<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 7, 1996
---------------
Physicians Resource Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-13778 76-0456864
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Three Lincoln Centre, Suite 1540, 5430 LBJ Freeway, Dallas, TX 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 982-8200
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
EQUIMED ACQUISITION
Physicians Resource Group, Inc., a Delaware corporation ("PRG")
entered into an Asset Purchase Agreement (herein so called) among PRG, PRG
Georgia, Inc., a Delaware corporation ("PRG Sub") and EquiMed, Inc., a Delaware
corporation ("EquiMed"), pursuant to which PRG will acquire (through PRG Sub, a
wholly owned subsidiary of PRG) substantially all of the assets and properties
and certain liabilities related to EquiMed's ophthalmological physician
practice management business operating through its Ophthalmology Division (the
"Division"). The Asset Purchase Agreement was executed on October 7, 1996.
To the best knowledge of PRG, at the time of the execution of the
Asset Purchase Agreement there was no material relationship between (i) EquiMed
and its stockholders, on the one hand and (ii) PRG or any PRG affiliates,
directors or officers or any associate of such directors or officers on the
other.
The consideration for the acquisition was determined by arms-length
negotiations between the parties. The aggregate consideration to be paid for
the purchase of the assets of the Division generally is $54,563,400 plus a
multiple of the amount of change that any additional acquisitions of
ophthalmological practices by EquiMed that are closed or are the subject of
binding purchase agreements on or before March 31, 1997 would have had on
EquiMed's net income for the year ended December 31, 1996, had such additional
acquisitions been consummated by EquiMed on January 1, 1996. The primary
source of funds to be used for the acquisition of the assets of the Division by
PRG will be cash from PRG's working capital.
As a result of the acquisition, PRG will become the indirect holder
(through PRG Sub) of substantially all of the assets and properties and certain
liabilities related to the business of the Division. PRG intends to provide
the use of such assets to the various ophthalmological practices pursuant to
the terms of the respective management services agreements entered into between
such practices and EquiMed. The transaction contemplated by the Asset Purchase
Agreement is expected to be consummated in November 1996 following termination
of applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
AMERICAN OPHTHALMIC ACQUISITION
PRG also entered into an Agreement and Plan of Merger among PRG, PRG
Acquisition Corporation, a Delaware corporation ("Merger Sub") and American
Ophthalmic Incorporated, a Florida corporation ("AOI") (the "Merger
Agreement"), pursuant to which AOI shall merge with and into Merger Sub (the
"Merger"). The Merger Agreement was executed on October 7, 1996.
As a result of the Merger, AOI will become a wholly-owned subsidiary
of PRG and PRG will become the indirect owner of all of the assets and
properties, real and personal, tangible and intangible, and liabilities of AOI,
a management services organization that is in the business of
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acquiring the assets of ophthalmological and optometric practices and providing
such practices with the use of the assets it acquires as well as other
management services under the terms of service agreements entered into with
such practices. PRG intends to continue to provide the use of the assets
acquired through the Merger to such practices.
To the best knowledge of PRG, at the time of the execution of the
Merger Agreement there was no material relationship between (i) AOI and its
stockholders on the one hand and (ii) PRG, or any of its affiliates, any
director or officer of PRG, or any associate of such director or officer on the
other.
The aggregate consideration to be paid by PRG in connection with the
Merger (the "Merger Consideration") is expected to be $70,000,000. Up to
$10,000,000 of the Merger Consideration may be placed into escrow for a period
of 135 days following Closing pending the provision by AOI of binding letters
of intent meeting certain specific acquisition criteria. Half of the Merger
Consideration will be payable in cash and the remaining half of the Merger
Consideration will be payable in shares of the common stock, par value $.01 per
share, of PRG. The cash portion of the Merger Consideration shall be paid out
of PRG's working capital. The acquisition consideration for the Merger was
determined by arms-length negotiations between the parties to the Merger
Agreement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The required financial statements will be filed by amendment
to this Current Report on Form 8-K.
(b) The required pro forma financial information will be filed by
amendment to this Current Report on Form 8-K.
(c) Exhibits.
Exhibit No. Description
2.1 - Asset Purchase Agreement by and among EquiMed, Inc.,
PRG Georgia and Physicians Resource Group, Inc. dated
October 7, 1996.(4)
2.2 - Agreement and Plan of Merger by and among American
Ophthalmic Incorporated, PRG Acquisition Corporation
and Physicians Resource Group, Inc. dated October 7,
1996.(4)
4.1 - Restated Certificate of Incorporation of Physicians
Resource Group, Inc. (2)
4.2 - Certificate of Designations, Preferences, Rights and
Limitations of Class A Preferred Stock of Physicians
Resource Group, Inc. (2)
4.3 - Third Amended and Restated Bylaws of Physicians
Resource Group, Inc. (3)
4.4 - Form of Warrant Certificate (2)
4.5 - Form of certificate evidencing ownership of Common
Stock of Physicians Resource Group, Inc. (2)
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(1) - Previously filed as an exhibit to the Registrant's
Registration Statement on Form S-4 (No. 333- 00230)
and incorporated herein by reference.
(2) - Previously filed as an exhibit to the Registrant's
Registration Statement on Form S-1 (No. 33- 91440)
and incorporated herein by reference.
(3) - Previously filed as an exhibit to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by
reference.
(4) - Filed herewith. The Registrant will supplementally
furnish a copy of any omitted schedule to such
agreement to the Securities and Exchange Commission
upon request.
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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.
PHYSICIANS RESOURCE GROUP, INC.
Date: October 7, 1996 By: /s/ Richard J. D'Amico
-----------------------------------
Richard J. D'Amico
Senior Vice President and
General Counsel
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ------------
<S> <C> <C>
2.1 - Asset Purchase Agreement by and among EquiMed, Inc.,
PRG Georgia, and Physicians Resource Group, Inc.
dated October 7, 1996.(4)
2.2 - Agreement and Plan of Merger by and among American
Ophthalmic Incorporated, PRG Acquisition Corporation
and Physicians Resource Group, Inc. dated October 7,
1996.(4)
4.1 - Restated Certificate of Incorporation of Physicians
Resource Group, Inc. (2)
4.2 - Certificate of Designations, Preferences, Rights and
Limitations of Class A Preferred Stock of Physicians
Resource Group, Inc. (2)
4.3 - Third Amended and Restated Bylaws of Physicians
Resource Group, Inc. (3)
4.4 - Form of Warrant Certificate (2)
4.5 - Form of certificate evidencing ownership of Common
Stock of Physicians Resource Group, Inc. (2)
</TABLE>
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(1) - Previously filed as an exhibit to the Registrant's
Registration Statement on Form S-4 (No. 333- 00230)
and incorporated herein by reference.
(2) - Previously filed as an exhibit to the Registrant's
Registration Statement on Form S-1 (No. 33- 91440)
and incorporated herein by reference.
(3) - Previously filed as an exhibit to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by
reference.
(4) - Filed herewith. The Registrant will supplementally
furnish a copy of any omitted schedule to such
agreement to the Securities and Exchange Commission
upon request.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
EQUIMED, INC.,
PRG GEORGIA, INC.
AND
PHYSICIANS RESOURCE GROUP, INC.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Terms of the Sale and Purchase of Assets . . . . . . . 6
2.1 Conveyance of Assets . . . . . . . . . . . . . . . . . 6
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . 7
2.3 Purchase Price; Assumption of Liabilities . . . . . . 7
2.4 Subsequent Actions . . . . . . . . . . . . . . . . . . 8
Section 3. Representations and Warranties of Seller . . . . . . . 8
3.1 Corporate Existence; Good Standing . . . . . . . . . . 8
3.2 Power and Authority for Transactions . . . . . . . . . 8
3.3 Permits, Licenses and Governmental Authorizations . . 9
3.4 Corporate Records . . . . . . . . . . . . . . . . . . 9
3.5 Consents . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 Seller's Financial Information . . . . . . . . . . . . 9
3.7 Leases . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 Condition and Usefulness of Assets . . . . . . . . . . 9
3.9 Title to and Encumbrances on Property . . . . . . . . 9
3.10 Inventories . . . . . . . . . . . . . . . . . . . . . 10
3.11 Intellectual Property Rights; Names . . . . . . . . . 10
3.12 Officers; Payroll Information; Employees . . . . . . . 10
3.13 Legal Proceedings . . . . . . . . . . . . . . . . . . 10
3.14 Contracts . . . . . . . . . . . . . . . . . . . . . . 11
3.15 Subsequent Events . . . . . . . . . . . . . . . . . . 11
3.16 Accounts Receivable/Payable . . . . . . . . . . . . . 13
3.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 13
3.18 Liabilities; Debt . . . . . . . . . . . . . . . . . . 14
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . 14
3.20 Employee Benefit Plans . . . . . . . . . . . . . . . . 14
3.21 Adverse Agreements . . . . . . . . . . . . . . . . . . 15
3.22 Compliance with Laws in General . . . . . . . . . . . 15
3.23 Medicare and Medicaid Programs . . . . . . . . . . . . 15
3.24 Fraud and Abuse . . . . . . . . . . . . . . . . . . . 15
3.25 Due Diligence Information . . . . . . . . . . . . . . 16
3.26 Suppliers . . . . . . . . . . . . . . . . . . . . . . 16
3.27 Banking Relations . . . . . . . . . . . . . . . . . . 16
3.28 Ownership Interests of Interested Persons;
Competitors . . . . . . . . . . . . . . . . . . . . 16
3.29 Payors . . . . . . . . . . . . . . . . . . . . . . . . 16
3.30 Recoupment Proceedings . . . . . . . . . . . . . . . . 16
3.31 No Brokers . . . . . . . . . . . . . . . . . . . . . . 16
3.32 No Material Adverse Effect . . . . . . . . . . . . . . 17
3.33 Affiliated Practices . . . . . . . . . . . . . . . . . 17
3.34 Additional Acquisitions. . . . . . . . . . . . . . . . 17
3.35 Environmental . . . . . . . . . . . . . . . . . . . . 17
3.36 Real Property . . . . . . . . . . . . . . . . . . . . 18
3.37 Sansone Note . . . . . . . . . . . . . . . . . . . . . 18
Section 4. Representations and Warranties of Purchaser . . . . . 18
4.1 Corporate Existence: Good Standing . . . . . . . . . . 18
4.2 Power and Authority . . . . . . . . . . . . . . . . . 18
4.3 Financial Capacity . . . . . . . . . . . . . . . . . . 18
4.4 No Untrue Representations . . . . . . . . . . . . . . 18
</TABLE>
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<TABLE>
<S> <C> <C>
Section 5. Covenants of Seller . . . . . . . . . . . . . . . . . 18
5.1 Consummation of Agreement . . . . . . . . . . . . . . 18
5.2 Business Operations . . . . . . . . . . . . . . . . . 18
5.3 Access and Notice . . . . . . . . . . . . . . . . . . 19
5.4 Approvals of Third Parties and Permits and
Consents . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Acquisition Proposals . . . . . . . . . . . . . . . . 19
5.6 Employee Matters . . . . . . . . . . . . . . . . . . . 19
5.7 Requirements to Effect Acquisition . . . . . . . . . . 19
5.8 Accounting and Tax Matters . . . . . . . . . . . . . . 19
5.9 Offer of Employment to Employees . . . . . . . . . . . 20
5.10 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Consummation of Additional Acquisitions. . . . . . . . 20
5.12 Transfer of Dr. Colkitt Ownership Interests in
ASC's and Practices of the Division . . . . . . . . 20
Section 6. Covenants of Purchaser . . . . . . . . . . . . . . . . 20
6.1 Consummation of Agreement . . . . . . . . . . . . . . 20
6.2 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7. Purchaser's Conditions Precedent . . . . . . . . . . . 20
7.1 Representations and Warranties . . . . . . . . . . . . 20
7.2 Covenants and Conditions . . . . . . . . . . . . . . . 21
7.3 Proceedings . . . . . . . . . . . . . . . . . . . . . 21
7.4 No Material Adverse Change . . . . . . . . . . . . . . 21
7.5 Practice Service Agreement . . . . . . . . . . . . . . 21
7.6 Consents and Approvals . . . . . . . . . . . . . . . . 21
7.7 Closing Deliveries . . . . . . . . . . . . . . . . . . 21
7.8 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 21
7.9 Leases. . . . . . . . . . . . . . . . . . . . . . . . 21
7.10 Seller's Convertible Acquisition Indebtedness. . . . . 21
7.11 Sublease . . . . . . . . . . . . . . . . . . . . . . . 21
7.12 Local Counsel Opinions . . . . . . . . . . . . . . . . 21
7.13 Salvitti Employment Agreement . . . . . . . . . . . . 22
Section 8. Seller's Conditions Precedent . . . . . . . . . . . . 22
8.1 Representations and Warranties . . . . . . . . . . . . 22
8.2 Covenants and Conditions . . . . . . . . . . . . . . . 22
8.3 Proceedings . . . . . . . . . . . . . . . . . . . . . 22
8.4 Closing Deliveries . . . . . . . . . . . . . . . . . . 22
8.5 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9. Closing Deliveries . . . . . . . . . . . . . . . . . . 22
9.1 Deliveries of Seller . . . . . . . . . . . . . . . . . 22
9.2 Deliveries of Purchaser . . . . . . . . . . . . . . . 23
Section 10. Nature and Survival of Representations and
Warranties; Indemnification . . . . . . . . . . . . 24
10.1 Nature and Survival . . . . . . . . . . . . . . . . . 24
10.2 Indemnification by Purchaser and PRG . . . . . . . . . 24
10.3 Indemnification by Seller . . . . . . . . . . . . . . 25
10.4 Indemnification Procedure . . . . . . . . . . . . . . 25
10.5 Right of Setoff . . . . . . . . . . . . . . . . . . . 25
10.6 Limitation on Indemnification . . . . . . . . . . . . 26
Section 11. Termination . . . . . . . . . . . . . . . . . . . . . 26
Section 12. Noncompetition . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<TABLE>
<S> <C>
12.1 Prohibited Activities of Seller . . . . . . . . . . . 26
12.2 Damages . . . . . . . . . . . . . . . . . . . . . . . 27
12.3 Reasonable Restraint . . . . . . . . . . . . . . . . . 27
12.4 Severability; Reformation . . . . . . . . . . . . . . 27
12.5 Prohibited Activities of Purchaser and PRG . . . . . . 27
12.6 Term . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 13. Nondisclosure of Confidential Information . . . . . . 28
Section 14. Miscellaneous . . . . . . . . . . . . . . . . . . . . 28
14.1 Additional Acquisitions . . . . . . . . . . . . . . . 28
14.2 Deferred Compensation . . . . . . . . . . . . . . . . 29
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . 29
14.4 Further Assurances . . . . . . . . . . . . . . . . . . 30
14.5 Each Party to Bear Costs . . . . . . . . . . . . . . . 30
14.6 Public Disclosures . . . . . . . . . . . . . . . . . . 31
14.7 Transfer Taxes . . . . . . . . . . . . . . . . . . . . 31
14.8 Arbitration . . . . . . . . . . . . . . . . . . . . . 31
14.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 31
14.10 Captions . . . . . . . . . . . . . . . . . . . . . . . 31
14.11 Integration of Exhibits . . . . . . . . . . . . . . . 31
14.12 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . 32
14.13 Counterparts . . . . . . . . . . . . . . . . . . . . . 32
14.14 Binding Effect/Assignment . . . . . . . . . . . . . . 32
14.15 No Rule of Construction . . . . . . . . . . . . . . . 32
14.16 Costs of Enforcement . . . . . . . . . . . . . . . . . 32
14.17 Prorations . . . . . . . . . . . . . . . . . . . . . . 32
14.18 Waiver of Bulk Transfer Compliance . . . . . . . . . . 32
14.19 Amendments; Waivers . . . . . . . . . . . . . . . . . 32
14.20 Service of Process . . . . . . . . . . . . . . . . . . 32
14.21 Severability . . . . . . . . . . . . . . . . . . . . . 33
14.22 Employees (Post-Closing) . . . . . . . . . . . . . . . 33
14.23 EquiVision Name . . . . . . . . . . . . . . . . . . . 33
14.24 Parties' Obligations . . . . . . . . . . . . . . . . . 33
</TABLE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
1(c) Additional Pro Forma Adjustments
1(h) Additional Acquisitions
1(h)(i) Form of Asset Purchase Agreement
1(h)(ii) Form of Service Agreement
1(j) Annual After-Tax Contribution
1(aj) Excluded Assets
2.1(a)(i) Locations of Assets & Personal Property
2.1(a)(ii) Assets Owned by Seller at Tucker, Georgia location
2.3(b) Liabilities
3.1 Corporate Existence; Good Standing
3.3 Permits and Licenses
3.5 Consents
3.6 Financial Statements
3.7 Leases
3.9 Real and Personal Property; Encumbrances
</TABLE>
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<TABLE>
<S> <C>
3.11 Patents and Trademarks; Names
3.12 Directors and Officers; Payroll Information
3.13 Legal Proceedings
3.14 Contracts (other than Leases)
3.15(h) Assets Sold or Transferred; Debts Cancelled
3.15(j) Capital Expenditures
3.16 Accounts Receivable
3.17(a) Taxes Being Contested
3.17(c) Partnerships
3.18 Debt
3.19(b) Insurance Policies
3.19(c) Pending Claims on Insurance Policies
3.20 Employee Benefit Plans
3.26 Suppliers
3.27 Banking Relations
3.28 Ownership Interests of Interested Persons
3.33(a) Affiliated Practices
5.9 Offer of Employment to Employees
5.12 Transfer Documents
7.5 Service Agreement Amendments
7.9 Leases
9.1(h) Opinion of Counsel of Seller
9.2(f) An Opinion of Counsel to Purchaser
12.1 Exceptions to Noncompete
ANNEX I Purchase Price
</TABLE>
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), made and executed as
of the 6th day of October, 1996, is by and among PRG GEORGIA, INC., a Delaware
corporation ("Purchaser"), PHYSICIANS RESOURCE GROUP, INC., a Delaware
corporation ("PRG") and EQUIMED, INC., a Delaware corporation ("Seller").
