the severe harm to the Business and Purchaser which would result in
the event that a violation of this non-competition covenant were to occur.
16.2. The Stockholder's Confidentiality Covenant. From the date hereof,
the Stockholder shall not, directly or indirectly, use for any purpose, or
disclose to any third party, any information of Purchaser or the Acquired
Companies, as appropriate (whether written or oral), including any business
<PAGE>
management or economic studies, customer lists, proprietary forms, proprietary
business or management methods, marketing data, fee schedules, or trade secrets
of Purchaser or of the Acquired Companies, as applicable, and including the
terms and provisions of this Agreement and any transaction or document executed
by the parties pursuant to this Agreement. Notwithstanding the foregoing, the
Stockholder may disclose information that they can establish (a) is or becomes
generally available to and known by the public or optometric community (other
than as a result of an unpermitted disclosure directly or indirectly by the
Stockholder or its Affiliates, advisors or representatives); (b) is or becomes
available to such Stockholder on a nonconfidential basis from a source other
than Purchaser, the Acquired Companies or their respective Affiliates, advisors
or representatives, provided that such source is not and was not bound by a
confidentiality agreement with or other obligation of secrecy to Purchaser, the
Acquired Companies or their respective Affiliates, advisors or representatives
of which such Stockholder has knowledge; or (c) has already been or is hereafter
independently acquired or developed by such Stockholder without violating any
confidentiality agreement with or other obligation of secrecy to Purchaser, the
Acquired Companies or their respective Affiliates, advisors or representatives.
Without limiting the other possible remedies to Purchaser for the breach of this
covenant, the Stockholder agrees that injunctive or other equitable relief shall
be available to enforce this covenant, such relief to be without the necessity
of posting a bond, cash or otherwise. The Stockholder further agrees that if any
restriction contained in this Section 16.2 is held by any court to be
unenforceable or unreasonable, a lesser restriction shall be enforced in its
place and the remaining restrictions contained herein shall be enforced
independently of each other.
16.3. Survival. The parties acknowledge and agree that this Article 16
shall survive the Closing of the transactions contemplated herein.
17. DISPUTES.
17.1. Mediation and Arbitration. Any dispute, controversy or claim
(excluding claims arising out of an alleged breach of Article 16 of this
Agreement) arising out of this Agreement, or the breach thereof, that cannot be
settled through negotiation shall be settled (a) first, by the parties trying in
good faith to settle the dispute by mediation under the Commercial Mediation
Rules of the AAA (such mediation session to be held in Tampa, Florida, and to
commence within 15 days of the appointment of the mediator by the AAA),
administered by the AAA under its Commercial Arbitration Rules (such arbitration
to be held in Tampa, Florida, before a single arbitrator and to commence within
15 days of the appointment of the arbitrator by the AAA), and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
<PAGE>
18. MISCELLANEOUS.
18.1. Taxes. The Stockholder shall pay all transfer taxes, sales and
other taxes and charges, if any, which may become payable in connection with the
transactions and documents contemplated hereunder. Notwithstanding the
foregoing, Purchaser shall pay all transfer taxes, sales and other taxes and
charges imposed by the State of Florida, if any, which may become payable in
connection with the transactions and documents contemplated hereunder.
18.2. Remedies Not Exclusive. No remedy conferred by any of the
specific provisions of this Agreement or any document contemplated by this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
18.3. Parties Bound. Except to the extent otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, representatives, administrators,
guardians, successors and assigns; and no other person shall have any right,
benefit or obligation hereunder.
18.4. Notices. All notices, reports, records or other communications
that are required or permitted to be given to the parties under this Agreement
shall be sufficient in all respects if given in writing and delivered in person,
by telecopy, by overnight courier or by registered or certified mail, postage
prepaid, return receipt requested, to the receiving party at the following
address:
If to Purchaser addressed to:
Vision Twenty-0ne, Inc.
7209 Bryan Dairy Road
Largo, Florida 33777
Facsimile No.: (813) 545-4419
Attn: Richard T. Welch
<PAGE>
With copies to:
Shumaker, Loop & Kendrick
Post Office Box 172609
101 E. Kennedy Boulevard, Suite 2800
Tampa, Florida 33672-0609
Facsimile No. (813) 229-1660
Attn: Darrell C. Smith, Esquire
If to the Acquired Companies or the Stockholder addressed to:
LaserSight Incorporated
12161 Lackland Road
St. Louis, MO 63146
Attn: Michael R. Farris, Chief Executive Officer
With copies to:
Sonnenschein Nath & Rosenthal
One Metropolitan Square
Suite 3000
St. Louis, Missouri 63102
Facsimile No. (314) 259-5959
Attn: Alan Bornstein, Esquire
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 18.4. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery or
refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
18.5. Choice of Law. This Agreement shall be construed, interpreted,
and the rights of the parties determined in accordance with, the laws of the
State of Florida except with respect to matters of law concerning the internal
affairs of any corporate or partnership entity which is a party to or the
subject of this Agreement, and as to those matters the law of the state of
incorporation or organization of the respective entity shall govern.
18.6. Entire Agreement; Amendments and Waivers. This Agreement,
together with the documents contemplated by this Agreement and all Exhibits and
Schedules hereto and thereto, constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof. No supplement, modification or waiver of any of the
<PAGE>
provisions of this Agreement shall be binding unless it shall be specifically
designated to be a supplement, modification or waiver of this Agreement and
shall be executed in writing by the party to be bound thereby. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
18.7. Confidentiality Agreements. The provisions of any prior
confidentiality agreements and letters of intent between or among Purchaser, the
Acquired Companies and the Stockholder, as amended, shall terminate and cease to
be of any force or effect at and upon the Closing.
18.8. Assignment. This Agreement may not be assigned by operation of
law or otherwise except that Purchaser shall have the right to assign this
Agreement, at any time, to any Affiliate or direct or indirect wholly-owned
subsidiary.
18.9. Attorneys' Fees. Except as otherwise specifically provided
herein, if any action or proceeding is brought by any party with respect to this
Agreement or the other documents contemplated with respect to the
interpretation, enforcement or breach hereof, the prevailing party in such
action shall be entitled to an award of all reasonable costs of litigation or
arbitration, including, without limitation, attorneys' fees, to be paid by the
losing party, in such amounts as may be determined by the court having
jurisdiction of such action or proceeding or by the arbitrators deciding such
action or proceeding.