References contained herein to "Seller" and "Seller Sub" when used in the
context of description of the Business (hereinafter defined) or the Division
(hereinafter defined) shall be deemed to refer only to the ophthalmology
physician practice management and ambulatory surgery center business of Seller
and not to the oncology and other non-ophthalmology physician practice
management business of Seller.
WITNESSETH:
WHEREAS, Seller operates an ophthalmological physician practice
management business ("the Business") through its Ophthalmology Division (the
"Division");
WHEREAS, Purchaser is a wholly-owned subsidiary of PRG, which is
engaged in the ophthalmological physician practice management business; and
WHEREAS, Seller wishes to sell to Purchaser and Purchaser wishes to
acquire from Seller, substantially all of the assets used by the Division, all
upon the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "AAA" shall have the meaning set forth in Section 14.8.
(b) "Acquisition" shall mean the consummation of the transactions
contemplated by this Agreement.
(c) "Acquisition Pro Forma Net Income" shall mean the aggregate
amount of change determined on an accrual basis and with certain pro forma
adjustments that the Additional Acquisitions would have had on Purchaser's net
income for the year ended December 31, 1996 had the Additional Acquisitions
been consummated by Purchaser on January 1, 1996. Acquisition Pro Forma Net
Income will include pro forma adjustments for (i) the effect on Purchaser's net
income for the year ended December 31, 1996 of amortization expense
attributable to the intangible assets created by acquiring the Additional
Acquisitions, (ii) an eight percent (8%) per annum pre-tax financing charge
applied to the dollar value of consideration paid in the acquisition of the
Additional Acquisitions, (iii) income taxes at the rate of 40% (assuming no
non-recurring tax benefits), and (iv) amortization expense related to the
direct expenses incurred by Purchaser in connection with consummation of the
Additional Acquisitions, including expenses for operational, accounting, legal
and Medicare compliance due diligence and related travel, but excluding any
general and administrative corporate expenses (including salary) of Purchaser,
all as if the Additional Acquisitions had been consummated on January 1, 1996,
as well as the other pro forma adjustments set forth on Exhibit 1(c) attached
hereto. Acquisition Pro Forma Net Income shall be calculated by Purchaser in
accordance with work prepared by Arthur Andersen as reviewed and approved by
Ernst & Young using Purchaser's accounting methods, estimated useful lives, and
policies and in accordance with GAAP, consistently applied, and application of
the pro forma adjustments discussed above.
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Within 30 days of the consummation of each Additional Acquisition, PRG
shall deliver to Seller in writing, PRG's calculation of Acquisition Pro Forma
Net Income related to such Additional Acquisition. If Seller objects to PRG's
calculation of Acquisition Pro Forma Net Income, it shall so inform PRG in
writing (a "Dispute Notice") within five days of receipt by Seller of PRG's
calculation. In the absence of such Dispute Notice PRG's calculation shall be
final and binding on each party to this Agreement. If a Dispute Notice is
delivered to PRG, Purchaser and Seller shall negotiate in good faith to resolve
any differences related to the calculation of Acquisition Pro Forma Net Income
promptly following delivery of the Dispute Notice. If Purchaser and Seller
fail to reach agreement after three business days of such good faith
negotiations, then Acquisition Pro Forma Net Income shall be determined by a
partner in the Tampa, Florida office of Coopers & Lybrand, L.L.P. with
significant health care experience (the "Determining Party"), whose
determination of Acquisition Pro Forma Net Income shall be final and binding on
each party hereto. In the event that it is necessary for the Determining Party
to calculate Acquisition Pro Forma Net Income, Purchaser and Seller will fully
cooperate with the Determining Party in order to enable the Determining Party
to reach its determination as soon as practicable, but in no event later than
15 days after the matter is referred to the Determining Party. The cost of
retaining the Determining Party will be shared equally by Purchaser and Seller.
(d) "Acquisition Proposal" shall have the meaning set forth in
Section 5.5.
(e) "Acquisition Valuation" shall mean the product obtained by
multiplying (i) Acquisition Pro Forma Net Income times (ii) 12.
(f) "Accounts Payable" shall have the meaning set forth in Section
3.16.
(g) "Accounts Receivable" shall have the meaning set forth in
Section 3.16.
(h) "Additional Acquisitions" shall mean those acquisitions listed
on Exhibit 1(h) attached hereto, that, (i) on or prior to March 31, 1997, are
the subject of binding acquisition agreements with no material right of
termination on the part of the entity to be acquired and that are consummated
by the Division or by Purchaser or another wholly-owned subsidiary of PRG by
April 30, 1997 using the forms of acquisition agreements and service agreements
provided by Purchaser attached hereto as Exhibits 1(h)(i) and 1(h)(ii) with
such modifications as are reasonably necessary to consummate the acquisition
including a service fee containing the following components: (1) a management
fee of 5% of net revenues, (2) an annual amortization charge equal to the
purchase price of the entity amortized over 18 years, (3) a net income fee
equal to maximum 51% of the net income of the practice calculated after the
application of (1) and (2), and such other modifications as are approved in
writing by Purchaser in advance of consummation of the Additional Acquisition,
which approval will not be unreasonably withheld, (ii) provide for a minimum of
fifty percent of the consideration for such Additional Acquisition in the form
of PRG Common Stock, the issuance of which is unregistered or which is
contractually restricted as to resale in accordance with the provisions of Rule
144 under the Securities Act of 1933, (iii) provide for a purchase price not to
exceed 10 times Annual After-Tax Contribution, with such variations in such
financial terms as may be consented to in writing by Purchaser in advance of
the consummation of the Additional Acquisition, (iv) comply with PRG's
financial, operational and legal due diligence standards as historically
applied (which the parties acknowledge include an audit by an independent
Medicare/Medicaid consultant) and (v) with respect to geographic markets in
which PRG or one of its subsidiaries currently manages an optometric or
ophthalmological practice or manages an ASC, the PRG-affiliated practices and
managed ASC's in that geographic market have approved the Additional
Acquisition. The transaction referred to in the definition of CEC
Reimbursement shall be deemed to be an Additional Acquisition.
(i) "Affiliate" means a person that, at anytime on or after the
date of this Agreement, directly, or indirectly through one or more
intermediaries, controls, controlled, is controlled by, was controlled by, is
under common control with or was under common control with, Seller, within the
meaning of Rule 144 promulgated under the Securities Act of 1933, as amended.
Persons who are "Affiliates" of Seller include, without limitation, Dr.
Colkitt.
(j) "Annual After-Tax Contribution" shall mean with respect to
each Additional Acquisition the pro forma impact of an Additional Acquisition
on PRG's net income as calculated in accordance with Exhibit 1(j).
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(k) "Approvals" shall have the meaning set forth in Section
3.33(b).
(l) "Arbitration Rules" shall have the meaning set forth in
Section 14.8.
(m) "Arthur Andersen" shall mean Arthur Andersen LLP, PRG's
independent public accountants.
(n) "ASC" shall have the meaning set forth in Section 3.33(a)(ii)
(o) "Assets" shall have the meaning set forth in Section 2.1.
(p) "Balance Sheet" shall have the meaning set forth in Section
3.6.
(q) "Balance Sheet Date" shall have the meaning set forth in
Section 3.6.
(r) "best knowledge", "have no knowledge of", or "do not know of"
and similar phrases shall mean (i) in the case of a natural person, the
particular fact was known, or not known, as the context requires, to such
person after diligent investigation and inquiry by such person, and (ii) in the
case of an entity, the particular fact was known, or not known, as the context
requires, to any officer of such entity after diligent investigation and
inquiry by such officer of such entity.
(s) "Business" shall have the meaning set forth in the recitals to
this Agreement.
(t) "CEC Reimbursement" shall mean $563,400, which is the cash
portion of the purchase price paid by Seller in connection with the
consummation of the transactions contemplated by that certain Asset Purchase
Agreement dated September 1, 1996, among Seller, John Waite and Comprehensive
Eye Care, Ltd., a Georgia corporation.
(u) "Closing" shall mean the closing of the transactions
contemplated by this Agreement, which shall occur at 10:00 a.m., local time, on
the Closing Date in the offices of Jackson & Walker, L.L.P., 901 Main Street,
Suite 6000, Dallas, Texas 75202, or at such other time and place as shall be
mutually agreed in writing by the parties hereto.
(v) "Closing Date" shall mean October 31, 1996 if the waiting
period under the HSR Act shall have expired prior to that date, November 15,
1996, if the waiting period under the HSR Act expires during the time period
from October 31, 1996 through November 15, 1996, and November 30, 1996, if the
waiting period under the HSR Act expires during the time period from November
15, 1996 through November 29, 1996. The Closing Date shall be subject to
extension pursuant to Section 11(d) hereof.
(w) "Closing Valuation" shall mean $54,000,000.
(x) "Code" shall mean the Internal Revenue Code of 1986.
(y) "Contracts" shall have the meaning set forth in Section 3.14.
(z) "Damages" shall have the meaning set forth in Section 10.2.
(aa) "Determining Party" shall have the meaning set forth in
Section 1(c).
(ab) "Dispute Notice" shall have the meaning set forth in Section
1(c).
(ac) "Division" shall have the meaning set forth in the recitals to
this Agreement.
(ad) "Dr. Colkitt" shall have the meaning set forth in Section
5.12.
(ae) "Dr. Salvitti" shall mean E. Ronald Salvitti.
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(af) "Environmental Claims" means all claims, demands, liabilities
(including strict liability), losses, damages (including consequential
damages), causes of action, judgments, penalties, fines, costs and expenses
(including fees, costs and expenses of attorneys, consultants, contractors,
experts and laboratories), of any and every kind or character, contingent or
otherwise, matured or unmatured, known or unknown, foreseeable or
unforeseeable, made, incurred, suffered, brought, or imposed at any time and
from time to time whether before or after the Closing Date caused by or related
to any Hazardous Material or the violation of any Environmental Requirement,
and regardless of whether any of the foregoing was caused by Seller or any
third party, including but not limited to (a) injury or damage to any person,
property, or natural resource occurring on or off the Real Property, including
but not limited to the cost of demolition and rebuilding of any improvements on
the Real Property; (b) the investigation or remediation of any such Hazardous
Material or violation of an Environmental Requirement; (c) the investigation
and defense of any claim, whether or not such claim is ultimately defeated; and
(d) the settlement of any claim or judgment.
(ag) "Environmental Laws" shall mean all federal, state and local
laws, rules, regulations, and administrative agency guidance relating to
pollution or protection of human health or the environment (including ambient
air, surface water, groundwater, land surface, or subsurface strata), including
laws and regulations relating to Releases or threatened Releases of Hazardous
Materials or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials, and including, but not limited to the Clean Air Act, 42 U.S.C.
Section 7401, et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251, et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601, et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq.;
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601, et seq., as amended by the Superfund Amendments
and Reauthorization Act of 1986; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq.; the Occupational Safety and Health Act, 29
U.S.C. Section 651, et seq.; the Georgia Hazardous Site Response Act, O.C.G.A.
Section 12-8-90, et seq.; the Georgia Safe Drinking Water Act, O.C.G.A. Section
12-5-170, et seq.; the Georgia Ground Water Use Act, O.C.G.A. Section 12-5-90,
et seq.; the Georgia Underground Storage Tank Act, O.C.G.A. Section 12-13-1, et
seq.; and the Georgia Water Quality Control Act, O.C.G.A. Section 12-5-20, et
seq.
(ah) "Environmental Requirement" means any provision, permit,
agreement or restriction pertaining to pollution, protection of human health or
the environment (including ambient air, surface water, groundwater, land
surface or subsurface strata), contained in or otherwise imposed through
application of any federal, state or local law, rule or regulation relating to
Hazardous Materials or the environment or any license, authorization, decision,
order, injunction, decree or rule of common law and any judicial interpretation
of any of the foregoing which pertains to any Hazardous Material or the
environment and shall include without limitation, the Solid Waste Disposal Act,
42. U.S.C. Section 6901, et seq.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq. as
amended by the Superfund Amendments and Reauthorization Act of 1986; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean
Air Act, 42 U.S.C. Section 7401, et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
300f, et seq.; and any other state or federal environmental statutes and all
rules, regulations, orders and decrees promulgated under any of the foregoing
as any of the foregoing now exists.
(ai) "Ernst & Young" shall mean Ernst & Young L.L.P., Seller's
independent public accountants.
(aj) "Excluded Assets" shall mean the assets and properties of
Seller not used in the operation of the business of the Division, including,
but not limited to, the following:
(1) The consideration delivered to Seller pursuant to this
Agreement for the Assets sold, transferred, assigned, conveyed and
delivered pursuant hereto;
(2) Seller's right to enforce Purchaser's representations,
warranties and covenants hereunder and the obligations of Purchaser to
pay, perform or discharge the liabilities of Seller assumed by
Purchaser pursuant to this Agreement and all other rights, including
rights of indemnification, of Seller under this Agreement or any
instrument executed pursuant hereto;
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(3) Seller's books of account related to the Division, but
Seller agrees that Purchaser shall have the right at Purchaser's
request to inspect such books and make copies thereof;
(4) Cash of the Division as of 11:59 p.m. on the day
preceding the Closing Date; and
(5) The Assets listed on Exhibit 1(aj) attached hereto.
(ak) "Financial Statements" shall have the meaning set forth in
Section 3.6.
(al) "GAAP" shall mean generally accepted accounting principles.
(am) "Governmental Entity" shall have the meaning set forth in
Section 3.22.
(an) "Hazardous Material(s)" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls, (b) any chemicals, materials or substances which are now defined as
or included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants" or words of similar import under
any Environmental Law, and (c) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under any
Environmental Law applicable to the Real Property.
(ao) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
(ap) "ordinary course of business" means the usual and customary
way in which Seller has conducted the business of the Division in the past.
(aq) "Paying Practice" shall have the meaning set forth in Section
14.2.
(ar) "Paying Practice Differential" shall have the meaning set
forth in Section 14.2.
(as) "Practice" shall have the meaning set forth in Section
3.33(a)(i).
(at) "Practice Service Agreement" means any management services
agreement or similar arrangement entered into between Seller or any subsidiary
or affiliate of Seller and any Practice or ASC.
(au) "PRG" shall have the meaning set forth in the recitals of this
Agreement.
(av) "Purchase Price" shall have the meaning set forth in Section
2.3(a).
(aw) "Real Property" shall have the meaning set forth in Section
3.35.
(ax) "Release" shall mean any release, spill, emission, leaking,
injection, deposit, disposal, discharge, disbursal, leaching, or migration into
the atmosphere, soil, subsurface, surface water, groundwater, or property.
(ay) "Salvitti Employment Agreement" shall have the meaning set
forth in Section 14.2.
(az) "Salvitti Optional Employment Agreement" shall have the
meaning set forth in Section 7.13.
(ba) "Salvitti P.A." shall mean E. Ronald Salvitti, M.D., Inc.
(bb) "Salvitti P.A. Differential" shall have the meaning set forth
in Section 14.2.
(bc) "Salvitti Payment" shall have the meaning set forth in Section
14.2.
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(bd) "Seller Permits" shall have the meaning set forth in Section
3.22.
(be) "Seller Plan" shall have the meaning set forth in Section
3.20.
(bf) "Seller Sub" shall have the meaning set forth in Section 3.1.
(bg) "Tax(es)" means all taxes, fees, assessments, levies, duties
and similar charges imposed by any federal, state, local or foreign
governmental authority, together with all interest, penalties, fines and other
additions imposed in respect thereof; including, without limitation, all
income, gains, real property gains, profits, gross receipts, payroll,
employment, social security (and similar), disability, health, hospitalization,
unemployment compensation, worker's compensation, Pension Benefit Guaranty
Corporation, severance, windfall profits, environmental, license, occupation,
customs, imposts, capital stock, franchise, ad valorem, excise, sales, use,
transfer, registration, value added, alternative minimum, add-on minimum,
successor, withholding and estimated taxes or other charges.
(bh) "Tax Returns" means all original and amended returns,
declarations, certifications, statements, notices, elections, estimates,
reports, claims for refund and information returns relating to or required to
be filed or maintained in connection with any Tax, together with all schedules
and attachments thereto.
(bi) "Transfer Taxes" shall have the meaning set forth in Section
14.7.
(bj) "Treasury Regulations" means temporary and final Income Tax
Regulations promulgated under the Code, as amended from time to time (or
corresponding provisions of succeeding regulations).
SECTION 2. TERMS OF THE SALE AND PURCHASE OF ASSETS.