18.10. Further Assurances. From time to time hereafter and without
further consideration, each of the parties hereto shall execute and deliver such
additional or further instruments of conveyance, assignment and transfer and
take such other actions as any of the other parties hereto may reasonably
request in order to more effectively consummate the transactions contemplated
hereunder or as shall be reasonably necessary or appropriate in connection with
the carrying out of the parties' respective obligations hereunder for the
purposes of this Agreement.
18.11. Announcements and Press Releases. Any press releases or any
other public announcements concerning this Agreement or the transactions
contemplated hereunder shall be approved in advance by Purchaser and the
Stockholder; provided, however, that such approval shall not be unreasonably
withheld and if any party reasonably believes that it has a legal obligation to
make a press release and the consent of the other party cannot be obtained, then
the release may be made without such approval.
18.12. No Tax Representations. Each party acknowledges that it is
relying solely on its advisors to determine the tax consequences of the
transactions contemplated hereunder and that no representation or warranty has
<PAGE>
been made by any party as to the tax consequences of such transactions except as
otherwise specifically set forth in this Agreement.
18.13. No Rights as Stockholder. The Stockholder shall have no rights
as a stockholder with respect to any shares of Common Stock until the issuance
of a stock certificate evidencing such shares. Except as otherwise provided in
the Agreement, no adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to such date any stock
certificate is issued.
18.14. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.15. Headings. The headings of the several articles and sections
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
18.16. Severability. Each article, section and subsection of this
Agreement constitutes a separate and distinct undertaking, covenant or provision
of this Agreement. If any such provision shall finally be determined to be
unlawful, such provision shall be deemed severed from this Agreement, but every
other provision of this Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
MEC HEALTH CARE, INC.
By: /s/ Gregory L. Wilson
-------------------------
(Name)
Vice President
-------------------------
(Title)
LSI ACQUISITION, INC.
By: /s/ Michael R. Farris
-------------------------
(Name)
President and CEO
-------------------------
(Title)
LASERSIGHT INCORPORATED
By: /s/ Michael R. Farris
-------------------------
(Name)
President and CEO
-------------------------
(Title)
VISION TWENTY-ONE, INC.
By: /s/ Richard T. Welch
-------------------------
(Name)
Chief Financial Officer
-------------------------
(Title)
STOCK DISTRIBUTION AGREEMENT
----------------------------
This Stock Distribution Agreement ("Agreement"), dated as of December 30,
1997, is by and between Vision Twenty-One, Inc. ("Vision 21"), a Florida
corporation and any successor, and LaserSight Incorporated (the "Stockholder"),
a Delaware corporation.
R E C I T A L S
---------------
A. The Stockholder and Vision 21 have executed that certain Stock Purchase
Agreement effective as of December 1, 1997 (the "Stock Purchase Agreement"),
pursuant to which Vision 21 has agreed to acquire all of the issued and
outstanding stock of MEC Health Care, Inc. and LSI Acquisition, Inc., in
exchange for delivery to the Stockholder of 812,500 shares of Vision 21 common
stock and the Additional Shares (as defined in the Stock Purchase Agreement,
collectively, the "Restricted Shares") and $6,500,000 in cash, as more fully set
forth in the Stock Purchase Agreement.
B. The Stockholder and Vision 21 desire to enter into the plan of
distribution (the "Plan of Distribution") described herein for liquidation of
the Restricted Shares through, at Vision 21's sole option, a "shelf"
registration statement, private placement, redemption by Vision 21 or other
method acceptable to Vision 21 and the Stockholder.
NOW THEREFORE, for and in consideration of the mutual agreements, terms,
covenants and conditions herein and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. Plan of Distribution of Restricted Shares.
(a) Stockholder agrees that on each date specified in Section 1(b)
below that number of the Restricted Shares so indicated in connection with such
date shall, at Vision 21's sole option, either (i) be sold through a market
maker designated by Vision 21 through a "shelf" registration statement (the
"Registration Statement") pursuant to Sections 2, 3 and 4 hereof, (ii) be sold
through a market maker designated by Vision 21 through a private placement
pursuant to Sections 5, 6 and 7 hereof or other method of sale reasonably
acceptable to Vision 21 and the Stockholder, or (iii) be purchased by Vision 21
pursuant to Section 8 hereof.
(b) The Restricted Shares shall be liquidated on, or, at Vision 21's
option, before the following specified dates in the following specified
increments in accordance with the terms of this Agreement:
RESTRICTED SHARES DISTRIBUTION SCHEDULE
---------------------------------------
Number of Shares
Date to be Liquidated
-------------------------------------------------------------------------------
February 2 through 166,666 and 25% of the Additional Shares
February 27, 1998
March 2 through March 31, 1998 166,667 and 25% of the Additional Shares
<PAGE>
April 1 through April 30, 229,167 and 25% of the Additional Shares
1998
May 1 through May 29, 250,000 and 25% of the Additional Shares
1998
(c) Vision 21 agrees that no matter how the Restricted Shares are
liquidated pursuant to this Agreement on each of the dates set forth in Section
1(b) hereof the Stockholder shall receive from Vision 21 and/or the party
purchasing Restricted Shares a sum equal to the number of Restricted Shares to
be sold on such date times the closing price of Vision 21 common stock as quoted
by the NASDAQ National Market System on such date. Vision 21 also agrees the
Stockholder shall receive a minimum of an aggregate of Six Million Five Hundred
Thousand Dollars ($6,500,000) and a maximum of an aggregate of Seven Million
Four Hundred Seventy-Five Thousand Dollars ($7,475,000) in connection with the
liquidation of the Restricted Shares. In the event the Stockholder realizes
aggregate gross proceeds from the sale of the Restricted Shares equal to Seven
Million Four Hundred Seventy-Five Thousand Dollars ($7,475,000) prior to all
Restricted Shares being liquidated pursuant to the Plan of Distribution, the
Restricted Shares not yet liquidated, if any, shall be returned to Vision 21. If
by 4:00 p.m., New York time, on May 29, 1998, the Stockholder has not realized
the sum of at least Six Million Five Hundred Thousand Dollars ($6,500,000) from
the sale of the Restricted Shares, Vision 21 shall pay the Stockholder by wire
transfer of immediately available funds on May 29, 1998 the cash sum which is
equal to Six Million Five Hundred Thousand Dollars ($6,500,000) less the
proceeds received through such date by the Stockholder from the sale of
Restricted Shares. However, if on such date not all Restricted Shares have been
liquidated and Vision 21 exercises its right under Section 8 of this Agreement
to redeem such Restricted Shares, then, such Restricted Shares shall be returned
to Vision 21 in connection with the purchase thereof.
(d) Stockholder agrees not to sell, pledge, transfer or dispose of the
Restricted Shares except in accordance with the terms of this Agreement and the
terms of that certain Stock Pledge Agreement between the Stockholder and
Foothill Capital Corporation dated as of December 30, 1997.
(e) The parties acknowledge and agree that the number of Restricted
Shares (and therefore the Six Million Five Hundred Thousand Dollar ($6,500,000)
minimum payment contemplated by Section 1(c) and the Seven Million Four Hundred
Seventy-Five Thousand Dollar ($7,475,000) maximum payment contemplated by
Section 1(c)) shall be subject to the adjustments contemplated by Section 2.5 of
the Stock Purchase Agreement.
2. Shelf Registration.
(a) Vision 21 may, in its sole discretion, file and cause to be
declared effective as soon as practicable a Registration Statement pursuant to
the Securities Act of 1933, as amended (the "Securities Act") for all of the
Restricted Shares not yet liquidated in accordance with the Plan of
Distribution, which form will then be available for the sale of the Restricted
Shares in accordance with the Plan of Distribution. The Registration Statement
shall be kept effective until such time as all of the Restricted Shares have
been liquidated, provided that Vision 21 may terminate an effective Registration
Statement prior to all of the Restricted Shares being liquidated if on the date
of such termination Vision 21 is in compliance with the terms of this Agreement.
<PAGE>
(b) Vision 21 shall have the right to extend, temporarily suspend or
delay the effectiveness of any Registration Statement for a period of up to
thirty (30) days if, upon the advice of counsel, such extension, suspension or
delay is advisable and in the best interests of Vision 21 because of the
existence of non-public material information, or to allow Vision 21 to complete
any pending audit of its financial statements, any material public financing
plan, any pending material acquisition, or to release audited financial
statements for any pending material acquisition as required by the Securities
and Exchange Commission (the "Commission"), provided that Vision 21 shall only
be entitled to one such suspension during the Plan of Distribution.
(c) The Stockholder agrees to cooperate with Vision 21 in all
reasonable respects in connection with registration of the Restricted Shares,
including timely supplying all information and executing and returning all
documents requested by Vision 21 which are reasonable and customary.
(d) Vision 21 shall be entitled to include in the Registration
Statement any other securities of Vision 21 (whether to be offered by Vision 21
or other Vision 21 security holders and regardless of the proposed terms of the
transfer or sale of such other securities).
3. Registration Covenants of Vision 21. In the event Vision 21 elects to
file a Registration Statement to liquidate the Restricted Shares, Vision 21
hereby covenants and agrees to:
(a) Take such steps as may be necessary to comply with the Blue Sky
laws of such states as may be required by law; provided that in no event shall
Vision 21 be obligated to qualify to do business in any state where it is not so
qualified or to take any action which would subject it to unlimited service of
process in any state where it is not at such time so subject;
(b) Pay all fees and expenses of Vision 21's counsel, all accounting
costs (including costs associated with the preparation of interim period
financial statements), registration and Blue Sky filing fees, NASD fees,
printing costs, experts' fees and expenses, costs of post-effective amendments,
Eligible Broker's Fees (as defined herein), and all other usual and customary
expenses in connection with the Registration Statement;
(c) Notify the Stockholder promptly after it shall receive notice
thereof, of the date and time when such Registration Statement and each
post-effective amendment thereto has become effective or a supplement to any
prospectus forming a part of such Registration Statement has been filed and
provide the Stockholder with such number of prospectuses, and any amendments
thereof or supplements thereto, the Stockholder may reasonably request;
(d) Promptly notify the Stockholder of any request by the Commission
for the amending or supplementing of such registration statement or prospectus
or for additional information and provide the Stockholder with copies of such
requests;
<PAGE>
(e) Prepare and promptly file with the Commission and promptly notify
Stockholder of the filing of such amendments or supplements to such Registration
Statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to the Restricted Shares is
required to be delivered under the Securities Act, any event has occurred as the
result of which any such prospectus or any other prospectus as then in effect
may include an 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
not misleading;
(f) Advise the Stockholder promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued; and
(g) Once the Registration Statement is effective Vision 21 shall, on or
before the relevant date set forth in Section 1(b) hereof, instruct its transfer
agent to immediately remove any restrictive legend from that number Restricted
Shares then eligible to be sold pursuant to the Plan of Distribution. For
purposes of Sections 3(b) and 6(b) "Eligible Broker's Fees" shall mean brokers',
underwriters' and placement agents' fees, commissions and discounts related to
the liquidation of Restricted Shares pursuant to a Registration Statement or a
private placement, provided that if the Stockholder receives in excess of Six
Million Five Hundred Thousand Dollars ($6,500,000) from the liquidation of
Restricted Shares then the amount so received by the Stockholder in excess of
Six Million Five Hundred Thousand Dollars ($6,500,000), shall be utilized to pay
all customary brokers', underwriters' and placement agents' fees, commissions
and discounts related to the liquidation of Restricted Shares, until such fees
are paid in full and thereafter such excess shall be retained by the Stockholder
subject to the limitations of Section 1(c).
4. Registration Covenants of Stockholder. In the event Vision 21 elects to
file a Registration Statement to liquidate the Restricted Shares, Stockholder
hereby covenants and agrees:
(a) To cooperate with Vision 21 in its compliance with all federal and
state securities laws, including without limitation providing such information
and signing such documents as are necessary to effect registration pursuant to
this Agreement; and
(b) To the entry of stop transfer instructions with Vision 21's
transfer agent against the transfer of any Restricted Shares except in
compliance with all applicable securities laws.