2.1 CONVEYANCE OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Seller shall sell, convey,
transfer, deliver and assign to Purchaser all of Seller's right, title and
interest in and to the business, properties and assets of Seller used in the
Business of the Division (personal, tangible and intangible), including,
without limitation, all items of personal property and other assets used in
connection with the Business conducted by the Division and Seller's ownership
interests in Seller Subs that are partnerships or limited liability companies
and all of the assets of the Seller Subs that are corporations used in
connection with the Business conducted by the Division (except as otherwise
provided herein) (individually, an "Asset", and collectively the "Assets"),
free and clear of all obligations, security interests, claims, liens and
encumbrances whatsoever, except as specifically relate to the Assumed
Liabilities. Without limiting the foregoing, the Assets specifically include:
(a) All of the Real Property, personal property, plant,
furniture, fixtures, equipment and goodwill of Seller of every kind and used in
the Business in which Seller has any right or interest that are situated in the
locations set forth in Exhibit 2.1(a)(i) attached hereto and all items owned by
Seller identified on Exhibit 2.1(a)(ii) attached hereto and situated at 3754
LaVista Road, Tucker, Georgia 30084; and
(b) All inventories maintained by Seller used in the
business of the Division that are situated in the locations set forth in
Exhibit 2.1(a)(i) attached hereto;
(c) All rights under Contracts and leases related to the
Business or the Division including leases identified on Exhibit 3.7 and
Contracts identified on Exhibit 3.14 attached hereto (excluding this Agreement
and the agreements, instruments and documents executed and delivered by
Purchaser pursuant to this Agreement);
(d) All accounts receivable as of the Closing Date
related to the Division and the accounts receivable records related to such
receivables;
(e) The books and records of Seller related to the
Division (other than those which constitute Excluded Assets) relating to the
Assets, all of which shall be delivered to Purchaser;
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(f) Subject to applicable laws and regulations, all
transferable licenses and other regulatory approvals necessary for or incident
to the operation of the Assets and/or the Business;
(g) Except for the names EquiMed and EquiVision and the
EquiMed logo, all clinical and administrative policy and procedure manuals,
trade secrets, logos, names, trademarks, service marks, marketing and
promotional materials (including audiotapes, videotapes and printed materials)
and all other property rights required for or incident to the marketing of the
products and services of the Division, and all books and records relating
thereto; and
(h) All computers, data processing equipment, and
nonexclusive right to related software;
(i) Prepaid expenses with respect to the Contracts and
the utilities servicing the Assets; and
(j) All of Seller's rights under all merger and
acquisition agreements (including any agreements ancillary thereto) with
respect to the Practices and the ASC's.
2.2 EXCLUDED ASSETS. There shall be excluded from the Assets to
be transferred and conveyed hereunder those assets and properties of Seller
described in Section 1(aj), and Seller shall retain all of its right, title and
interest in and to, the Excluded Assets.
2.3 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration
for the sale of the Assets by Seller, Purchaser shall provide Seller with the
following consideration:
(a) Purchase Price. Seller shall receive the
consideration specified in Annex I attached hereto (the "Purchase Price"). The
Purchase Price shall be allocated among the Assets as agreed in writing among
Purchaser and Seller on the Closing Date, which allocation shall be made as
provided in Section 1060 of the Code. Purchaser and Seller shall each file
Form 8594 (Asset Acquisition Statement Under Section 1060) on a timely basis
reporting the allocation of the Purchase Price consistent with the allocation
agreed to by Purchaser and Seller. Purchaser and Seller shall not take any
position on their respective income tax returns that is inconsistent with the
allocation of the Purchase Price as agreed to or as adjusted as a result of a
subsequent increase or decrease in the Purchase Price.
(b) Assumption of Liabilities. Except as otherwise
provided herein, Purchaser shall assume on the Closing Date, and shall perform
or discharge on or after the Closing Date, (i) all of Seller's current accounts
payable and current accrued liabilities (other than the current portion of
long-term debt) related to the Division and (ii) all of the contracts, leases,
commitments, obligations and liabilities of Seller related to the Division
(including certain acquisition indebtedness) which are listed on Exhibit 2.3(b)
attached hereto to the extent that such obligations are current and not
otherwise in default and (iii) the liabilities of Seller for employee benefits
vested in those employees of Seller who accept and commence employment with
Purchaser, but only to the extent that such liabilities are listed on Exhibit
2.3(b). Notwithstanding any contrary provision contained herein, Purchaser
shall not be deemed to have assumed, nor shall Purchaser assume: (i) any
liability, commitment or obligation not a trade account payable generated in
the ordinary course of business or not indicated on Exhibit 2.3(b), (ii) any
liability set forth on Exhibit 2.3(b) which may be incurred by reason of any
breach of or default under such contracts, leases, commitments or obligations
which occurred prior to the Closing Date unless such liability is subject to a
reasonable dispute or is properly reflected on the Balance Sheet; (iii) any
liability based upon or arising out of a violation of any antitrust or similar
restraint- of-trade laws by Seller, including, without limiting the generality
of the foregoing, any such antitrust liability which may arise in connection
with agreements, contracts, commitments or orders for the sale of goods or
provision of services by Seller reflected on the books of Seller at or prior to
the Closing Date; (iv) any liability based upon or arising out of any tortious
or wrongful actions of Seller or any of its directors, officers, stockholders
or employees; (v) any mortgages on real property except as otherwise listed on
Exhibit 2.3(b); nor (vi) any liability incurred or to be incurred pursuant to
any malpractice or other suits or actions pending against Seller or any
stockholder or employee of Seller; (vii) any liability of Seller for unpaid
Taxes for periods before the Closing; (viii) any liability of Seller for Taxes
(including, without limitation, income and Transfer Taxes) resulting from the
consummation of the transactions contemplated by this Agreement; (ix) any
liability of
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Seller for the unpaid Taxes of any Person other than Seller under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or
foreign law), as transferee or successor, by contract, or otherwise; nor (x)
any liability of Seller for costs and expenses described in Section 14.5(a)
hereof.
(c) In the event that Seller consummates an Additional
Acquisition after the date of this Agreement and prior to the Closing Date,
Purchaser agrees to assume the indebtedness incurred and reimburse Seller at
Closing for any cash amounts paid by Seller in consideration for the
consummation of such Additional Acquisition.
2.4 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Purchaser or PRG shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Purchaser its
right, title or interest in, to or under any of the Assets or otherwise to
carry out this Agreement, in return for the consideration set forth in this
Agreement, the officers and directors of Purchaser shall be authorized to
execute and deliver, in the name and on behalf of Seller or otherwise, to carry
out all such deeds, bills of sale, assignments and assurances and to take and
do, in the name and on behalf of Purchaser or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under the Assets in Purchaser or
otherwise to carry out this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Purchaser and PRG as follows:
3.1 CORPORATE EXISTENCE; GOOD STANDING. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Seller and the Seller Subs (defined below) have all
necessary corporate powers to own all of their respective assets and to carry
on their respective business as such business is now being conducted. Except
for the entities (the "Seller Subs") disclosed in Exhibit 3.1, Seller does not
own stock in or control, directly or indirectly, any other corporation,
association or business organization, nor is Seller a party to any joint
venture or partnership, related to the Business or the Division. Except as
disclosed in Exhibit 3.1, none of the liabilities listed on Exhibit 2.3(b) are
convertible into or exchangeable for an equity interest in or property of
Seller or the Seller Subs. Seller and the Seller Subs, respectively, are duly
licensed or qualified to do business as a foreign corporation (or, in the case
of the Seller Subs, as the appropriate entity) and are in good standing under
the laws of each jurisdiction in which the character of the properties owned or
leased by them therein in connection with the Business or in which the
transaction of the Business makes such qualification necessary. Such
jurisdictions are set forth in Exhibit 3.1. Neither Seller nor the Seller Subs
have any assets, employees or offices used in connection with the Business in
any location other than the locations set forth in Exhibit 3.1. The Seller
Subs are entities duly organized, validly existing and in good standing under
the laws of the respective states under which they exist.
3.2 POWER AND AUTHORITY FOR TRANSACTIONS. Seller has the
corporate power to execute, deliver and perform this Agreement and all
agreements and other documents executed and delivered by it pursuant to this
Agreement or to be executed and delivered on the Closing Date, and has taken
all action required by law, its Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Seller's stockholders have taken all
necessary action to approve the consummation of the transactions contemplated
herein. This Agreement and all agreements and documents executed and delivered
in connection herewith have been, or will be as of the Closing Date, duly
executed and delivered by Seller, and constitute or will constitute the legal,
valid and binding obligation of Seller, enforceable against Seller in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies. The execution and delivery of this
Agreement, and the agreements executed and delivered pursuant to this Agreement
or to be executed and delivered on the Closing Date, do not, and, subject to
the receipt of consents described on Exhibit 3.5, the consummation of the
actions contemplated hereby will not, violate any provision of the Certificate
of Incorporation or Bylaws of Seller or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which Seller
is a party or by
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which Seller is bound, or violate any material restrictions of any kind to
which Seller is subject, or result in any lien or encumbrance on any of
Seller's assets.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental
authorizations and approvals required for the conduct of the Business or the
use of the Assets, or waivers thereof, have been duly obtained and are in full
force and effect. All permits and licenses related to the practice of medicine
at the Practices and operating licenses, required certificates of need and
other governmental authorizations required under applicable healthcare laws for
the operation of the ASC's are described on Exhibit 3.3. There are no
proceedings pending or, to the knowledge of Seller, threatened, which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any thereof.
3.4 CORPORATE RECORDS. Seller has provided Purchaser with access
to true and correct copies of the Certificate of Incorporation, Bylaws and
minutes of Seller and the Seller Subs (or, in the case of the Seller Subs that
are partnerships or limited liability companies, their organizational
documents) and all amendments thereto have been delivered to Purchaser. The
minute books of Seller and Seller Subs that are corporations contain accurate
copies of all minutes of the meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Seller since its
formation. The books of account of Seller and the Seller Subs have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Seller and the Seller Subs have been properly
recorded in such books.
3.5 CONSENTS. Except as set forth on Exhibit 3.5, no consent,
approval, authorization, order, permit, license, filing or registration with
any governmental authority, any lender, lessor, any manufacturer or supplier,
any Practice, any ASC or any other person or entity is required to be made or
obtained by Seller to authorize, or is required in connection with, the
execution, delivery and performance of this Agreement and the agreements and
documents contemplated hereby on the part of Seller.
3.6 SELLER'S FINANCIAL INFORMATION. Seller has heretofore
furnished Purchaser with copies of financial information ("Financial
Statements") about the Division as of and for the periods ended July 31, 1996
(the "Balance Sheet Date") as set forth on Exhibit 3.6 attached hereto,
including the unaudited Balance Sheet ("Balance Sheet") as of the Balance Sheet
Date. All such financial statements have been prepared in accordance with GAAP
consistently followed throughout the periods indicated, reflect all liabilities
of Seller, including all contingent liabilities of Seller as of their
respective dates, and present fairly the financial position of Seller as of
such dates and the results of operations and cash flows for the period or
periods reflected therein.
3.7 LEASES. Exhibit 3.7 attached hereto sets forth a list of all
leases pursuant to which Seller or a Seller Sub leases, as lessor or lessee,
real or personal property that provide for payments to or by Seller or any of
the Seller Subs of an amount in excess of $25,000 per annum (which are not
cancelable on 30 days' notice) used in operating the Business or related to the
Assets and which are not cancelable on 30 days' notice. All such leases listed
on Exhibit 3.7 are valid and enforceable in accordance with their respective
terms, and there is not under any such lease any existing default by Seller or
the Seller Subs, as lessor or lessee, or any condition or event of which Seller
has knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Seller or the Seller Subs have not taken adequate
steps to cure such default or to prevent a default from occurring.
3.8 CONDITION AND USEFULNESS OF ASSETS. The Assets constitute the
only assets necessary for the conduct of the Business. Seller has not made use
of any subsidiary or affiliate entity of Seller in connection with the conduct
of the Business other than the Seller Subs. All of the Assets are in good
condition and repair subject to normal wear and tear and conform with all
applicable ordinances, regulations and other laws, and Seller has no knowledge
of any latent defects therein.
3.9 TITLE TO AND ENCUMBRANCES ON PROPERTY. Except as set forth in
Exhibit 3.9, Seller has good, valid and marketable title to all of the Assets,
including but not limited to, all items of property identified on Exhibit
2.1(a)(i) and (ii) attached hereto, free and clear of any liens, claims,
charges, exceptions or encumbrances. Seller shall cause all encumbrances set
forth on Exhibit 3.9 (other than those encumbrances indicated on Exhibit
2.3(b))
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to be released or terminated prior to the Closing Date and the Assets shall not
be used to satisfy such liens, claims or encumbrances, except in the ordinary
course of business consistent with past practice.
3.10 INVENTORIES. All inventories of Seller used in the conduct of
the Business are reflected on the Balance Sheet in accordance with GAAP
consistently applied. The items of Seller's inventory have been acquired in
the ordinary course of its business, are adequate for the reasonable
requirements of the Business, and, to the best knowledge of Seller, may be used
for their intended purposes.
3.11 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
Exhibit 3.11, neither Seller nor any of the Seller Subs have any right, title
or interest in or to patents, patent rights, corporate names, assumed names,
manufacturing processes, trade names, trademarks, service marks, inventions,
specialized treatment protocols, copyrights, formulas and trade secrets or
similar items, and such items are the only such items incidental to the conduct
of the Business. Set forth in Exhibit 3.11 is a listing of all names of all
predecessor companies of Seller related to the Division or the Business,
including the names of any entities from whom Seller or any of the Seller Subs
previously acquired significant assets. Except for off-the-shelf software
licenses and except as set forth on Exhibit 3.11, neither Seller nor any of the
Seller Subs are a licensee in respect of any patents, trademarks, service
marks, trade names, copyrights or applications therefor, or manufacturing
processes, formulas or trade secrets or similar items and no such licenses are
necessary for the conduct of the Business or the use of the Assets. No claim
is pending or has been made to the effect that the Assets or the present or
past operations of Seller or the Seller Subs in connection with the Assets
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Seller has the sole and exclusive right to use all
Assets without infringing or violating the rights of any third parties and no
consents of any third parties are required for the use thereof by Purchaser.
3.12 OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
Exhibit 3.12 attached hereto is a true and complete list, as of the date of
this Agreement of: (a) the name of each officer of Seller and the offices held
by each, (b) the most recent payroll report of the Division, showing all
current employees of Seller and the Seller Subs relating to the Business and
their current levels of compensation, (c) promised increases in compensation of
employees of Seller and/or the Seller Subs relating to the Business that have
not yet been effected, (d) oral or written employment agreements,
noncompetition agreements or independent contractor agreements (and all
amendments thereto) relating to the Business to which Seller, any Practice or
any ASC is a party, access to which have been provided to Purchaser, and (e)
all employee manuals, materials, policies, procedures and work-related rules of
the Division, access to which have been provided to Purchaser. The Division is
in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. The Division has not engaged
in any unfair labor practice. There are no unfair labor practices charges or
complaints relating to the Division pending or threatened against Seller, and
Seller has never been a party to any agreement with any union, labor
organization or collective bargaining unit relating to the Business. No
employees of Seller or the Seller Subs relating to the Business are represented
by any union, labor organization or collective bargaining unit. To the
knowledge of the executive officers of Seller, Seller's and Seller Sub's
employees relating to the Business have no intention to and have not threatened
to organize or join a union, labor organization or collective bargaining unit,
and there are no existing or threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Division, nor does any
basis therefor exist. To the knowledge of Seller, none of Seller's or Seller
Sub's employees relating to the Business and none of any Practice's or ASC's
employees are in violation of any term of any employment contract, or any other
contract or agreement relating to the relationship of any such employee with
Seller or any Seller Sub, any Practice or any ASC.
3.13 LEGAL PROCEEDINGS. Except as set forth in Exhibit 3.13, none
of Seller, the Seller Subs, the Division, the Business, the Assets, the
Practices and the ASC's is subject to any pending, nor does Seller have
knowledge of any threatened litigation, governmental investigation,
condemnation or other proceeding against or relating to or affecting the Seller
Subs, the Division, the Business, the Assets, the Practices or the ASC's or the
transactions contemplated by this Agreement, nor is there any legal impediment
of which Seller has knowledge to the continued operation of the Business, the
use of the Assets in the ordinary course, or the business of the Practices or
the ASC's, subject to consents set forth on Exhibit 3.5.
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3.14 CONTRACTS. Seller has provided to Purchaser access to true
copies of all written, and disclosed to Purchaser all oral, outstanding
contracts, obligations and commitments of Seller and the Seller Subs
("Contracts"), entered into in connection with or related to the Assets or the
Business, all of which are listed or incorporated by reference on Exhibit 3.7
(in the case of leases that provide for payments to or by Seller or any of the
Seller Subs for an amount in excess of $25,000 per annum which are not
cancelable on 30 days' notice), Exhibit 3.12 (in the case of employment
agreements) and Exhibit 3.14 (in the case of Contracts that provide for
payments to or by Seller or any of the Seller Subs for an amount in excess of
$25,000 per annum which are not cancelable on 30 days' notice) other than
leases and employment agreements) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made by
any party thereto. Except as indicated on such Exhibits, there is not under
any such Contract any existing default by Seller or any Seller Sub, or any
condition or event of which Seller has knowledge which with notice or lapse of
time, or both, would constitute a default. Seller has no knowledge of any
default by any other party to such Contracts. Neither Seller nor any Seller
Sub has received notice of the intention of any party to any Contract to cancel
or terminate any Contract and have no reason to believe that any amendment or
change to any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on Exhibit 3.7, Exhibit 3.12 and
Exhibit 3.14, neither Seller nor any Seller Sub is a party to any written or
oral unperformed agreement, contract, lease or arrangement relating to the
Business that provide for payments to or by Seller or any of the Seller Subs
for an amount in excess of $25,000 per annum (which are not cancelable on 30
days' notice), including any:
(a) Contract related to the acquisition of the Assets (or
any portion thereof) or the Division (or any portion thereof) other than this
Agreement;
(b) Employment, consulting or compensation agreement or
arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether
as lessor or lessee;
(e) Deed, bill of sale or other document evidencing an
interest in or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or
equipment (i) which is in excess of the requirements of the Business now booked
or for normal operating inventories, or (ii) which is not terminable upon
notice of thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed
or lent or to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Management services or similar contracts; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Seller or a Seller Sub more than 30 days after the date hereof.