5. Private Placement.
(a) Vision 21 may, in its sole discretion, sell Restricted Shares
pursuant to a private placement through a market maker designated by Vision 21.
<PAGE>
(b) The Stockholder agrees to cooperate with Vision 21 in all
reasonable respects in connection with the private placement of the Restricted
Shares, including timely supplying all information and executing and returning
all documents requested by Vision 21 which are reasonable and customary.
(c) Vision 21 shall be entitled to include in the private placement any
other securities of Vision 21 (whether to be offered by Vision 21 or other
Vision 21 security holders and regardless of the proposed terms of the transfer
or sale of such other securities).
(d) In connection with any private placement of Restricted Shares the
Stockholder shall be entitled to receive from Vision 21 and/or the purchaser of
the Restricted Shares so sold the closing price of Vision 21 common stock as
quoted by the NASDAQ National Market System on the date of the sale pursuant to
the private placement.
6. Private Placement Covenants of Vision 21. In the event Vision 21 elects
to liquidate the Restricted Shares pursuant to a private placement, Vision 21
hereby covenants and agrees to:
(a) Take such steps as may be necessary to comply with the Blue Sky
laws of such states as may be required by law; provided that in no event shall
Vision 21 be obligated to qualify to do business in any state where it is not so
qualified or to take any action which would subject it to unlimited service of
process in any state where it is not at such time so subject; and
(b) Pay all fees and expenses of Vision 21's counsel, all accounting
costs (including costs associated with the preparation of interim period
financial statements), registration and Blue Sky filing fees, printing costs,
experts' fees and expenses, Eligible Brokers' Fees, and all other usual and
customary expenses in connection with the private placement.
7. Private Placement Covenants of Stockholder. In the event Vision 21
elects to liquidate the Restricted Shares pursuant to a private placement,
Stockholder hereby covenants and agrees:
(a) To cooperate with Vision 21 in its compliance with all federal and
state securities laws, including without limitation providing such information
and signing such documents as are necessary to effect the private placement
pursuant to this Agreement; and
(b) That in no event will the Stockholder be eligible to receive more
than the maximum amount contemplated by Section 1(c) from the liquidation of
Restricted Shares.
8. Redemption. Vision 21 shall have the right to redeem all or any part of
the Restricted Shares at any time by paying the Stockholder a cash sum equal to
the number resulting from multiplying the number of Restricted Shares so
redeemed by the greater of (i) the Valuation Price (as defined in the Stock
Purchase Agreement), and (ii) the closing price of Vision 21 common stock as
quoted by the NASDAQ National Market System on the date of such redemption. In
no event will the Stockholder be eligible to receive more than the maximum
amount contemplated by Section 1(c) from the liquidation of Restricted Shares.
<PAGE>
9. Indemnification of Stockholder. Whenever registration with respect to
any shares of Stockholder's Restricted Shares is effected under the Securities
Act pursuant hereto or when Restricted Shares are sold pursuant to a private
placement, Vision 21 will indemnify and hold harmless the Stockholder and its
directors and officers from and against any and all losses, claims, liabilities,
expenses and damages (including any and all investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they may become subject under the Securities Act, the Exchange Act of 1934 (the
"Exchange Act") or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or alleged omission to
state in the Registration Statement, private placement memorandum or other
document filed with the Commission, a material fact required to be stated or
necessary to make the statements in such a document not misleading, provided
that Vision 21 will not be liable to Stockholder to the extent that such loss,
claim, liability, expense or damage is based on an untrue statement or omission
made in reliance on and in conformity with written information furnished to
Vision 21 by Stockholder or through any attorney-in-fact for Stockholder,
expressly for inclusion in the Registration Statement or any prospectus included
in the Registration Statement or a private placement memorandum.
10. Indemnification of Vision 21. Whenever registration with respect to any
shares of Stockholder's Restricted Shares is effected under the Securities Act
pursuant hereto or when Restricted Shares are sold pursuant to a private
placement, the Stockholder will indemnify and hold harmless Vision 21 and each
of Vision 21's directors and officers from and against any and all losses,
claims, liabilities, expenses and damages (including any and all investigative,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any addition, suit or proceeding or any claim asserted),
to which they, or any of them, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact required to be stated in the Registration Statement
or private placement memorandum or necessary to make the statements in such
documents not misleading; provided that Stockholder will not be liable except to
the extent that such loss, claim, liability, expense or damage arises from or is
based upon an untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with written information
furnished to Vision 21 by the Stockholder, or by the Stockholder through any
attorney-in-fact, expressly for inclusion in the registration statement or any
prospectus included in such registration statement or a private placement
memorandum.
11. Defense of Claim. Promptly after receipt by an indemnified party of
notice of the commencement of any action, the indemnified party shall notify the
indemnifying party in writing of the commencement thereof if a claim in respect
thereof is to be made against any indemnifying party under this Agreement, but
the omission of such notice shall not relieve the indemnifying party from
liability which it may have to the indemnified party under this Agreement,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice, and shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under this
Agreement. In case any action is brought against the indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and to the extent that
<PAGE>
it chooses, to assume the defense thereof with counsel reasonably satisfactory
to the indemnified party, and after notice from the indemnifying party to the
indemnified party that it so chooses, the indemnifying party shall not be liable
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof; provided however that (i) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the claim within twenty (20) days after receiving notice from the indemnified
party that the indemnified party believes the indemnifying party has failed to
diligently defend such claim, or (ii) if the indemnified party who is a
defendant in any action or proceeding which is also brought against the
indemnifying party reasonably shall have concluded that there are legal defenses
available to the indemnified party which conflict with the defense strategy of
the indemnifying party, or (iii) if in the opinion of counsel for the
indemnified party a conflict of interest exists that requires separate
representation of the indemnified party and the indemnifying party, then the
indemnified party shall have the right to assume or continue its own defense as
set forth above and the indemnifying party shall reimburse the indemnified party
for the costs of such defense. In no event shall the indemnifying party be
reasonable for the fees of more than one firm for all indemnified parties.
12. Survival of Indemnity. The indemnifications provided by this Agreement
shall be a continuing right to indemnification and shall survive the
registration and sale of any securities by any person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
13. Remedies. If Vision 21 fails to take the actions or make the payments
described in Sections 1(a) or 1(c) hereof on or before the date which is three
business days after the date specified in such Sections (the "Default Date")
then the following shall apply:
(a) Vision 21 shall prepare, and, on or prior to 20 business days after
the Default Date (the "Filing Date"), file with the Commission a registration
statement on Form S-3 (or, if Form S-3 is not then available, on such form of
registration statement as is then available to effect a registration of all of
the Restricted Shares) covering the resale of all of the Restricted Shares. Such
registration statement (and each amendment or supplement thereto) shall be
provided to (and subject to the approval of (which approval shall not be
unreasonably withheld or delayed)) the Stockholder and their counsel prior to
its filing or other submission, except to the extent that a post-effective
amendment of such registration statement, or supplement to the related
prospectus, is required by applicable securities law to be filed before such
approval can reasonably be obtained, in which case Vision 21 shall provide a
copy of such amendment or supplement, as applicable, to the Stockholder and
their counsel as soon as practicable after such filing. Vision 21 shall cause
such registration statement to become effective as soon as practicable after
such filing and keep such registration statement effective at all times until
such date as is the earlier of (i) the date on which all of the Restricted
Shares have been sold, and (ii) the date on which all of the Restricted Shares
may be immediately sold to the public without registration conditions, or
limitations, whether pursuant to Rule 144(k) or otherwise (the "Registration
Period").
Vision 21 shall cause such registration statement to become effective
as soon as practicable, but in no event later than the ninetieth (90th) day
following the Default Date (the "Registration Deadline"). If (i) such
registration statement covering all of the Restricted Shares is not declared
<PAGE>
effective by the Commission on or before the Registration Deadline, or (ii)
after such registration statement has been declared effective by the Commission,
sales of all the Restricted Shares cannot be made pursuant to such registration
statement (by reason of a stop order or Vision 21's failure to update the
registration statement), then Vision 21 will make payments to the Stockholder in
such amounts and at such times as shall be determined pursuant to this Section
13(a) as partial relief for the damages to the Stockholder by reason of any such
delay in or reduction of their ability to sell the Restricted Shares (which
remedy shall not be exclusive of any other remedies available at law or in
equity). Vision 21 shall pay to the Stockholder an amount equal to (i) (A) .01
per month (prorated daily during the first 30 days after the Registration
Deadline) and .02 per month, prorated daily (thereafter) times (B) the aggregate
value of the Restricted Shares not yet liquidated pursuant to the Plan of
Distribution (such value shall be calculated utilizing the closing price of
Vision 21 common stock as quoted by the NASDAQ National Market System as of the
date the Restricted Stock was issued) times (ii) the sum of: (A) the number of
months (prorated per day for partial months) following the Registration Deadline
but prior to the date such registration statement is declared effective by the
Commission plus (B) the number of months (prorated per day for partial months)
following the Registration Deadline but prior to the termination of the
Registration Period that sales cannot be made pursuant to the Registration
Statement after the Registration Statement has been declared effective. Such
amounts shall be paid in cash within five business days after the end of each
period that gives rise to such obligation, provided that, if any such period
extends for more than 30 days, payments shall be made for each such 30 day
period within five business days after the end of such 30 day period.
(b) The Stockholder will be free to sell all of the Restricted Shares
in a private placement or other transaction subject only to compliance with
applicable securities laws, including, without limitation, to persons in the
United States whom the Stockholder reasonably believes to be qualified
institutional buyers as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("Rule 144A"), in transactions under Rule
144A and (ii) to a limited number of other institutional "accredited investors"
(as defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of the Act)
in private sales exempt from registration under the Act (such persons specified
in clauses (i) and (ii) being referred to herein as the "Eligible Purchasers").
Sales to Eligible Purchasers shall be made in compliance with applicable
securities laws and any shares so sold shall bear appropriate restrictive
legends.
Vision 21 agrees to take all necessary steps to facilitate the
Stockholder's sale of the Restricted Shares to Eligible Purchasers. During the
period of time the Stockholder is trying to sell the Restricted Shares pursuant
to this Section 13(b), Vision 21 shall advise the Stockholder promptly and, if
requested by it, shall promptly confirm such advice in writing, of any material
adverse change, or of any event or condition known to Vision 21 which is
reasonably likely to result in a material change, in the condition (financial or
other), business, prospects, liabilities (contingent or otherwise), properties,
net worth, solvency or results of operations of Vision 21 (whether or not
arising in the ordinary course of business), or of the happening of any event,
any information becoming known or the existence of any condition that would
require any amendment or supplement to any Vision 21 filing with the Commission
so that such filings would not contain any 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, in the light of the circumstances under which they
were made, not misleading.
<PAGE>
Vision 21 will cooperate with the Stockholder and with its counsel in
connection with the qualification of the Restricted Shares for offering and sale
by the Stockholder and by dealers to Eligible Purchasers under the securities or
Blue Sky laws of such jurisdictions as the Stockholder may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such qualification.
For so long as any of the Restricted Shares are held by the Stockholder
and are "restricted securities" within the meaning of Rule 144(a)(3) under the
Act and during any period in which Vision 21 is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, Vision 21 will furnish
to holders and beneficial owners of the Restricted Shares and prospective
purchasers of Restricted Shares designated by such holders, upon request of such
holders or beneficial owners or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Act to permit
compliance with Rule 144A in connection with resales of the Restricted Shares.
(c) The Stockholder will be free to seek all other remedies which may
be available at law or in equity in connection with Vision 21's failure to
comply with the terms of this Agreement.
14. Listing on Securities Exchanges. Vision 21 shall cause the listing and
the continuation of listing of Vision 21's common stock on the NASDAQ National
Market. By February 1, 1998 Vision 21 shall file the appropriate application
(and pay the associated fee) for listing the Restricted Shares with NASDAQ.