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3.15 SUBSEQUENT EVENTS. None of Seller, the Seller Subs, the
Practices or the ASC's have (except as would not affect the Assets or the
Business to any material degree), since the Balance Sheet Date:
(a) Incurred any material obligation or liability
(absolute, accrued, contingent or otherwise) or entered into any contract,
lease, license or commitment, except in connection with the performance of this
Agreement, other than in the ordinary course of business or incurred any
indebtedness;
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation or liability
(absolute, accrued, contingent or otherwise) other than (i) liabilities shown
or reflected on the Balance Sheet or (ii) liabilities incurred since the
Balance Sheet Date in the ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any
person or entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or
supplier that has, or may have, individually or in the aggregate, a material
adverse effect on the Business;
(f) Increased or established any reserve for Taxes or any
other liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Seller in the ordinary course of
business since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge
or other encumbrance any of the Assets, tangible or intangible, except in the
ordinary course of business;
(h) Sold or contracted to sell or transferred or
contracted to transfer any of the Assets or any other assets used in the
conduct of the Business, cancelled any debts or claims or waived any rights,
except in the ordinary course of business or except as set forth in Exhibit
3.15(h);
(i) Except in the ordinary course of business consistent
with past practices, granted any increase in the rates of pay of employees,
consultants or agents, or by means of any bonus or pension plan, contract or
other commitment, increased the compensation of any officer, employee,
consultant or agent;
(j) Authorized or incurred any capital expenditures in
excess of Ten Thousand and No/100 Dollars ($10,000.00) or which together
aggregate more than Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), except as set forth in Exhibit 3.15(j) attached hereto;
(k) Except for this Agreement and any other agreement
executed and delivered pursuant to this Agreement, entered into any material
transaction other than in the ordinary course of business or permitted
hereunder;
(l) Experienced damage, destruction or loss (whether or
not covered by insurance) materially and adversely affecting any of its
properties, assets or business or the Business or the Assets, or experienced
any other material adverse change in its financial condition, assets,
prospects, liabilities or business;
(m) Declared or paid a distribution, payment or dividend
of any kind on its respective capital stock or other securities, as the case
may be;
(n) Repurchased, approved any repurchase or agreed to
repurchase any of its respective capital stock or securities, as the case may
be;
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(o) Collected accounts receivable in a manner outside the
ordinary course of business or not consistent with past practice;
(p) Suffered or caused to be suffered, or taken any
action that may result in, any material adverse change in the Business or to
the Assets; or
(q) Effected any material change in Seller's respective
accounting principles, practices or methods as they relate to the Business or
the Division.
3.16 ACCOUNTS RECEIVABLE/PAYABLE. The Balance Sheet reflects the
amount, as of the Balance Sheet Date and determined in conformity with GAAP and
the past practices employed by Seller, of the Division's (i) accounts
receivable, net of allowances for uncollectible and doubtful amounts
("Accounts Receivable") and (ii) current accounts payable and current accrued
liabilities (other than the current portion of long-term debt) ("Accounts
Payable"). Exhibit 3.16 contains a true and accurate (i) summary list of all
Accounts Receivable, (ii) summary list of all Accounts Payable and (iii)
statement of the working capital of the Division as of the Balance Sheet Date.
The Division maintains its accounting records in sufficient detail to
substantiate the accounts receivable reflected on the Balance Sheet and has
given and will give to Purchaser full and complete access to those records,
including the right to make copies therefrom. Since the Balance Sheet Date,
neither Seller nor the Division has changed any 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. Accounts Receivable are recorded in amounts estimated to be net of
contractual allowances related to third-party payor arrangements. Seller is in
substantial compliance with the terms and conditions of such third-party payor
arrangements, and the reserves established by Seller are adequate to cover any
liability resulting from lack of compliance.
3.17 TAXES.
(a) RETURNS; PAYMENT OF TAXES. All Tax Returns required
to have been filed by Seller, with respect to the Business of the Division, or
the Seller Subs have been timely filed (taking into account duly granted
extensions) and are true, correct and complete in all respects. All Taxes
shown thereon as owing have been paid. The Seller Subs and, to the extent
attributable to the Business of the Division, Seller, have withheld and paid
over all Taxes required to have been withheld and paid over and has complied
with all information reporting and back-up withholding requirements relating
thereto. There are no liens with respect to Taxes on any of the Assets, other
than liens for Taxes not yet due and payable or for Taxes disclosed in Exhibit
3.17(a) that are being contested in good faith through appropriate proceedings
and for which adequate reserves have been established in the Financial
Statements.
(b) DEFICIENCIES, PROCEEDINGS, WAIVERS. No deficiencies
exist or have been asserted or, to the best knowledge of Seller, are expected
to be asserted (verbally or in writing) with respect to Taxes of the Seller
Subs or Seller attributable to the Business of the Division and Seller and the
Seller Subs have not received notice (verbally or in writing) that any of them
have not filed a Tax Return or paid any Taxes (attributable to the Business of
the Division, in the case of Seller) required to be filed or paid by it. No
audit, examination, investigation, action, suit, claim or proceeding relating
to the determination, assessment or collection of any Tax of any Seller Sub or
of Seller attributable to the Business of the Division is currently in process,
pending or, to the best knowledge of Seller, threatened (verbally or in
writing).
(c) SPECIAL STATUS. The Contracts do not and will not
include any obligation to make any payment that under any circumstance will not
be deductible by Purchaser or any successor or assignee of Purchaser by reason
of Code Section 280G. Except as disclosed in Exhibit 3.17(c), none of the
Assets and Contracts reflect any arrangement for which partnership Tax Returns
are required to be filed. None of the Assets are subject to any "safe harbor
lease" within the meaning of Code Section 168(f)(8) as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982, or
constitute "tax-exempt use property" within the meaning of Code Section 168(h)
or "tax exempt bond financed property" within the meaning of Code Section
168(g)(5).
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3.18 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Seller and the Seller Subs did not have, as of
the Balance Sheet Date, and have not incurred since that date and will not have
incurred as of the Closing Date, any liabilities or obligations of any nature
(related to the Division, in the case of Seller), whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business. Seller does not know, or have
reasonable grounds to know, of any basis for the assertion against Seller or
any of the Seller Subs, as of the Balance Sheet Date, of any claim or liability
of any nature (related to the Division, in the case of Seller) in any amount
not fully reflected or reserved against on the Balance Sheet, or of any claim
or liability of any nature (related to the Division, in the case of Seller)
arising since that date other than those incurred in the ordinary course of
business or contemplated by this Agreement. All indebtedness of the Seller
Subs and of Seller related to the Division (including without limitation,
indebtedness for borrowed money, guaranties and capital lease obligations) is
described on Exhibit 3.18 attached hereto.
3.19 INSURANCE.
(a) Seller has property, fire and casualty insurance
policies, with extended coverage (subject to reasonable deductibles),
sufficient to allow Seller to replace any of its properties relating to the
Business that might be damaged or destroyed. Except for professional liability
insurance which is specifically covered in Section 3.19(b) below, Seller, the
Practices and the ASC's have liability, workers compensation insurance and bond
and surety arrangements reasonably adequate, in light of the business in which
they are engaged, to protect them and their financial condition against the
risks involved in the business conducted by them. Exhibit 3.19(b) sets forth a
list of all such policies as of the date thereof.
(b) Exhibit 3.19(b) sets forth a list of each policy of
professional liability insurance and errors and omissions insurance, and all
amendments and endorsements thereto currently in effect, which provide
insurance for any of the Division, the Practices, the ASC's and the Additional
Acquisitions, including the name of each insurer, the amount of coverage
provided under the policy, all persons, groups and entities that are afforded
coverage under the policies, the term of the policy and type of coverage
(whether "claims made" or otherwise and whether such policies include "tail"
coverage) and whether the policy is in effect as of the date hereof.
(c) Exhibit 3.19(c) sets forth any pending claims against
Seller under each of the policies described above, and there are no other
pending claims against Seller related to the Division, the Seller Subs, the
Practices and the ASC's under any of such policies, and to the knowledge of
Seller no event has occurred and no condition exists that could reasonably be
expected to give rise to or serve as a basis for any such claim.
(d) Neither Seller nor any Seller Sub, Practice or ASC is
in default under any insurance policy or bond described in Sections 3.19(a) and
(b), and no event which would (with the passage of time, notice or both)
constitute a breach or default thereunder by Seller, any Seller Sub, any
Practice or any ASC or, to Seller's knowledge, the insurer thereunder, has
occurred, or, to Seller's knowledge, will occur as a result of the transactions
contemplated herein. Consummation of the transactions contemplated herein will
not (and will not give any person or entity a right to) terminate or modify any
material rights of, or accelerate or augment any material obligation of Seller,
any Seller Sub, any Practice or any ASC under any insurance policy or bond
insofar as such policy or bond relates to or covers incidents that give rise to
claims for incidents taking place prior to the Closing Date. Neither Seller,
any Seller Sub, any Practice nor any ASC has done anything by way of action or
inaction which might invalidate or diminish coverage under any of such policies
in whole or in part. There are no outstanding requirements or recommendations
of any insurance company that has issued a policy to Seller, any Seller Sub,
any Practice or any ASC which require or recommend any changes to the conduct
of the business of Seller, any Seller Sub, any Practice or any ASC, or any
repair or other work with respect to any of its or their respective properties.
3.20 EMPLOYEE BENEFIT PLANS. Except as set forth on Exhibit 3.20
attached hereto and with respect to the employees of the Division, Seller has
neither established, nor maintains, nor is obligated to make contributions to
or under or otherwise participate in, (a) any bonus or other type of
compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit- sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in Section 3(3) of the
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Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All
such plans listed on Exhibit 3.20 (individually a "Seller Plan," and
collectively the "Seller Plans") have been operated and administered in all
material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Code, Title VII of the
Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those federal agencies responsible for the
administration of such laws. No act or failure to act by Seller has resulted
in a "prohibited transaction" (as defined in ERISA) with respect to the Seller
Plans. No "reportable event" (as defined in ERISA) has occurred with respect
to any of the Seller Plans. Seller has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multi-employer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Seller Plan, either (i) the value
of plan assets (including commitments under insurance contracts) is at least
equal to the value of plan liabilities or (ii) the value of plan liabilities in
excess of plan assets is disclosed on the Balance Sheet, all as of the Closing
Date.
3.21 ADVERSE AGREEMENTS. Neither Seller, any Seller Sub, any
Practice nor any ASC is, nor will be as of the Closing Date, a party to any
agreement or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects, directly or indirectly, the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of the Division, the Business or the Assets.
3.22 COMPLIANCE WITH LAWS IN GENERAL. Seller, the Seller Subs, the
Practices and the ASC's hold all permits, licenses, variances, exemptions,
orders and approvals of all courts, administrative agencies or commissions or
other governmental authorities, instrumentalities or contractors, domestic or
foreign (each, a "Governmental Entity") necessary or advisable in the conduct
of the Business (or, in the case of the Seller Subs, the Practices, the ASC's
or their respective businesses) (the "Seller Permits"). Seller, the Seller
Subs, the Practices, the ASC's are in compliance with the terms of the Seller
Permits. The Business (and, in the case of the Seller Subs, the Practices and,
the ASC's, their respective businesses) is not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity, including, but not
limited to, laws, rules and regulations relating to professional and specialty
licensing, the corporate practice of medicine, prohibitions on kickbacks and
referrals under Medicare and Medicaid programs or under state law, health care,
drug enforcement, zoning ordinances, building codes, occupational health and
safety, employee benefits, immigration, wages, workplace safety, equal
employment opportunity and race, religious, sex and age discrimination. No
investigation or review by any Governmental Entity with respect to Seller, any
of the Seller Subs, any of the Practices or the ASC's is pending, or, to the
knowledge of Seller, threatened, nor has any Governmental Entity indicated an
intention to conduct the same.
3.23 MEDICARE AND MEDICAID PROGRAMS. Each of the Practices and the
ASC's is qualified for participation in the Medicare and Medicaid programs and
is party to provider agreements for such programs which are in full force and
effect with no defaults having occurred thereunder. Each of the Practices, the
ASC's, the Seller Subs and Seller, as the case may be, has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and there is no liability to any payor with respect thereto. There
are no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by any of the Practices,
the ASC's, the Seller Subs and Seller. None of the Practices, the ASC's, the
Seller Subs and Seller have been convicted of, or pled guilty or nolo
contendere to, patient abuse or negligence, or any other Medicare or Medicaid
program related offense and none has committed any offense which may serve as
the basis for suspension or exclusion from the Medicare and Medicaid programs.
3.24 FRAUD AND ABUSE. None of the Practices or the ASC's (during
the time period in which any have been affiliated with Seller), the Seller Subs
and Seller have engaged in any activities which are prohibited under Section
1320a-7b or Section 1395nn of Title 42 of the United States Code or the
regulations promulgated thereunder, or related 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
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or causing to be made any false statement or representation of a material fact
for use in determining rights to any benefit or payment; (c) any failure by a
claimant to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment; and (d) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate) directly or indirectly,
overtly or covertly, in cash or in kind, or offering to pay or receive such
remuneration (i) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by Medicare or Medicaid, or (ii) in
return for purchasing, leasing or ordering or arranging for, or recommending,
purchasing, leasing or ordering any good, facility, service or item for which
payment may be made in whole or in part by Medicare or Medicaid, or (e)
referring a patient for designated health services to or providing designated
health services to a patient upon referral from an entity or person with which
the physician or an immediate family member has a financial relationship, and
to which no exception under Section 1395nn of Title 42 of the United States
Code applies.
3.25 DUE DILIGENCE INFORMATION. No representation or warranty by
Seller in this Agreement, and no Exhibit or certificate issued or executed by,
or information furnished by, officers or directors of Seller and furnished or
to be furnished to Purchaser or PRG pursuant hereto, or in connection with the
transactions contemplated hereby, 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 or facts contained therein not misleading.
3.26 SUPPLIERS. Set forth in Exhibit 3.26 is a complete and
accurate list of the ten (10) largest suppliers of the Division in terms of
dollar volume of transactions for each of the last three fiscal years and the
current fiscal year to date, showing, with respect to each, the name, address
and aggregate dollar volume of purchases from such supplier.
3.27 BANKING RELATIONS. Set forth in Exhibit 3.27 is a complete
and accurate list of all arrangements relating to the Business or the Division
with any bank or other financial institution, indicating with respect to each
relationship the type of arrangement maintained (such as checking account,
borrowing arrangements, safe deposit box, etc.) and the person or persons
authorized in respect thereof.
3.28 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS.
Except as set forth in Exhibit 3.28, no officer, employee, director or
stockholder of Seller or any of the Seller Subs, 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 or competitor
of the Division or any organization that has a material contract or arrangement
with the Division. Neither Seller, any of the Seller Subs nor any of their
respective directors, officers, employees, consultants or stockholders nor any
affiliate of such person is, or within the last three years was, a party to any
contract, lease, agreement or arrangement, including, but not limited to, any
joint venture or consulting agreement with any physician, hospital, pharmacy,
home health agency or other person or entity which is in a position to make or
influence referrals to, or otherwise generate business for, the Division or to
provide services, lease space, lease equipment or engage in any other venture
or activity with the Division.
3.29 PAYORS. Each of the Division, the Seller Subs, the Practices,
the ASC's and the Additional Acquisitions has good relations with all payors of
their respective services and none of such payors has notified such parties
that it intends to discontinue its relationship with any of them or to deny any
claims submitted to such payor for payment.
3.30 RECOUPMENT PROCEEDINGS. There are no material Medicare or
Medicaid recoupment or recoupments of any third-party payor being sought,
requested, claimed or threatened against Seller (with respect to the Business),
any Seller Subs, any Practices or any ASC's.
3.31 NO BROKERS. Seller has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Purchaser, PRG, or any of their subsidiaries or affiliates, to
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pay any finder's fees, brokerage or agent's commissions or other like payments
in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
3.32 NO MATERIAL ADVERSE EFFECT. Except as disclosed in the
exhibits to this Agreement, Seller is not aware of any fact which, alone or
together with another fact, has resulted in or after the Acquisition is likely
to result in, a materially adverse effect to the Division or the Business as of
the date hereof.
3.33 AFFILIATED PRACTICES.
(a) Exhibit 3.33(a) lists the following:
(i) each entity with which Seller or any Seller
Sub has entered into a management services agreement or similar agreement
requiring Seller or any other entity to provide ophthalmological medical
practice management or similar services including any such entity arising out
of or related to any Additional Acquisition consummated by Seller on or before
the Closing Date (each such entity is referred to herein as a "Practice" and
collectively such entities are referred to herein as the "Practices");
(ii) each entity in which Seller or any of
Seller's affiliates hold an interest, that provides ambulatory surgical
services including any such entity arising out of or related to any Additional
Acquisition consummated on or before the Closing Date (each such entity is
referred to herein as an "ASC" and collectively such entities are referred to
herein as the "ASC's"); and
(iii) with respect to each Practice and each ASC,
the type of entity that comprises the Practice or ASC, its jurisdiction of
organization or formation, all locations at which the Practice or ASC conducts
business and the nature of its business (i.e., ophthalmology, optometry,
ambulatory surgical center, optical shop, etc.).
(b) Each Practice and ASC is duly qualified and has all
necessary licenses, permits, approvals, consents, qualifications,
authorizations and accreditations of any governmental agency or authority,
including but not limited to, any health care regulatory authority, and under
all applicable laws or regulations as are required to own its assets and
properties as now owned and to carry on its business as now conducted (the
"Approvals"), and the continuation, validity and effectiveness of all the
Approvals will not be adversely affected by the execution of this Agreement or
the consummation of the transactions contemplated hereby.
3.34 ADDITIONAL ACQUISITIONS. To the knowledge of Seller, all due
diligence information relating to the Additional Acquisitions which has been or
will be provided to Purchaser by Seller or any Additional Acquisition,
including but not limited to the financial statements of the Additional
Acquisitions, is (or will be at the time of presentation) true and complete as
presented. Seller has no reason to believe that any such information is untrue
or misleading in any respect.
3.35 ENVIRONMENTAL. During the period of Seller's (or any Seller
Sub's) tenancy in any and all real property constituting a part of the Assets
(such real property, the "Real Property"), such Real Property has not been used
for industrial or manufacturing purposes, for landfill, dumping or other waste
disposal activities or operations, or for generation, storage, use, sale,
treatment, processing, recycling or disposal of any Hazardous Material. To the
best knowledge of Seller, no such use of the Real Property occurred at any time
prior to the period of Seller's (or any Seller Sub's) ownership or tenancy of
the Real Property; and no such use on any real property adjacent to the Real
Property occurred at any time prior to the date hereof. There is no Hazardous
Material storage tank (or similar vessel) whether underground or otherwise,
sump or well currently on the Real Property and Seller has received no notice
and has no knowledge of any Environmental Claim regarding the Real Property or
any adjacent property. The use of the Real Property by Seller (and any Seller
Sub or any of Seller's subtenants or successors in interest to any portion of
the Real Property, as the case may be) complies with all applicable
Environmental Requirements and neither Seller, any Seller Sub nor any subtenant
or successor in interest of Seller has obtained or is required to obtain any
permit or other authorization to construct, occupy, operate, use or conduct any
activity on any of the Real Property by reason of any Environmental
Requirement. The Real Property does not appear on
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the National Priorities List or to Seller's best knowledge any other list or
data base of properties maintained by any local, state or federal agency or
department showing properties which are known to contain or which are suspected
of containing a Hazardous Material. Neither Seller nor any Seller Sub has ever
applied for and been denied environmental impairment liability insurance
coverage relating to the Real Property.
3.36 REAL PROPERTY. Neither Seller, any Seller Sub, any affiliate
of Seller nor any entity in which Seller holds an interest has title to or an
ownership interest in any Real Property used in connection with or in any way
related to the Business.
3.37 SANSONE NOTE. At July 31, 1996, the current unpaid portion of
that certain promissory note dated September 27, 1995 executed by Michael A.
Sansone, M.D., P.C. in the original principal amount of $700,000 was
$281,374.40. As of the date hereof, such note is current. Such note has been
properly recorded on the Balance Sheet. To the knowledge of Seller, no
conditions exist that would cause such note to be uncollectible.
Section 4. Representations and Warranties of Purchaser.
PRG and Purchaser hereby, jointly and severally, represent and warrant
to Seller as follows:
4.1 CORPORATE EXISTENCE: GOOD STANDING. Purchaser is a
corporation duly organized and existing and in good standing under the laws of
the State of Delaware.
4.2 POWER AND AUTHORITY. Purchaser has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement, and has
taken all actions required by law, its Certificate of Incorporation, its Bylaws
or otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. The execution and delivery of this
Agreement and the agreements related hereto executed and delivered pursuant to
this Agreement do not and, subject to the receipt of regulatory approvals where
required, the consummation of the transactions contemplated hereby will not,
violate any provision of the Certificate of Incorporation or Bylaws of
Purchaser.
4.3 FINANCIAL CAPACITY. Purchaser has the financial capacity and
creditworthiness to perform each and every obligation and commitment of
Purchaser set forth in this Agreement, including without limitation its
obligations to consummate the Additional Acquisitions.
4.4 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Purchaser in this Agreement, and no Exhibit or certificate issued by officers
or directors of Purchaser and furnished or to be furnished to Seller pursuant
hereto, or in connection with the transactions contemplated hereby, 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 or facts contained
therein not misleading.
SECTION 5. COVENANTS OF SELLER.
Seller agrees that between the date hereof and the Closing Date:
5.1 CONSUMMATION OF AGREEMENT. Seller shall use its best efforts
to cause the consummation of the transactions contemplated hereby in accordance
with their terms and conditions.
5.2 BUSINESS OPERATIONS. Seller shall operate the Division and
the Business and use the Assets in the ordinary course. Seller shall not enter
into any lease, contract, indebtedness, commitment, purchase or sale or acquire
or dispose of any capital asset relating to the Business or the Assets except
in the ordinary course of business. Seller shall use its best efforts to
preserve the Division and the Business and Assets intact and shall not take any
action that would have an adverse effect on the Business or Assets, including
without limitation, any action the primary purpose or effect of which is to
generate or preserve cash; provided that Seller may continue to operate in the
ordinary course. Seller shall use its best efforts to preserve intact the
relationships with payors, customers, suppliers, patients and others having
significant business relations with the Division. Seller shall collect its
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receivables and pay its trade payables related to the Business in the ordinary
course of business. Seller shall not introduce any new method of management,
operations or accounting related to the Business or the Division. Seller shall
operate the Business in compliance with all applicable Environmental
Requirements.
5.3 ACCESS AND NOTICE. Seller shall permit Purchaser and its
authorized representatives access to, and make available for inspection, all of
the assets and business of the Division, the Business and the Assets, including
employees, customers and suppliers and permit Purchaser and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the Division, the Business or the Assets as
Purchaser or its representatives may request. Without limiting the foregoing,
Seller shall provide its full assistance to Arthur Andersen or any other
representative of Purchaser in the course of an audit of the Division. Seller
hereby grants Purchaser and/or PRG the right to use and/or publish the results,
or any portion thereof, of any such audit in such reports as PRG may deem
advisable to file in accordance with the provisions of the Securities Exchange
Act of 1934, as amended, or any of the rules and regulations promulgated
thereunder. Seller shall promptly notify Purchaser in writing of (i) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Seller is a party and relating to the Business or the
Assets, and (ii) any adverse change in the Division's or the Business'
financial condition or the Assets. Seller shall permit Purchaser and its
authorized representatives access to the Real Property and allow Purchaser and
its authorized representatives to take reasonable samples of soil, groundwater
or any other environmental media from the Real Property in connection with the
conduct of an environmental assessment (the "Phase I Assessment"), and such
further analyses or investigations as Purchaser shall deem appropriate.
5.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Seller
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby,
including consents described on Exhibit 3.5. Seller shall use its best efforts
to obtain all licenses, permits, approvals or other authorizations required
under any law, rule, regulation, or otherwise to provide the services of Seller
contemplated by the Practice Service Agreements and to operate the Business and
use the Assets.
5.5 ACQUISITION PROPOSALS. Seller shall not, and shall cause
Seller's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Seller, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of, Seller directly
or indirectly relating to the Division (such proposal or offer, an "Acquisition
Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to such proposal or offer, and Seller will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Seller shall immediately notify Purchaser if any such
inquiries or proposals are received.
5.6 EMPLOYEE MATTERS. Seller shall not, without the prior written
approval of PRG, except in the ordinary course of business consistent with past
practice or as required by law, increase the cash compensation of any employee
or any independent contractor of Seller relating to the Business; adopt, amend
or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit, or
fail to pay any premium or contribution due or file any report with respect to
any employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon the
Division, its prospects, the Business or the Assets.
5.7 REQUIREMENTS TO EFFECT ACQUISITION. Seller shall use its best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
5.8 ACCOUNTING AND TAX MATTERS. Seller will not change in any
material respect the financial accounting methods or practices followed by
Seller (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except as
may be required by GAAP. To the extent attributable to the Assets or the
Business of the Division, Seller will duly, accurately and timely (with regard
to any duly granted extensions) file all Tax Returns required to be filed, and
pay all Taxes required to be
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paid, by it on or before the Closing Date. To the extent attributable to the
Assets or the Business of the Division, except with the prior written consent
of Purchaser, Seller will not (i) make, adopt or change any material Tax
election or Tax accounting method, (ii) enter into any closing agreement with
respect to Taxes of Seller or settle any asserted Tax claim or assessment, or
(iii) consent to any Tax claim or assessment or to any waiver or extension of
the statute of limitations for any Tax claim or assessment.
5.9 OFFER OF EMPLOYMENT TO EMPLOYEES. Seller shall cooperate with
all requests made by PRG or Purchaser for the purpose of allowing PRG or
Purchaser to offer employment to all employees of the ophthalmology division of
Seller at the field offices of the Business and at the Tucker, Georgia office
of the Division other than those employees listed on Exhibit 5.9, such
employment to be effective as of the Closing Date. Purchaser will, as a part
of its offer of employment to employees, extend to persons accepting such
offers of employment, credit for the length of service since the most recent
date of hire by Seller prior to the Closing Date, for the purpose of
determining eligibility for participation in employee benefits plans, if any,
offered by Purchaser after the Closing Date. However, except as set forth in
Exhibit 2.3(b), Seller shall remain liable under any Seller Plans for any
claims incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Seller's employees incurred by Seller prior to the Closing Date.
5.10 HSR ACT. To the extent notification under the HSR Act is
required, Seller shall use its best efforts to file as soon as possible and to
effect early termination of all applicable waiting periods under the HSR Act,
including, without limitation, complying promptly with all requests for
additional information.
5.11 CONSUMMATION OF ADDITIONAL ACQUISITIONS. Seller shall use its
best efforts to consummate the Additional Acquisitions.
5.12 TRANSFER OF DR. COLKITT OWNERSHIP INTERESTS IN ASC'S AND
PRACTICES OF THE DIVISION. Seller, whether pursuant to the terms of that
certain Stock Option Agreement dated December 29, 1995 between Douglas R.
Colkitt, M.D. ("Dr. Colkitt") and Seller, that certain Master Assignment of
the Stock Option Agreements dated December 29, 1995 between Dr. Colkitt and
Seller, or otherwise, shall use its best efforts to cause Dr. Colkitt to divest
and transfer to a person or entity identified by Purchaser, to the satisfaction
of Purchaser in its sole discretion, (i) all beneficial ownership interests,
(ii) all options to acquire ownership interests and (iii) any securities
convertible now or in the future into ownership interests, in any and all
Practices and ASC's, in each case free and clear of all liens, claims and
encumbrances using documents substantially in the form attached hereto as
Exhibit 5.12.
SECTION 6. COVENANTS OF PURCHASER.
PRG and Purchaser jointly and severally agree that between the date
hereof and the Closing Date:
6.1 CONSUMMATION OF AGREEMENT. Purchaser shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Purchaser will use its best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
6.2 HSR ACT. To the extent notification under the HSR Act is
required, Purchaser shall use its best efforts to file as soon as possible and
to effect early termination of all applicable waiting periods under the HSR
Act, including without limitation complying promptly with all requests
thereunder for additional information.
SECTION 7. PURCHASER'S CONDITIONS PRECEDENT.
The obligations of Purchaser hereunder are subject to the fulfillment
at or prior to the Closing Date of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained herein that are qualified as to materiality
shall have been true and correct in all respects when initially made and shall
be
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true and correct in all respects as of the Closing Date and all other
representations and warranties of Seller 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 at the Closing Date.
7.2 COVENANTS AND CONDITIONS. Seller shall have performed and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed and complied with by Seller prior to the Closing
Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in Seller's working capital (defined as current assets,
excluding cash, less current liabilities) at the Closing Date from Seller's
working capital (as so defined) at the Balance Sheet Date).
7.5 PRACTICE SERVICE AGREEMENTS. On the Closing Date, Seller
shall have entered into such amendments to the Practice Service Agreements as
are set forth on Exhibit 7.5.
7.6 CONSENTS AND APPROVALS. Seller shall have obtained all
material government and other third-party approvals and consents.
7.7 CLOSING DELIVERIES. Purchaser shall have received all
documents, duly executed in form satisfactory to Purchaser and its counsel,
referred to in Section 9.1.
7.8 HSR ACT. To the extent notification under the HSR Act is
required, all applicable waiting periods under the HSR Act shall have expired
or been terminated.
7.9 LEASES. The leases for the properties listed on Exhibit 7.9
shall have been committed to writing on the terms indicated on Exhibit 7.9 to
Purchaser's satisfaction in its reasonable discretion.
7.10 SELLER'S CONVERTIBLE ACQUISITION INDEBTEDNESS. Purchaser's
agreement under Section 2.3 to assume the indebtedness represented by (i) that
certain promissory note dated March 15, 1996 in the original principal amount
of $1,250,000 payable to Everett C. Moulton, III and (ii) those certain
promissory notes each dated April 1, 1996 in the original principal amounts of
$330,000 and $920,000, respectively, and each payable to Thomas G. Abell, M.D.,
is conditioned upon Seller's ability to obtain at or before closing amendments
to such notes or related documents in form and substance reasonably acceptable
to PRG and its counsel, the effect of which is to provide that such notes shall
no longer be convertible into Seller's Common Stock, but instead shall be
convertible into PRG Common Stock, based on a price of $30.00 per PRG common
share, at the times that such notes had previously been convertible into
Seller's Common Stock.
7.11 SUBLEASE. Purchaser, as sublessor, and Seller, as sublessee,
shall have entered into a sublease for premises located at 3754 LaVista Road,
Tucker, Georgia 30084, for space for the period following the Closing Date
until April 30, 1997 or 30 days after notice of termination, whichever is
earlier, for Larry Pearson and his assistant at a rental rate based on the
square foot rental rate paid by Purchaser for such space and on such other
terms and conditions as are mutually acceptable to Purchaser and Seller.
7.12 LOCAL COUNSEL OPINIONS. Seller shall have provided to PRG and
Purchaser opinions in form and substance satisfactory to PRG and Purchaser
provided by counsel satisfactory to PRG and Purchaser to the effect that the
service agreements related to the New York and Illinois practices identified on
Exhibit 7.5 and the employment agreements to which the physicians providing
medical services at those practices are parties comply in all material respects
with the laws of the State of New York or the State of Illinois, as the case
may be. Counsel providing the legal opinion regarding the Illinois practices
must be licensed in Illinois and counsel providing the legal opinion regarding
the New York practices must be licensed in New York.
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7.13 SALVITTI EMPLOYMENT AGREEMENT. Section 3.9 of that certain
Physician Optional Employment Agreement dated April 1, 1996 between E. Ronald
Salvitti, M.D., Inc. and E. Ronald Salvitti, M.D. (the "Salvitti Optional
Employment Agreement") shall have been amended so that the reference to 300% in
the 12th line of Section 3.9 is changed to 30%.
SECTION 8. SELLER'S CONDITIONS PRECEDENT.
The obligations of Seller hereunder are subject to fulfillment at or
prior to the Closing Date of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained herein that are qualified as to materiality
shall have been true and correct in all respects when initially made and shall
be true and correct in all respects as of the Closing Date and all other
representations and warranties of Purchaser contained herein shall have been
true and correct in all material respects when actually made and shall be true
and correct in all material respects at the Closing Date.
8.2 COVENANTS AND CONDITIONS. Purchaser shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Purchaser prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Seller shall have received all documents,
duly executed in form satisfactory to Seller and its counsel, referred to in
Section 9.2.
8.5 HSR ACT. To the extent notification under the HSR Act is
required, all applicable waiting periods under the HSR Act shall have expired
or been terminated.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF SELLER. At or prior to the Closing, Seller
shall deliver to Purchaser the following, all of which shall be in a form
satisfactory to counsel to Purchaser and PRG:
(a) a copy of the resolutions of the Board of Directors
of Seller authorizing the execution, delivery and performance of this Agreement
and all related documents and agreements certified by the Secretary of Seller
as being true and correct copies of the original thereof;
(b) a bill of sale conveying the Assets to Purchaser;
(c) an assignment of each contract, agreement and lease
being assigned to and assumed by Purchaser;
(d) a certificate of the President of Seller, dated as of
the Closing Date, (i) as to the truth and correctness of the representations
and warranties of Seller contained herein; (ii) as to the performance of and
compliance by Seller with all covenants contained herein; and (iii) certifying
that all conditions precedent of Seller to the Closing have been satisfied;
(e) a certificate of the Secretary of Seller certifying
as to the incumbency of the directors and officers of Seller and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Seller;
(f) a certificate, dated within 20 days of the date of
this Agreement, of the Secretary of the State of Delaware establishing that
Seller is in existence and is in good standing to transact business in the
state of
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incorporation together with a bring-down telegram related to such certificate
dated within three (3) days prior to the Closing Date;
(g) certificates dated within 20 days of the date of this
Agreement, of the Secretary of State of the jurisdiction of incorporation of
each of the Seller Subs that is a corporation establishing that such Seller Sub
is in existence and is in good standing to transact business in the state of
incorporation;
(h) an opinion of counsel to Seller in form and substance
reasonably satisfactory to Purchaser and its counsel to the effect set forth in
Exhibit 9.1(h);
(i) all material authorizations, consents, approvals,
permits and licenses referred to in Sections 3.3 and 3.5;
(j) certificates dated within twenty (20) days of the
date of this Agreement, of the Secretaries of State of Delaware and the states
set forth in Exhibit 3.1 to the effect that Seller is qualified to do business
and is in good standing as a foreign corporation in each of such states
together with bring-down telegrams dated within three (3) business days prior
to the Closing Date related to each such certificates (but only with respect to
certificates issued by states that also provide bring-down telegrams);
(k) an assignment, in a form reasonably acceptable to
Purchaser, of all logos, names, trademarks, service marks and all other
proprietary information required for or incidental to the Business or the
marketing of the products and services of the Division other than the
tradenames "EquiMed" and "Equivision" and the EquiMed logo;
(l) evidence, in form and substance reasonably
satisfactory to Purchaser and its counsel, that the divestitures and transfers
required by Section 5.12 have occurred;
(m) evidence satisfactory to Purchaser and its counsel
that all liens and encumbrances on any of the Assets have been released on or
before the Closing Date;
(n) an assignment of all security interests and security
agreements held by Seller that relate to the Practices;
(o) the sublease referenced in Section 7.11;
(p) the opinions of local counsel referenced in Section
7.12;
(q) a certificate of the President and Chief Financial
Officer of Seller stating that there has been no material adverse change in
Seller's working capital (defined as current assets, excluding cash, less
current liabilities) at the Closing Date from Seller's working capital (as so
defined) at the Balance Sheet Date;
(r) the leases referenced in Section 7.9; and
(s) such other instruments and documents as reasonably
requested by PRG or Purchaser to carry out and effect the purpose and intent of
this Agreement.