15. SEC Filings. During the period of time the Stockholder owns the
restricted Shares Vision 21 shall supply the Stockholder with a copy of all
annual or quarterly reports of Vision 21 and such other reports and documents
filed by the Company with the Commission. Such copies shall be supplied within
three business days after the filing thereof with the Commission.
16. Non-Transferability. The benefits set forth herein, including
indemnification by Vision 21, are granted for the sole and personal benefit of
the Stockholder and may not be transferred or assigned, provided that Vision 21
consents to the terms and conditions of that certain Collateral Assignment among
Vision 21, the Stockholder and Foothill Capital Corporation dated December 30,
1997.
17. Delay of Registration. Stockholder agrees that it shall have no right
to obtain or seek an injunction restraining or otherwise delaying any
registration statement filed by Vision 21.
18. Notices.
(a) All communications under this Agreement shall be in writing and
shall be sufficient in all respects if personally delivered or mailed by prepaid
certified or registered mail, return receipt requested, addressed as follows:
<PAGE>
(i) If to Vision 21, at:
Vision Twenty-One, Inc.
7209 Bryan Dairy Road
Largo, Florida 34647
Attn: Theodore N. Gillette, Chief Executive Officer
With a copy to:
Darrell C. Smith, Esquire
Shumaker, Loop & Kendrick, LLP
101 E. Kennedy Boulevard, Suite 2800
Tampa, Florida 33602
(ii) If to the Stockholder at:
LaserSight Incorporated
12161 Lackland Road
St. Louis, Missouri 63146
Attn: Michael R. Farris, Chief Executive Officer
with a copy to:
Alan B. Bornstein, Esquire
Sonnenschein Nath & Rosenthal
One Metropolitan Square
Suite 3000
St. Louis, Missouri 63102
or at such other address as one party may have furnished in writing to the other
party.
(b) Any notice so addressed, when mailed by registered or certified
mail, shall be deemed to be given three days after so mailed, and when delivered
by hand shall be deemed to be given upon delivery.
19. Counterparts. One or more counterparts of this Agreement may be signed
by the parties, each of which shall be an original but all of which together
shall constitute one and the same instrument.
20. Governing Law. This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Florida, which shall prevail in
all matters arising under or in connection with this Agreement.
21. Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
<PAGE>
22. Stock Lettering. Vision 21 shall have the right to provide a legend on
the shares of Common Stock covered hereunder reflecting the restrictions
described herein.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year first above written.
VISION TWENTY-ONE, INC.
By: /s/ Richard T. Welch
-------------------------------
Richard T. Welch,
its Chief Financial Officer
LASERSIGHT INCORPORATED
By: /s/ Michael R. Farris
-------------------------------
Michael R. Farris,
its Chief Executive Officer
CONSENT AND AMENDMENT NUMBER FOUR TO
LOAN AND SECURITY AGREEMENT
---------------------------
THIS CONSENT AND AMENDMENT NUMBER FOUR TO LOAN AND SECURITY AGREEMENT
(this "Consent and Amendment") is entered into as of December 30, 1997 (but
effective only in accordance with the terms and conditions of Section 5 of this
Consent and Amendment), by and among FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), LASERSIGHT INCORPORATED, a Delaware corporation
("LaserSight"), LASERSIGHT TECHNOLOGIES, INC., a Delaware corporation
("Technologies"), MEC HEALTH CARE, INC., a Maryland corporation ("MEC"), LSI
ACQUISITION, INC., a New Jersey corporation ("LSI"), LASERSIGHT CENTERS
INCORPORATED, a Delaware corporation ("Centers"), and MRF, INC., a Missouri
corporation ("MRF," together with LaserSight, Technologies, MEC, LSI, and
Centers, individually and collectively, jointly and severally, "Borrower"), with
reference to the following facts:
A. Foothill and Borrower heretofore have entered into that certain
Loan and Security Agreement, dated as of March 31, 1997, as
amended by that certain Consent and Amendment Number One to Loan
and Security Agreement, dated as of July 28, 1997, by that certain
Consent and Amendment Number Two to Loan and Security Agreement,
dated as of August 29, 1997, and by that certain Consent and
Amendment Number Three to Loan and Security Agreement, dated as of
September 10, 1997 (as amended, the "Loan Agreement");
B. Borrower has requested that Foothill consent to the sale by
LaserSight of all of the issued and outstanding capital stock of
MEC and LSI to Vision Twenty-One, Inc., a Florida corporation
("Vision") for a total purchase price of $13,000,000, payable
$6,500,000 in cash at closing to occur on the date hereof, and the
balance of $6,500,000 (subject to certain purchase price
adjustments) to be paid between the date hereof and May 29, 1998
through LaserSight's disposition, on a periodic basis, of shares
of Vision's common stock received from Vision at the closing (the
"Vision Pledged Shares"), and, in the event that LaserSight has
not received $6,500,000 through the disposition of the Vision
Pledged Shares on or before May 29, 1998, Vision will pay the
amount of any such shortfall on such date to LaserSight in cash;
that Foothill further agree to a waiver of compliance by Borrower
with the Financial Covenants as set forth in the Loan Agreement
until June 15, 1998; that the Loan Agreement be amended to delete
MEC and LSI as borrowers thereunder and that all other Loan
Documents, including, but not limited to, the Stock Pledge
<PAGE>
Agreement, the Copyright Security Agreement, the Patent Security
Agreement, the Trademark Security Agreement, and the Suretyship
Agreement, in each case between the Borrower and Foothill and
dated as of March 31, 1997, be simultaneously amended to delete
MEC and LSI as parties thereto; and that Foothill further agree to
release its lien of the capital stock and assets of each of MEC
and LSI and to amend all filed financing statements to delete MEC
and LSI as debtors (the foregoing hereinafter referred to as the
"Transaction").
C. In response to the foregoing request that Foothill consent to the
Transaction, Foothill requires that the Borrower, out of the
initial cash proceeds received by it from the Transaction, reduce
the amount outstanding under the Term Loan as of the date hereof
by $2,000,000, with the balance of the Term Loan to be repaid on
or before June 15, 1998, out of the proceeds received from
LaserSight's disposition of the Vision Pledged Shares after
LaserSight has received $2,500,000 of such proceeds; that the
Borrower, also out of the initial cash proceeds from the
Transaction, repay all Revolving Advances outstanding as of the
date hereof; and that the Loan Agreement be amended to change the
Maximum Revolver Amount from $4,000,000 to $2,000,000, with all
Revolving Advances being fully repaid and the Loan Agreement
terminated as of June 15, 1998.