9.2 DELIVERIES OF PURCHASER. At or prior to the Closing Purchaser
shall deliver to Seller the following, all of which shall be in a form
satisfactory to counsel to Seller:
(a) the Closing Valuation;
(b) a copy of the resolutions of the Board of Directors
of Purchaser and PRG authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary of such entities as being true and correct copies of the original
thereof;
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(c) certificates of the President of Purchaser, dated as
of the Closing Date, (i) as to the truth and correctness of the representations
and warranties of Purchaser contained herein; (ii) as to the performance of and
compliance by Purchaser with all covenants contained herein; and (iii)
certifying that all conditions precedent of Purchaser to the Closing have been
satisfied;
(d) a certificate of the Secretary of Purchaser
certifying as to the incumbency of the directors and officers of Purchaser and
as to the signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Purchaser;
(e) certificates, dated within twenty (20) days of the
Closing Date, of the Secretary of the State of Delaware establishing that
Purchaser is in existence and is in good standing to transact business in the
State of Delaware;
(f) an opinion of counsel to Purchaser in form and
substance reasonably satisfactory to Seller and its counsel to the effect set
forth in Exhibit 9.2(f);
(g) such other instruments and documents as reasonably
requested by Seller to carry out and effect the purpose and intent of this
Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit attached hereto, any agreement executed pursuant
hereto, and any certificate executed and delivered by any party pursuant to the
terms of this Agreement, shall constitute representations and warranties of
Seller, or of Purchaser, as the case may be. All such representations and
warranties, and all representations and warranties expressly labeled as such in
this Agreement shall survive the date of this Agreement and the Closing Date
for a period of two (2) years following the Closing Date, except that the
representations and warranties set forth in Sections 3.17, 3.22, 3.23, 3.24,
3.30 and 3.35 with respect to environmental and medical waste laws, health care
laws and matters and Tax representations and warranties shall survive until one
year after the expiration of the applicable statute of limitations for the
violation of law or the assessment or collection of any Tax as the case may be.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties against any party after the date on
which such survival period shall terminate. No party shall be entitled to
claim indemnity from any other party pursuant to Section 10.2 or 10.3 hereof,
unless such party has timely given the notice required in Section 10.2, 10.3 or
10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect to
which the notices required by Section 10.2, 10.3 or 10.4, as applicable, are
not timely provided.
10.2 INDEMNIFICATION BY PURCHASER AND PRG. PURCHASER AND PRG (FOR
PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4,
"INDEMNITOR"), JOINTLY AND SEVERALLY SHALL INDEMNIFY AND HOLD SELLER, AND ITS
OFFICERS, DIRECTORS, STOCKHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING SELLER, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES
AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS
OF COUNSEL THROUGH APPEAL) (COLLECTIVELY, "DAMAGES") ARISING FROM OR BY REASON
OF OR RESULTING FROM ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND, FROM AND AFTER THE CLOSING DATE,
ARISING FROM OR BY REASON OF OR RESULTING FROM INDEMNITOR'S MANAGEMENT AND
OWNERSHIP OF THE ASSETS OR BREACH OF ANY CONTRACTS, INCLUDING LEASES AND ASSET
PURCHASE AGREEMENTS ASSIGNED TO PURCHASER PURSUANT TO THE TERMS HEREOF.
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10.3 INDEMNIFICATION BY SELLER. SELLER (FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PURCHASER AND ITS OFFICERS, DIRECTORS, STOCKHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PURCHASER, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AS "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL DAMAGES ARISING FROM OR BY
REASON OF OR RESULTING FROM ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION,
WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE
EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED
OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND, WITH RESPECT TO ALL TIMES
PRIOR TO OR AFTER THE CLOSING DATE, ARISING FROM OR BY REASON OF OR RESULTING
FROM THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE OWNERSHIP OR OPERATION OF
THE BUSINESS OR THE ASSETS, AND WITH RESPECT TO (I) ANY VIOLATION BY SELLER OR
THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF
STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT
OR OBLIGATION ARISING OUT OF OR RESULTING FROM CLAIMS RELATED TO MEDICAL
TREATMENT OCCURRING ON OR PRIOR TO THE CLOSING DATE SUBMITTED TO ANY THIRD
PARTY PAYOR, WHETHER ON, PRIOR TO OR AFTER THE CLOSING DATE, ANY LIABILITIES
THAT ARE NOT SPECIFICALLY ASSUMED BY PURCHASER PURSUANT TO THE TERMS OF THIS
AGREEMENT AND ANY LIABILITIES NOT SET FORTH ON EXHIBIT 2.3(b) OR (II) ALL
LIABILITIES OF SELLER, IF ANY, FOR THE TAXES OF ANY OTHER PERSON PURSUANT TO
TREASURY REGULATIONS SECTION 1.1502-6 OR OTHER LAW, AS A TRANSFEREE OR
SUCCESSOR, BY CONTRACT OR OTHERWISE.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action or
other proceeding in respect of which indemnification or reimbursement may be
sought hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own defense
of such action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Person, (a) there are or may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to Indemnitor and which could not be adequately
advanced by counsel chosen by Indemnitor, or (b) a conflict or potential
conflict exists between Indemnitor and such Indemnified Person that would make
such separate representation advisable; provided, however, that in no event
shall Indemnitor be required to pay fees and expenses hereunder for more than
one firm of attorneys of Indemnified Person in any jurisdiction in any one
action or proceeding or group of related actions or proceedings. Indemnitor
shall not, without the prior written consent of any Indemnified Person, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Seller or any other event giving rise
to indemnification under Section 10.3 hereof, Purchaser shall be entitled to
offset the amount of damages incurred by it as a result of such breach of
warranty, representation, covenant or agreement against the amounts payable as
the Acquisition Valuation. Purchaser shall notify Seller in writing in the
event that Purchaser claims a setoff with respect to such damages. If Seller
objects to such setoff, in whole or in part, in writing within five (5)
business days following receipt of such notice of setoff claim and the disputed
claim is finally determined by arbitration or a court, as the case may be,
without any appeal of such determination having been filed within the
applicable period for appeal, then (A) Purchaser shall immediately pay to
Seller an amount equal to two (2) times the disputed amount of setoff taken by
Purchaser in the event that Seller is the prevailing
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party and Purchaser has exercised its right to setoff hereunder and (B) Seller
shall immediately pay to Purchaser an amount equal to two (2) times the
disputed amount to which the court or arbitrator(s) has determined that
Purchaser is entitled in the event that Purchaser is the prevailing party and
has refrained from exercising its right to setoff hereunder following receipt
of objection to setoff until such time as the disputed claim is submitted for
determination and is determined by arbitration or litigation by any party
hereto.
10.6 LIMITATION ON INDEMNIFICATION. Notwithstanding any other
provision of this Section 10, in no event shall a person be entitled to
indemnification hereunder unless, and only to the extent that, the aggregate
amount of all Damages for which such person would otherwise be entitled to
indemnification exceeds in the aggregate (when considered together with other
persons similarly situated) one percent (1%) of the Closing Valuation.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Purchaser if any representation or warranty of
Seller contained in this Agreement or in any certificate or other document
executed and delivered by Seller pursuant to this Agreement is or becomes
untrue or breached in any material respect or if Seller 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 ten (10) days after receipt of written notice thereof; provided,
however, that in the case of a termination pursuant to this subsection,
Purchaser shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in this subsection;
(c) at any time by Seller if any representation or warranty of
Purchaser contained in this Agreement or in any certificate or other document
executed and delivered by Purchaser pursuant to this Agreement is or becomes
untrue or breached in any material respect or if Purchaser fails to comply in
any material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within ten (10) days after receipt of written notice thereof; provided,
however, that in the case of a termination pursuant to this subsection, Seller
shall not have breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in this subsection;
(d) by either Purchaser or Seller if the transaction contemplated
hereby shall not have been consummated by November 30, 1996; provided that the
period set forth in this Section 11(d) shall automatically be extended until
such time as all applicable waiting periods under the HSR Act have expired; and
provided further that in the case of a termination pursuant to this subsection,
the terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner; or
(e) by Purchaser at any time prior to November 6, 1996, if
Purchaser determines in its sole discretion as the result of its legal,
financial, environmental and operational due diligence with respect to Seller,
that such due diligence reveals a material adverse change or difference in the
financial condition of the Business from that reflected in the Financial
Statements or a material issue(s) with respect to the regulatory compliance of
the Division or the ophthalmological practices or ASC's managed or operated by
the Division.
SECTION 12. NONCOMPETITION.
12.1 PROHIBITED ACTIVITIES OF SELLER. In order to protect
Purchaser and each of its affiliates (collectively, the "PRG Group") against
the unauthorized use or disclosure of any of their confidential information
presently known or hereinafter acquired by Seller and other good and valuable
consideration, Seller hereby agrees that, for a period of three (3) years
following the Closing Date, except as set forth on Exhibit 12.1 Seller and its
Affiliates shall not knowingly, directly or indirectly, for itself or on behalf
of any other corporation, person, firm,
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partnership, association or any other entity (whether as an individual, agent,
employee, officer, director or in any other capacity):
(a) engage or participate in or finance any business
which engages in direct competition with the ophthalmological or optometric
physician practice management business being conducted by PRG or any
ophthalmological or optometric practice or ophthalmological ambulatory surgical
center managed or operated by PRG or any member of the PRG Group anywhere
within 50 miles of any location of any member of the PRG Group or any
ophthalmological or optometric practice or ophthalmological ambulatory surgical
center managed or operated by PRG or any member of the PRG Group; provided,
however, that this provision shall not prohibit Seller or any of its Affiliates
from continuing to operate any existing facility that is not part of the
Business or Division or from purchasing or holding an aggregate equity interest
of up to 2%, so long as Seller and its Affiliates combined do not purchase or
hold an aggregate equity interest of more than 5%, in any business in direct
competition with the ophthalmological or optometric physician practice
management business of the PRG Group or any ophthalmological or optometric
practice managed by the PRG Group; or
(b) induce or attempt to influence any employee of any
member of the PRG Group or any ophthalmological or optometric practice or
ophthalmological ambulatory surgical center managed or operated by PRG or any
member of the PRG Group to terminate his or her employment, or to hire any such
employee, whether or not so induced or influenced, except that any such
employee may be hired with PRG's prior written consent.
12.2 DAMAGES. Because of the difficulty of measuring economic
losses as a result of the breach of the covenants set forth in Section 12.1 and
12.5, and because of the immediate and irreparable damage that would be caused
thereby for which the non-breaching party would have no other adequate remedy,
each party agrees that, in the event of a breach by it or any of its Affiliates
of the covenants set forth in Section 12.1 and 12.5, the covenants may be
enforced by the non-breaching party or parties by injunctions and restraining
orders. The specific enforcement of the covenants set forth in Section 12.1
and 12.5 is nonexclusive and shall not preclude any party hereto from seeking
any other remedy available at law or in equity.
12.3 REASONABLE RESTRAINT. It is agreed by the parties that the
covenants in this Section 12 impose reasonable restraints on the parties hereto
in light of the activities and business of Seller, on the one hand, and
Purchaser and the PRG Group, on the other hand, on the date of the execution of
this Agreement and the future plans of Seller, on the one hand, and Purchaser,
on the other hand, and the PRG Group.
12.4 SEVERABILITY; REFORMATION. The covenants in this Section 12
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and this Agreement shall thereby be reformed.
12.5 PROHIBITED ACTIVITIES OF PURCHASER AND PRG.
(a) In the event that the Acquisition is not consummated,
in order to protect Seller against unauthorized use of the information set
forth in Exhibit 1(h), Purchaser and PRG jointly and severally agree that for a
period of seven (7) months following the date of this Agreement, neither
Purchaser nor PRG will pursue or otherwise take action to acquire the practices
listed in Exhibit 1(h).
(b) In the event that Seller presents to PRG a potential
acquisition that is a practice or ambulatory surgery center listed on Exhibit
1(h) and PRG declines to pursue the proposed acquisition because the financial
terms proposed by Seller do not fit the criteria for an Additional Acquisition,
then neither Purchaser nor PRG shall prior to November 30, 1997 consummate or
attempt to consummate an acquisition of the practice or ambulatory surgery
center that was the subject of the proposed acquisition on financial terms
substantially similar to those presented by Seller and declined by PRG.
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12.6 TERM. It is specifically agreed that the time periods stated
in Sections 12.1 and 12.5 above shall be computed by excluding from such
computation any time during which Seller or any of its Affiliates is in
violation of any provision of this Section 12. The covenants contained in this
Section 12 shall have no effect if the transactions contemplated by this
Agreement are not consummated for any reason but otherwise shall not be
affected by any breach of any other provision hereof by any party hereto.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Seller recognizes and acknowledges it had in the
past, currently has, and in the future may possibly have, access to certain
confidential information of the PRG Group that constitutes valuable, special
and unique assets of the PRG Group's businesses. Seller agrees that it will
not disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Seller, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Seller shall, if possible, give
prior written notice thereof to Purchaser, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Seller reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party, or (iv) Seller is the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Seller of the provisions of this Section 13, Purchaser shall be
entitled to an injunction restraining Seller from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting Purchaser from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages. The obligations of the
parties under this Section 13 shall survive the termination of this Agreement.
(b) Purchaser recognizes and acknowledges it had in the
past, currently has, and in the future may possibly have, access to certain
confidential information of the Seller that constitutes valuable, special and
unique assets of Seller's businesses. Purchaser agrees that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Purchaser, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Purchaser shall, if possible,
give prior written notice thereof to Seller, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Purchaser
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Purchaser is the
sole and exclusive owner of such confidential information as a result of the
transactions contemplated hereunder or otherwise. In the event of a breach or
threatened breach by Purchaser of the provisions of this Section 13, Seller
shall be entitled to an injunction restraining Purchaser from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Seller from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this Section 13 shall survive the termination
of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 ADDITIONAL ACQUISITIONS. With respect to any Additional
Acquisitions that are consummated on or prior to the Closing Date, PRG shall
lend to Seller the funds necessary for Seller to consummate the Additional
Acquisition. With respect to Additional Acquisitions in geographic areas in
which the Division currently conducts business, the loan shall be evidenced by
a promissory note that matures in 90 days and is secured by the assets acquired
and the service agreement (if applicable) entered into in connection with the
Additional Acquisition. With respect to Additional Acquisitions in geographic
markets in which the Division does not currently conduct Business, the loan
shall be evidenced by a promissory note that matures in 90 days, is secured by
the assets acquired and the service agreement (if applicable) entered into in
connection with the Additional Acquisition and at PRG's option may be retired
by a conveyance to Purchaser of the assets securing the promissory note.
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14.2 DEFERRED COMPENSATION.
(a) In the event that Salvitti P.A. makes a payment to
Dr. Salvitti (a "Salvitti Payment") pursuant to either Section 3.9 of that
certain Physician Employment Agreement dated April 1, 1996 between Salvitti
P.A. and Dr. Salvitti (the "Salvitti Employment Agreement") or Section 3.9 of
the Salvitti Optional Employment Agreement, to the extent that for either of
the two succeeding twelve month periods beginning the first day of the month
following the date of the Salvitti Payment, the difference between the net
income of the Salvitti P.A. for such twelve month period and the net income of
Salvitti P.A. for the twelve month period ending the last day of the month
immediately preceding the date of the Salvitti Payment (such difference the
"Salvitti P.A. Differential) is less than 33% of the amount of the Salvitti
Payment, Seller shall pay to Salvitti P.A. (an intended third party beneficiary
of this Agreement) an amount equal to the difference between 33% of the amount
of the Salvitti Payment and the Salvitti P.A. Differential. For each of such
two twelve month periods following the Salvitti Payment, in the event that the
Salvitti P.A. Differential is a negative number, Seller shall pay to Salvitti
P.A. 33% of the amount of the Salvitti Payment.
(b) To the extent that future payments by the Practices
of deferred compensation obligations existing on the date of this Agreement
exceed $1,000,000 (excluding the Salvitti Payment), then with respect to each
such deferred compensation payment, to the extent that for either of the two
succeeding twelve month periods beginning the first day of the month following
the date of the deferred compensation payment, the difference between the net
income of the Practice making such deferred compensation payment (the "Paying
Practice") for such twelve month period and the net income of the Paying
Practice for the twelve month period ending the last day of the month
immediately preceding the date of the deferred compensation payment (the
"Paying Practice Differential") is less than 33% of the amount of such deferred
compensation payment, Seller shall pay the Paying Practice (an intended third
party beneficiary of this Agreement) an amount equal to the difference between
33% of the amount of the deferred compensation payment and the Paying Practice
Differential. For each of such two succeeding twelve month periods following
the deferred compensation payment, in the event that the Paying P.A.
Differential is a negative number, Seller shall pay to the Paying P.A. 33% of
the amount of the deferred compensation payment.
14.3 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
or by facsimile AND overnight courier, to the parties hereto at the following
addresses, or in writing and at such other address as any party may advise the
others in writing from time to time:
If to PRG: If to Purchaser:
Physicians Resource Group, Inc. PRG Georgia, Inc.
Three Lincoln Centre Three Lincoln Centre
5430 LBJ Freeway, Suite 1540 5430 LBJ Freeway, Suite 1540
Dallas, Texas 75240 Dallas, Texas 75240
Attn: Richard J. D'Amico, Esq. Attn: Richard J. D'Amico
Facsimile: (214) 982-8299 Facsimile: (214) 982-8299
with a copy of each notice directed to Purchaser or PRG to:
James S. Ryan, III, Esq.
Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Facsimile: (214) 953-5822
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If to Seller:
EquiMed, Inc.
3754 LaVista Road
Tucker, Georgia 30084
Attention: Larry W. Pearson
Facsimile: (404) 320-0023
with a copy to:
Marcy L. Colkitt, Esq.
2171 Sandy Dr.
State College, Pennsylvania 16803
Facsimile: (412) 463-3569
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.4 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of Agreement.
14.5 EACH PARTY TO BEAR COSTS.
(a) Except as provided in Section 2.3(c) above and
subparagraphs (b) and (c) below, each of the parties to this Agreement shall
pay all of the costs and expenses incurred by such party in connection with the
transactions contemplated by this Agreement, whether or not such transactions
are consummated. Without limiting the generality of the foregoing and whether
or not such liabilities may be deemed to have been incurred in the ordinary
course of business, Purchaser shall not be liable to or required to pay, either
directly or indirectly, any fees and expenses of legal counsel, accountants,
auditors or other persons or entities retained by Seller for services rendered
in connection with negotiating and closing the transactions contemplated by
this Agreement or the documents to be executed in connection herewith or the
costs and expenses incurred by Seller in connection with the consummation of
the Additional Acquisitions that are consummated prior to the Closing Date,
whether or not such costs or expenses are incurred before or after the Closing
Date.
(b) Notwithstanding the foregoing, fees and expenses
incurred by Arthur Andersen and Ernst & Young in connection with the
determination of the Acquisition Valuation shall be shared equally by Purchaser
and Seller; provided that Seller shall not be liable for more than $100,000.00
in such fees and expenses.
(c) In the event that this Agreement is terminated as a
result of an Acquisition Proposal being accepted by Seller, Seller will pay to
Purchaser a fee equal to all fees and expenses incurred by Purchaser in
connection with the transactions contemplated hereby, plus $1,800,000.00; which
amount shall be payable by wire transfer of same day funds; provided that no
fee shall be payable to Purchaser pursuant to this Section 14.5(c) unless and
until any person (other than Purchaser) and the Seller have entered into a
definitive agreement intended to consummate an Acquisition Proposal. Seller
acknowledges that the agreements contained in this Section 14.5(c) are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Purchaser would not enter into this Agreement;
accordingly, if Seller fails to promptly pay the amount due pursuant to this
Section 14.5(c), and, in order to obtain such payment, Purchaser commences a
suit which results in a judgment against the Seller for the fee set forth in
this paragraph (c), the non-prevailing party shall pay to the prevailing party
its costs and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the fee at the prime rate of
NationsBank of Texas, N.A. in effect on the date such payment was required to
be made.
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14.6 PUBLIC DISCLOSURES. Except as otherwise required by law, no
party to this Agreement shall make any public or other disclosure of this
Agreement or the transactions contemplated hereby without the prior consent of
the other parties. The parties to this Agreement shall cooperate with respect
to the form and content of any such disclosures.
14.7 TRANSFER TAXES. Each party to this Agreement shall be
responsible for payment of all of their respective sales, use, excise,
documentary, registration, stamp, stock transfer and other transfer Taxes and
fees (including any related interest, penalties or other additions to Tax)
(collectively, "Transfer Taxes") arising from the consummation of the
transactions contemplated by this Agreement, and for the costs and expenses
related to the filing of all required Tax Returns relating to such Transfer
Taxes. The party regularly required by applicable law to file any such Tax
Return shall prepare the return and file the return and pay all Taxes required
in respect thereof.
14.8 ARBITRATION. The parties hereto shall submit to binding
arbitration by a board of three arbitrators any disputed question or
controversy arising under this Agreement or arising out of or relating to the
transaction contemplated by this Agreement. Any such arbitration shall be
conducted in Wilmington, Delaware. Any party may initiate the arbitration, by
notice in writing to the other party, setting forth the nature of the dispute,
the amount involved, if any, and the remedy sought. Any party desiring to
initiate arbitration shall serve a written notice of intention to arbitrate to
the other party and to the American Arbitration Association ("AAA") office in
or closest to Wilmington, Delaware, and the AAA will administer such
arbitration in accordance with the Commercial Arbitration Rules of the AAA then
in effect (the "Arbitration Rules").
The board of three arbitrators shall be appointed promptly
upon written application of the initiating party, and shall be selected in
accordance with the Arbitration Rules. All of the arbitrators shall be members
of the National Academy of Arbitrators. The board of arbitrators appointed
hereunder shall conduct the arbitration pursuant to the Arbitration Rules,
except as such rules may be modified for the purpose of the arbitration
proceeding by mutual written agreement of the parties to this Agreement. No
depositions may be taken or other discovery obtained except for the exchange of
documents and witness lists as provided by the Arbitration Rules or by the
mutual agreement of the parties.
The award of the arbitrators, or a majority of them, shall be
final and binding upon the parties hereto and judgment thereon may be entered
in any court having jurisdiction. All statutes of limitations which would
otherwise be applicable shall apply to any arbitration proceeding hereunder.
The provisions of this section shall survive any termination, amendment, or
expiration of this Agreement unless all the parties hereto otherwise expressly
agree in writing.
The arbitrators, or a majority of them, may award reasonable
attorney's fees and costs to the prevailing party pursuant to the terms of this
Agreement.
Except as set forth above concerning awards to the prevailing
party, each party shall bear its own expenses in connection with preparation
for the presentation of its case at the arbitration proceedings and the fees
and expenses of the arbitrators and all other expenses of the arbitration
(except those referred to in the preceding sentence) shall be borne equally by
the parties to such arbitration.
14.9 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLIED
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.10 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.11 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all purposes
and not only in connection with the specific representation in which they are
explicitly referenced.
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14.12 ENTIRE AGREEMENT . THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES
ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.13 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
14.14 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person (other than PRG, which is deemed to
be a third-party beneficiary with respect to this Agreement) shall acquire or
have any right under or by virtue of this Agreement. No party may assign any
right or obligation hereunder without the prior written consent of the other
party; provided, however, that Purchaser may assign its rights and obligations
hereunder to an affiliate of Purchaser.
14.15 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by Purchaser, and that all parties have read
and negotiated the language used in this Agreement. The parties agree that,
because all parties participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes ambiguous
language in favor of or against any party by reason of that party's role in
drafting this Agreement.
14.16 COSTS OF ENFORCEMENT. In the event that Purchaser, on the one
hand, or Seller, on the other hand, file suit in any court against the other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.17 PRORATIONS. Seller agrees to reimburse Purchaser at Closing a
pro rata portion of all ad valorem Taxes levied upon the Assets for the
calendar year in which the Closing occurs. Such ad valorem Taxes shall be
estimated, apportioned and pro-rated among Seller and Purchaser as of the
Closing Date, and the prorated amount due Purchaser shall be credited to the
Closing Valuation. Upon payment by Purchaser of such ad valorem Taxes actually
assessed and paid on the Assets, Purchaser shall calculate the apportionment of
such ad valorem Taxes and shall pay Seller or may demand from Seller, and
Seller agrees to pay, the amount necessary to correct the estimate and
proration made at Closing.
14.18 WAIVER OF BULK TRANSFER COMPLIANCE. Seller and Purchaser
hereby waive any compliance with the Bulk Transfers Acts of any states in which
the Assets are located. Seller covenants and agrees that all of the creditors
with respect to the Business and the Assets will be paid in full by Seller
prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Purchaser pursuant to this Agreement. If required by
Purchaser, Seller shall furnish Purchaser with proof of payment of all
creditors with respect to the Business and the Assets. Notwithstanding the
foregoing, Seller may dispute the validity or amount of any such creditor's
claim without being deemed to be in violation of this Section 14.18, provided
that such dispute is in good faith and does not unreasonably delay the
resolution of the claim.
14.19 AMENDMENTS; WAIVERS. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.20 SERVICE OF PROCESS. Service of any and all process that may
be served on any party hereto in any suit, action or proceeding arising out of
this Agreement may be made in the manner and to the address set forth in
32
<PAGE> 38
Section 14.3 and service thus made shall be taken and held to be valid personal
service upon such party by any party hereto on whose behalf such service is
made.
14.21 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu of
such provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
14.22 EMPLOYEES (POST-CLOSING). For a period of one (1) year
following the Closing Date, Seller shall not directly or indirectly employ or
solicit for employment any employee of the Business or the Division who accepts
employment with Purchaser or PRG. With respect to persons listed on Exhibit
5.9, PRG will have the ability to continue to evaluate the possibility of
employing such individuals and Seller will cooperate with such evaluation.
14.23 EQUIVISION NAME. Following the Closing Date, Seller shall not
sell or license the right to use the names EquiVision or Equivision to any
other person or entity.
14.24 PARTIES' OBLIGATIONS. The obligations hereunder of the
parties hereto shall be binding solely with respect to the party to be bound,
and except as explicitly otherwise provided herein, no officer, director,
employee or shareholder of such party shall be a guarantor or shall otherwise
be bound by, or liable for, the non-performance of the obligations hereunder of
such party.
33
<PAGE> 39
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PRG GEORGIA, INC.
By:
Its:
EQUIMED, INC.
By:
Its:
PHYSICIANS RESOURCE GROUP, INC.
By:
Its:
34
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
1(c) Additional Pro Forma Adjustments
1(h) Additional Acquisitions
1(h)(i) Form of Asset Purchase Agreement
1(h)(ii) Form of Service Agreement
1(j) Annual After-Tax Contribution
1(aj) Excluded Assets
2.1(a)(i) Locations of Assets & Personal Property
2.1(a)(ii) Assets Owned by Seller at Tucker, Georgia location
2.3(b) Liabilities
3.1 Corporate Existence; Good Standing
3.3 Permits and Licenses
3.5 Consents
3.6 Financial Statements
3.7 Leases
3.9 Real and Personal Property; Encumbrances
3.11 Patents and Trademarks; Names
3.12 Directors and Officers; Payroll Information
3.13 Legal Proceedings
3.14 Contracts (other than Leases)
3.15(h) Assets Sold or Transferred; Debts Cancelled
3.15(j) Capital Expenditures
3.16 Accounts Receivable
3.17(a) Taxes Being Contested
3.17(c) Partnerships
3.18 Debt
3.19(b) Insurance Policies
3.19(c) Pending Claims on Insurance Policies
3.20 Employee Benefit Plans
3.26 Suppliers
3.27 Banking Relations
3.28 Ownership Interests of Interested Persons
3.33(a) Affiliated Practices
5.9 Offer of Employment to Employees
5.12 Transfer Documents
7.5 Service Agreement Amendments
7.9 Leases
9.1(h) Opinion of Counsel of Seller
9.2(f) An Opinion of Counsel to Purchaser
12.1 Exceptions to Noncompete
ANNEX I Purchase Price
</TABLE>
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<PAGE> 41
ANNEX I
PURCHASE PRICE
The consideration to be received by the Seller pursuant to the
Agreement (the "Acquisition Consideration") shall be the sum of (i) the Closing
Valuation, (ii) the Acquisition Valuation and (iii) the CEC Reimbursement. The
Closing Valuation and the CEC Reimbursement shall be paid by wire transfer at
Closing. The Acquisition Valuation shall be paid by wire transfer on or before
the later to occur of (i) May 15, 1997 or (ii) the date of final agreement
between the parties with respect to the Acquisition Pro Forma Net Income in
accordance with Section 1(c), provided that if Purchaser and Seller have not
agreed upon Acquisition Pro Forma Net Income on or prior to May 15, 1997,
Purchaser will, on or prior to May 15, 1997, pay to the Seller the undisputed
part, if any, of the Acquisition Valuation and shall pay to Seller the
remaining portion of the Acquisition Valuation plus interest on such remaining
portion at the rate of 8% per annum from and after May 15, 1997 no later than
the second business day following final determination of Acquisition Pro Forma
Net Income in accordance with Section 1(c) hereof.
36
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
The Merger
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
Certificate of Incorporation and Bylaws of the Surviving Corporation
2.1 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3
Directors and Officers of the Surviving Corporation
3.1 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4
Determination of Consideration; Escrow Adjustment; Conversion of Shares in the Merger
4.1 Determination of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Mechanics of Escrow Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Exchange of Certificates Representing Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 5
Representations and Warranties of the Corporation
5.1 Existence; Good Standing; Corporate Authority; Compliance With Law . . . . . . . . . . . . . . 10
5.2 Authorization, Validity and Effect of Agreements . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Affiliated Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 Affiliated Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Other Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.11 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.13 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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<TABLE>
<S> <C>
5.16 Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.17 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.18 [Intentionally Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.19 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.20 Contracts; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.21 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.22 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.23 Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.24 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.25 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.26 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.27 Recoupment Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.28 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.29 Title to Assets; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.30 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.31 Acquisition Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6
Representations and Warranties of Acquiror
6.1 Existence; Good Standing; Corporate Authority; Compliance With Law . . . . . . . . . . . . . . 28
6.2 Authorization, Validity and Effect of Agreements . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.9 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.10 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.11 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.13 Opinion of Acquiror's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.14 Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.15 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.16 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.17 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.18 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.19 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.20 Patents, Trademarks, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.21 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.22 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.23 Title to Assets; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.24 Shelf Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 7
Covenants
7.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Interim Operations of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Interim Operations of Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Shareholder Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Filings; Other Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.7 Merger Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.9 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.10 Information Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.11 Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.12 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.13 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.14 Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.15 Agreements by Affiliated Stockholders of the Corporation and Acquiror . . . . . . . . . . . . . 40
7.16 Service Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.17 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.18 First Union Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.19 Reasonable Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 8
Conditions
8.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . 41
8.2 Conditions to Obligation of the Corporation to Effect the Merger . . . . . . . . . . . . . . . 42
8.3 Conditions to Obligation of Acquiror and Merger Sub to Effect the Merger . . . . . . . . . . . 43
8.4 Frustration of Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 9
Termination
9.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.2 Termination by Either Acquiror or the Corporation . . . . . . . . . . . . . . . . . . . . . . . 45
9.3 Termination by the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.4 Termination by Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.5 Effect of Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.6 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 10
General Provisions
10.1 Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . 48
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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10.3 Binding Effect; Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.9 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.10 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.11 Incorporation of Exhibits and Disclosure Letters . . . . . . . . . . . . . . . . . . . . . . . 50
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.13 Obligation of Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
EXHIBITS
4.2(i)(a) Form of Letter of Intent
4.2(i)(b) Annual After Tax Contribution
7.15 Affiliates Letters
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 7, 1996, is among PHYSICIANS RESOURCE GROUP, INC., a Delaware
corporation (the "Acquiror"), AMERICAN OPHTHALMIC INCORPORATED, a Florida
corporation (the "Corporation"), and PRG ACQUISITION CORPORATION, a Delaware
corporation and a wholly owned subsidiary of Acquiror ("Merger Sub").
RECITALS
A. The Boards of Directors of the Corporation, Merger Sub and
Acquiror, and Acquiror acting as the sole stockholder of Merger Sub, each have
determined that a business combination between Acquiror and the Corporation is
in the best interests of their respective companies and stockholders, and
presents an opportunity for their respective companies to achieve long-term
strategic objectives and to maximize stockholder value, and accordingly have
agreed to effect the merger provided for herein upon the terms and subject to
the conditions set forth herein, whereby each issued and outstanding share of
common stock, par value $0.01 per share, of the Corporation ("Corporation
Common Stock") will be converted into the right to receive a combination of
cash and common stock, par value $0.01 per share, of Acquiror ("Acquiror Common
Stock").
B. The Corporation, Acquiror and Merger Sub desire to make certain
representations, warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
The Merger
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall
be merged with and into the Corporation in accordance with this Agreement and
the separate corporate existence of Merger Sub shall thereupon cease (the
"Merger"). The Corporation shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Florida, and all of the
rights, privileges, powers, immunities, purposes and franchises of Merger Sub
shall be vested in the Surviving Corporation. The Merger shall have the
effects specified in Section 259 of the Delaware General Corporation Law (the
"DGCL") and Section 1106 of the Florida Business Corporation Act (the "Florida
Act").