D. Foothill is willing to consent to the Transaction and to amend the
Loan Agreement in accordance with the terms and conditions hereof;
and
E. All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Loan Agreement, as amended
hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
premises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendments to the Loan Agreement.
---------------------------------
A. Section 1.1 of the Loan Agreement is hereby amended to revise
the following defined terms:
"Borrower" means LaserSight, Technologies, Centers and MRF,
individually and collectively, jointly and severally.
"Maximum Revolver Amount" means $2,000,000.
<PAGE>
B. Section 1.1 of the Loan Agreement hereby is amended to include
the following defined terms:
"Vision" means Vision Twenty-One, Inc., a Florida corporation.
"Vision Pledged Shares" means 812,500 shares of the issued and
outstanding common stock of Vision received by LaserSight as part of the
consideration for the sale by LaserSight to Vision of all of the issued and
outstanding capital stock of MEC and LSI pursuant to the terms of the Vision
Stock Purchase Agreement.
"Vision Stock Purchase Agreement" means that certain Stock Purchase
Agreement between Vision and LaserSight dated as of December 1, 1997 pursuant to
which LaserSight has agreed to sell to Vision all of the issued and outstanding
capital stock of MEC and LSI for a total consideration of $13,000,000, payable
$6,500,000 in cash and the balance through the issuance of the Vision Pledged
Shares.
"Vision Stock Distribution Agreement" means that certain Stock
Distribution Agreement between Vision and LaserSight dated as of December 30,
1997 pursuant to which Vision and LaserSight have agreed to the procedures for
the disposition of the Vision Pledged Shares through the period from the date
hereof through May 29, 1998, at which time, in the event that LaserSight has not
received a minimum of $6,500,000 from the disposition of the Vision Pledges
Shares, Vision will pay any such shortfall in cash to LaserSight in
consideration for any remaining Vision Pledged Shares held by LaserSight on such
date.
C. Section 2.3 of the Loan Agreement hereby is amended in its
entirety to read as follows:
2.3 Term Loan. Foothill has agreed to make a "Term Loan" to
Borrower in the original principal amount of $4,000,000. The Term Loan
shall be repaid with an initial repayment of $2,000,000 on or before
December 30, 1997, and the balance of $2,000,000 repaid through the
proceeds received by LaserSight from the disposition of the Vision
Pledged Shares pursuant to the terms of the Vision Stock Distribution
Agreement, it being agreed between Borrower and Foothill that the first
$2,500,000 of such proceeds shall be made available by Foothill to
Borrower for Revolving Advances in accordance with the terms hereof
through the application of such proceeds to the Foothill Account
pursuant to Section 2.7 hereof; and all proceeds received after the
<PAGE>
receipt of initial $2,500,000 in proceeds shall be applied by Foothill
as and when received from Vision, pursuant to the Vision Stock
Distribution Agreement or that certain Escrow Agreement between Vision
and LaserSight dated as of December 30, 1997 (the "Escrow Agreement"),
in repayment of the remaining outstanding balance from time to time
under the Term Loan until the Term Loan is fully repaid; and, on May
29, 1998, in the event that the Term Loan has not been fully repaid
from proceeds received from the disposition of the Vision Pledged
Shares and Vision is obligated, pursuant to the Vision Stock
Distribution Purchase Agreement, to pay a shortfall to LaserSight in
the amount of the difference between $6,500,000 (subject to certain
purchase price adjustments) and the amount received from the
disposition of the Vision Pledged Shares, any such cash payment made by
Vision shall be applied by Foothill first to the payment of any balance
remaining outstanding under the Term Loan, and any amount of such
shortfall payment remaining after such application, shall be made
available to Borrower for Revolving Advances in accordance with the
terms hereof by application to the Foothill Account. The outstanding
principal balance and all accrued and unpaid interest under the Term
Loan shall be due and payable upon the termination of this Agreement,
whether by its terms, by prepayment, by acceleration, or otherwise. The
unpaid principal balance of the Term Loan may be prepaid in whole or in
part without penalty of premium at any time during the term of this
Agreement upon 30 days prior written notice by Borrower to Foothill.
All amounts outstanding under the Term Loan shall constitute
Obligations.
D. Section 3.4 of the Loan Agreement hereby is amended in is
entirety to read as follows:
3.4 Term. This Agreement shall become effective upon the execution
and delivery hereof by each Borrower and Foothill and shall continue in
full force and effect for a term ending on the date (the "Maturity
Date") that is the earlier of (a) June 15, 1998, and (b) the date on
which the sale of Technologies by LaserSight is consummated. The
foregoing notwithstanding, Foothill shall have the right to terminate
its obligations under this Agreement immediately without notice upon
the occurrence and during the continuance in the Event of Default.
2. Consent. Foothill hereby consents to the Transaction, and agrees
that the Transaction shall not be deemed to cause any Default or Event of
Default under the Loan Agreement, as amended by this Consent and Amendment
including, but not limited to, any Default or Event of Default that would
otherwise have occurred as a result of the Transaction absent this Consent and
Amendment under Sections 7.3, 7.4 or 7.7 of the Loan Agreement. Foothill and
each Borrower hereby agrees and consents to the deletion of MEC and LSI as
Borrowers under the Loan Agreement and each remaining Borrower hereby
acknowledges and confirms that the deletion of MEC and LSI as Borrowers under
<PAGE>
the Loan Agreement shall not impair the obligations and liabilities of the
remaining Borrowers to Foothill. Foothill and Borrower further agree and consent
to conforming amendments to the Loan Documents to effect the deletion of MEC and
LSI as parties thereto, including, but not limited to, the Stock Pledge
Agreement, the Copyright Security Agreement, the Trademark Security Agreement,
the Patent Security Agreement and the Suretyship Agreement, in each case dated
as of March 31, 1997, between the Borrower and Foothill.
3. Waiver of Financial Covenant and Compliance. Foothill hereby waives
Borrower's compliance with the financial covenants set forth in Section 7.20 of
the Loan Agreement until June 16, 1998.
4. Representations and Warranties. Borrower hereby represents and
warrants to Foothill that (a) the execution, delivery, and performance of this
Consent and Amendment and of the Loan Agreement, as amended by this Consent and
Amendment, are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected, and (b) this Consent and Amendment
and the Loan Agreement, as amended by this Consent and Amendment, constitute
Borrower's legal, valid, and binding obligation, enforceable against Borrower in
accordance with its terms.
5. Conditions Precedent to the Effectiveness of this Consent and
Amendment. The effectiveness of this Consent and Amendment is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions:
A. Foothill shall have received each of the following documents,
duly executed, and each such document shall be in full force and effect:
(1) a Collateral Assignment of Rights Under Stock Purchase
Agreement, Stock Distribution Agreement and Escrow Agreement, in form
and substance satisfactory to Foothill, executed and delivered by
LaserSight and consented to by Vision, in the form of Exhibit A
attached hereto; and
(2) a Stock Pledge Agreement, in form and substance satisfactory
to Foothill, executed by LaserSight in favor of Foothill in the form of
Exhibit B attached hereto.
<PAGE>
B. Foothill shall have received the original certificates
representing or evidencing all of the Vision Pledged Shares, together with stock
powers or equivalent assignments with respect thereto duly endorsed in blank;
C. Foothill shall have received copies, certified by an
appropriate officer of LaserSight, as being true, complete, and correct, of the
Vision Stock Purchase Agreement, the Vision Stock Distribution Agreement, the
Escrow Agreement and any other documents or agreement executed and/or delivered
in connection therewith, each of which shall be in form and substance
satisfactory to Foothill;
D. No Material Adverse Change in the financial condition of
Borrower or in the value of the Collateral shall have occurred;
E. The representations and warranties in this Consent and
Amendment, the Loan Agreement as amended by this Consent and Amendment, and the
other Loan Documents shall be true and correct in all respects on and as of the
date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
F. No Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and be
continuing on the date hereof, nor shall result from the consummation of the
transactions contemplated herein;
G. No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against Borrower, Foothill, or any of their Affiliates;
H. Foothill shall have received from Borrower a modification fee
in the amount of $75,000, such fee fully earned by Foothill upon its execution
of this Consent and Amendment, such modification fee payable $50,000 upon the
execution of this Consent and Amendment by Foothill and the balance of $25,000
to be paid on the earlier to occur of (i) June 15, 1998 or (ii) the date on
which all of the Obligations of Borrower to Foothill under the Loan Agreement
have been paid in full; and
I. Foothill shall have received from Vision into the Foothill
Account $6,500,000, the cash portion of the purchase price for the shares of MEC
and LSI under the Vision Stock Purchase Agreement, and shall also have received
a direction letter from Borrower, in form and substance satisfactory to
Foothill, directing the application of such funds to repay outstanding Revolving
Advances, to pay down the Term Loan by $2,000,000, and the use of the balance of
such funds.
<PAGE>
6. Effect on Loan Agreement. The Loan Agreement, as amended hereby,
shall be and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects. The execution,
delivery, and performance of this Consent and Amendment shall not operate as a
waiver of or, except as expressly set forth herein, as an amendment, of any
right, power, or remedy of Foothill under the Loan Agreement, as in effect prior
to the date hereof.
7. Further Assurances. Borrower shall execute and deliver all
agreements, documents, and instruments, in form and substance reasonably
satisfactory to Foothill, and take all actions as Foothill may reasonably
request from time to time, to perfect and maintain the perfection and priority
of Foothill's security interests in the Collateral and to fully consummate the
transactions contemplated under this Consent and Amendment and the Loan
Agreement, as amended by this Consent and Amendment. Foothill shall execute and
deliver all agreements, documents and instruments, in form and substance
reasonably satisfactory to Vision, and take all actions as Vision may reasonably
request from time to time, to release Foothill's security interests in the
capital stock of MEC and LSI, and in the personal property assets of MEC and LSI
as required by the terms and conditions of the Vision Stock Purchase Agreement.
8. Miscellaneous.
A. Upon the effectiveness of this Consent and Amendment, each
reference in the Loan Agreement to "this Agreement," "hereunder," "herein,"
"hereof," or words of like import referring to the Loan Agreement shall mean and
refer to the Loan Agreement as amended by this Consent and Amendment.
B. Upon the effectiveness of this Consent and Amendment, each
reference in the Loan Documents to the "Loan Agreement," "thereunder,"
"therein," "thereof," or words of like import referring to the Loan Agreement
shall mean and refer to the Loan Agreement as amended by this Consent and
Amendment.
C. This Consent and Amendment shall be governed by and construed
in accordance with the laws of the State of California.
D. This Consent and Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Consent and Amendment
by signing any such counterpart.
<PAGE>
E. Upon the effectiveness of this Consent and Amendment, Foothill
hereby terminates its security interests in, security titles to and other liens
on all real and personal property assets of MEC and LSI without any further
action.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Consent and Amendment to be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Kent Dahl
-------------------------
Title: E.V.P.
---------------------
LASERSIGHT INCORPORATED,
a Delaware corporation
By: /s/ Michael R. Farris
-------------------------
Title: President
----------------------
LASERSIGHT TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Gregory L. Wilson
-------------------------
Title: Vice President
----------------------
MEC HEALTH CARE, INC.,
a Maryland corporation
By: /s/ Gregory L. Wilson
-------------------------
Title: Vice President
----------------------
[Signatures Continued on Next Page]
<PAGE>
LSI ACQUISITION, INC.,
a New Jersey corporation
By: /s/ Gregory L. Wilson
-------------------------
Title: Secretary/Treasurer
----------------------
LASERSIGHT CENTERS INCORPORATED,
a Delaware corporation
By: /s/ Gregory L. Wilson
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Title: Vice President
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MRF, INC.,
a Missouri corporation
By: /s/ Gregory L. Wilson
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Title: Secretary/Treasurer
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