1
<PAGE> 7
1.2 The Closing. The closing of the Merger (the "Closing") shall
take place (i) at the executive offices of Acquiror in the State of Texas, at
9:00 a.m., local time, on the first business day immediately following the day
on which the last to be fulfilled or waived of the conditions set forth in
Article 8 shall be fulfilled or waived in accordance herewith or (ii) at such
other time and place and/or on such other date as the Corporation and Acquiror
may agree. The date on which the Closing occurs is hereafter referred to as
the "Closing Date."
1.3 Effective Time. If all the conditions to the Merger set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated in accordance with Article 9, the
parties hereto shall, on the Closing Date, cause a Certificate of Merger
meeting the requirements of Section 252 of the DGCL to be properly executed and
filed with the Secretary of State of the State of Delaware in accordance with
such section and cause Articles of Merger meeting the requirements of Section
1105 of the Florida Act to be properly executed and filed with the Florida
Department of State in accordance with such section. The Merger shall become
effective at the time of the later to occur of the filing of the Certificate of
Merger in accordance with the DGCL and the filing of the Articles of Merger in
accordance with the Florida Act or at such later time as the parties hereto
have theretofore agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
ARTICLE 2
Certificate of Incorporation and Bylaws of the Surviving Corporation
2.1 Certificate of Incorporation. Effective at the Effective Time,
the Articles of Incorporation of the Corporation shall be the Articles of
Incorporation of the Surviving Corporation.
2.2 Bylaws. The Bylaws of the Corporation in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation.
ARTICLE 3
Directors and Officers of the Surviving Corporation
3.1 Directors. The persons who are directors of Merger Sub
immediately prior to the Effective Time shall, from and after the Effective
Time, be and become directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
3.2 Officers. The persons who are officers of Merger Sub immediately
prior to the Effective Time shall, from and after the Effective Time, be and
become officers of the Surviving
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Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws.
ARTICLE 4
Determination of Consideration; Escrow Adjustment; Conversion of Shares in the
Merger
4.1 Determination of Consideration.
(i) The aggregate value of the consideration to be paid by the
Acquiror in connection with the consummation of the Merger shall be
$70,000,000, subject to adjustment as set forth in subsection (iv) below. The
aggregate Merger Consideration shall be comprised of $35,000,000 in cash,
subject to adjustment as set forth in subsection (iv) below (the "Cash
Consideration") and a number of fully paid and nonassessable shares of Acquiror
Common Stock determined in accordance with this Section 4.1 (such shares of
Acquiror Common Stock being referred to herein as the "Stock Consideration").
The Cash Consideration and Stock Consideration are collectively referred to
herein as the "Merger Consideration".
(ii) The number of shares of Acquiror Common Stock comprising
the Stock Consideration shall be the quotient of $35,000,000 and the Acquiror
Share Price, as defined in subsection (iii) below, subject to adjustment as set
forth in subsection (iv) below.
(iii) The Acquiror Share Price shall be $23.35.
(iv) The Merger Consideration shall be subject to reduction by
the Escrow Adjustment (as defined in Section 4.2), if any, and shall be reduced
by an amount equal to the aggregate of any and all of the Corporation's
contractual severance obligations to Messrs. Whatley, Billing and Robbins (the
"Severance Adjustment"). The Merger Consideration shall be subject to increase
by the amount of any Voting Debt (as hereinafter defined) that is converted
into shares of Corporation Common Stock or repaid between the date hereof and
the Effective Time.
4.2 Mechanics of Escrow Adjustment.
(i) As used in this Agreement, the term "Escrow Adjustment"
shall mean that amount determined by multiplying (x) $400,000 less aggregate
Annual Pro Forma Net Income (hereafter defined) represented by letters of
intent (in substantially the form attached hereto as Exhibit 4.2(i)) to acquire
the assets or all of the outstanding capital stock of, and enter into
management services agreements with, eye care practices or ambulatory surgery
centers that are binding on the Acquisition Targets (hereafter defined) to
which the Corporation is a party on the tenth (10th) day prior to the Closing
Date, that meet the Purchase Price Criteria (hereinafter defined) and which
comply with Acquiror's financial, operational and legal due diligence standards
(which the parties acknowledge includes an audit by an independent
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<PAGE> 9
Medicare/Medicaid consultant) by (y) 25.00. As used herein, the term
"Acquisition Target" shall mean one of the eye care practices or ambulatory
surgery centers that is identified on Exhibit 4.2(i)(c), which shall be
provided to Acquiror and Merger Sub by the Corporation by 5:00 p.m., e.d.t.
October 8, 1996. As used herein, the term "Purchase Price Criteria" shall mean
a purchase price not to exceed fourteen (14) times Annual After Tax
Contribution (hereafter defined), a minimum of fifty percent (50%) of which
shall consist of shares of Acquiror Common Stock, the issuance of which is
unregistered or the resale of which is contractually restricted so that the
shares may be sold only in accordance with the holding period and volume
limitations of Rule 144 under the Securities Act, of 1933, as amended (the
"Securities Act") and thirty percent (30%) which shall consist of freely
tradeable shares of Acquiror Common Stock. As used in this Agreement, Annual
After Tax Contribution shall mean with respect to each Acquisition Target, the
pro forma impact of the Acquisition Target on Acquiror's net income as
calculated on Exhibit 4.2(i)(b). If the amount calculated pursuant to the
first sentence of this clause (i) is a negative number, there shall be no
Escrow Adjustment.
(ii) As used in this Agreement, Annual Pro Forma Net Income
shall mean the net income determined on an accrual basis in accordance with
generally accepted accounting principles consistently applied of each
Acquisition Target adjusted to reflect the pro forma effect on the Acquiror's
Net Income of the acquisition of such Acquisition Target as if such acquisition
had been consummated on January 1, 1996 and annualized for the year ended
December 31, 1996 using Acquiror's accounting methods, estimated useful lives
and policies. The pro forma adjustments to be made in calculating Annual Pro
Forma Net Income shall include, among other items (i) amortization of any
intangible assets created in the acquisition of an Acquisition Target, (ii) a
factor of 8% of the purchase price for an Acquisition Target representing the
cost of capital, and (iii) calculation of income taxes, exclusive of any
nonrecurring tax benefits. Annual Pro Forma Net Income as of the Closing Date
shall be calculated by Acquiror and approved by the Corporation using
Acquiror's accounting methods, estimated useful lives, and policies and in
accordance with generally accepted accounting principles, consistently applied,
and application of the pro forma adjustments discussed above. In order to
determine the amount of the Escrow Adjustment, on or prior to the sixth day
prior to the Closing Date, Acquiror shall deliver to Thomas R. Whatley, in
writing, Acquiror's calculation of the Annual Pro Forma Net Income. If Thomas
R. Whatley objects to Acquiror's calculation of the Annual Pro Forma Net
Income, he shall so inform Acquiror in writing (a "Dispute Notice") within two
days of receipt by Thomas R. Whatley of Acquiror's calculation. In the absence
of such Dispute Notice, Acquiror's calculation shall be final and binding on
each party to this Agreement. If a Dispute Notice is delivered to Acquiror,
Acquiror and Thomas R. Whatley shall negotiate in good faith to resolve any
differences related to the calculation of the Annual Pro Forma Net Income
promptly following delivery of the Dispute Notice. If Acquiror and Thomas R.
Whatley fail to reach agreement after one day of such good faith negotiations,
then the Annual Pro Forma Net Income shall be determined by a partner in the
Houston, Texas office of Coopers & Lybrand, L.L.P. with significant health care
experience (the "Determining Party"), whose determination of the Annual Pro
Forma Net Income shall be final and binding on each party hereto. In the event
that it is necessary for the Determining Party to calculate the Annual Pro
Forma Net Income, Acquiror and Thomas R. Whatley will fully cooperate with the
Determining Party in order to enable the Determining Party to reach its
determination as soon as practicable, but in
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no event later than the Closing Date. The cost of retaining the Determining
Party will be borne fifty percent (50%) by Acquiror and fifty percent (50%)
through a deduction from the Escrow Adjustment.
(iii) On the Closing Date the Escrow Adjustment, if any, shall
be placed into escrow with U.S. Trust Company of Texas, N.A. or another
financial institution mutually acceptable to Acquiror and the Corporation
pursuant to an escrow agreement having terms reasonably acceptable to Acquiror
and the Corporation that are consistent with the terms of this Agreement. The
amounts placed in escrow shall be comprised of fifty percent (50%) cash and
fifty percent (50%) freely tradeable shares of Acquiror Common Stock, based on
a per share value equal to the Acquiror Stock Price.
(iv) To the extent that within 30 days following the Closing
Date the Acquiror has been provided by any of Thomas R. Whatley, James C.
Washburn, Kathryn L. Sweers and Eric Ostarly with letters of intent related to
Acquisition Targets or that within 120 days following the Closing Date Acquiror
or any Acquiror Subsidiary has consummated an acquisition involving an
Acquisition Target (a "Subsequent Acquisition") representing Annual Pro Forma
Net Income in an amount up to the Escrow Adjustment, on the later of the 135th
day following the Closing Date or such date upon which the Determining Party
(as defined below) reaches its determination, that portion of the Escrow
Adjustment (together with any interest thereon) obtained by multiplying the
amount of additional Annual Pro Forma Net Income represented by the additional
letters of intent and Subsequent Acquisitions by 25, shall be transferred to
Exchange Agent (hereinafter defined) for the benefit of the shareholders of the
Corporation, fifty percent (50%) in cash and fifty percent (50%) in Acquiror
Common Stock based on the Acquiror Stock Price, and the remainder of the Escrow
Adjustment (together with any interest thereon) shall be released to Acquiror.
If the Annual Pro Forma Net Income represented by the additional letters of
intent and Subsequent Acquisitions is equal to or exceeds the Escrow
Adjustment, the entire Escrow Adjustment (together with any interest thereon)
shall be distributed to the Exchange Agent (hereinafter defined) for the
benefit of the shareholders of the Corporation. If within 120 days following
the Closing Date, the Acquiror has not been provided any additional letters of
intent to acquire Acquisition Targets or consummated a Subsequent Acquisition,
on the 135th day following the Closing Date the Escrow Adjustment (together
with any interest thereon) shall be released to Acquiror. On or prior to the
125th day following the Closing Date, Acquiror shall deliver to Thomas R.
Whatley in writing, Acquiror's calculation of the additional Annual Pro Forma
Net Income. If Thomas R. Whatley objects to Acquiror's calculation of the
additional Annual Pro Forma Net Income, he shall deliver to Acquiror a Dispute
Notice within five days of receipt by Thomas R. Whatley of Acquiror's
calculation. In the absence of such Dispute Notice, Acquiror's calculation
shall be final and binding on each party to this Agreement. If a Dispute
Notice is delivered to Acquiror, Acquiror and Thomas R. Whatley shall negotiate
in good faith to resolve any differences related to the calculation of the
additional Annual Pro Forma Net Income promptly following delivery of the
Dispute Notice. If Acquiror and Thomas R. Whatley fail to reach agreement
after three business days of such good faith negotiations, then the additional
Annual Pro Forma Net Income shall be determined by the Determining Party, whose
determination of the additional Annual Pro Forma Net Income shall be final and
binding on each party hereto. In the event that it is necessary for the
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Determining Party to calculate the additional Annual Pro Forma Net Income,
Acquiror and Thomas R. Whatley will fully cooperate with the Determining Party
in order to enable the Determining Party to reach its determination as soon as
practicable, but in no event later than 15 days after the matter is referred to
the Determining Party. The cost of retaining the Determining Party will be
borne equally fifty percent (50%) by Acquiror and fifty percent (50%) through a
deduction from the Escrow Adjustment.
4.3 Conversion of Shares.
(i) (a) At the Effective Time, each share of Corporation
Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares of Corporation Common Stock held by persons who
object to the Merger and comply with all provisions of the Florida law
concerning the right of such holders to dissent from the Merger and
demand appraisal of their shares ("Dissenting Common Holders")) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the Merger Consideration
Per Share and the Escrow Adjustment Per Share. As used herein, the term
"Merger Consideration Per Share" shall mean the amount determined in
accordance with the following formula:
M = C - D
-----
S
M = the Merger Consideration Per Share of Corporation Common Stock
C = $70,000,000 minus the Escrow Adjustment, minus the Severance
Adjustment and minus the aggregate amount paid pursuant to
Section 4.3(v) hereof and plus the amount of any Voting Debt that
is converted into shares of Corporation Common Stock or repaid
between the date hereof and the Effective Time.
D = the aggregate amount of accrued and unpaid dividends on the
Convertible Preferred Stock as of the Effective Time.
S = the number of shares of Corporation Common Stock outstanding at
the Effective Time (including as outstanding all shares issuable
upon the conversion of all outstanding shares of Convertible
Preferred Stock (as defined in Section 5.3 hereof) and the
exercise of all outstanding warrants to purchase shares of
Corporation Common Stock).
(b) At the Effective Time, each share of Convertible
Preferred Stock (as hereinafter defined) of the Corporation issued and
outstanding immediately prior to the Effective Time (other than shares
of Convertible Preferred Stock held by persons who object to the Merger
and comply with all provisions of the Florida Act concerning the right
of such holders to dissent from the Merger and demand appraisal of their
shares (together with the Dissenting Common Holders, the "Dissenting
Holders")) shall, by
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virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive (A) an amount equal to
accrued and unpaid dividends on such share as of the Effective Time,
payable fifty percent (50%) in cash and fifty percent (50%) in shares of
Acquiror Common Stock based on the Acquiror Stock Price, plus (B) an
amount equal to the Merger Consideration Per Share multiplied by the
number of shares of Corporation Common Stock into which such share is
convertible, in accordance with its terms, as of the Effective Time,
plus (C) an amount equal to the Escrow Adjustment Per Share multiplied
by the number of shares of Corporation Common Stock into which such
share is convertible, in accordance with its terms, as of the Effective
Time.
The "Escrow Adjustment Per Share" shall mean the amount of the Escrow
Adjustment transferred to the Exchange Agent pursuant to Section 4.2(iv)
allocated on the same proportionate basis as the Merger Consideration Per
Share. The Merger Consideration Per Share and Escrow Adjustment Per Share
shall be paid fifty percent (50%) in cash and fifty percent (50%) in shares of
Acquiror Common Stock based on the Acquiror Stock Price.
(ii) As a result of the Merger and without any action on the
part of the holder thereof, except as otherwise contemplated by Section
4.3(iii), all shares of Corporation Common Stock shall cease to be outstanding
and shall be cancelled and retired and shall cease to exist, and each holder of
a certificate (a "Certificate") representing any shares of Corporation Common
Stock or Convertible Preferred Stock shall thereafter cease to have any rights
with respect to such shares of Corporation Common Stock or Convertible
Preferred Stock, as the case may be, except the right to receive, without
interest, the Merger Consideration and cash for fractional interests of the
Acquiror Common Stock in accordance with Sections 4.1(i) and 4.4(v)) upon the
surrender of such Certificate.
(iii) Each share of Corporation Common Stock issued and
outstanding at the Effective Time and owned by any of the Acquiror, Acquiror
Subsidiaries, and each share of Corporation Common Stock issued and held in the
Corporation's treasury at the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, shall cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(iv) At the Effective Time, each share of Common Stock, par
value $0.01 per share, of Merger Sub issued and outstanding immediately prior
to the Effective Time as a result of the Merger shall continue to be an issued
and outstanding share of Common Stock of the Surviving Corporation. Each
certificate representing immediately prior to the Effective Date issued shares
of Common Stock of Merger Sub shall continue to evidence ownership of the same
number of shares of Common Stock of the Surviving Corporation.
(v) Prior to the Effective Time, the Corporation shall offer a
supplemental agreement or agreements to each of the holders of outstanding
options to purchase Corporation Common Stock providing that at the Effective
Time, unless such options have been previously
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exercised, each such option shall then be automatically redeemed in
consideration for payment mutually agreed upon by such holder and the
Corporation.
(vi) At or prior to the Effective Time, any outstanding
redeemable preferred stock of a Corporation Subsidiary (as defined in Section
5.4) shall have been redeemed by such Corporation Subsidiary.
(vii) At or prior to the Effective Time, each outstanding
warrant to acquire Corporation Common Stock shall have been exercised by the
holder of such warrant pursuant to the terms thereof.
(viii) Notwithstanding anything in this Agreement to the
contrary, shares of Corporation Common Stock outstanding immediately prior to
the Effective Time held by a Dissenting Holder (if any) ("Dissenting Shares")
shall not be converted into a right to receive the Merger Consideration and
cash in lieu of fractional shares in accordance with Sections 4.1(i) and
4.4(v), unless such Dissenting Holder fails to perfect or otherwise loses such
holder's right to appraisal, if any. If, after the Effective Time, such
Dissenting Holder fails to perfect or loses any such right to appraisal, such
shares shall be treated as if they had been converted as of the Effective Time
into the right to receive the Merger Consideration and cash in lieu of
fractional shares in accordance with Section 4.4(v) hereof. The Corporation
shall give prompt notice to Acquiror of any demands received by the Corporation
for appraisal of shares of Corporation Common Stock, and Acquiror shall have
the right to participate in and direct all negotiations and proceedings with
respect to such demands. The Corporation shall not, except with the prior
written consent of Acquiror, make any payment with respect to, or settle or
offer to settle, any such demands.
4.4 Exchange of Certificates Representing Shares.
(i) As of the Effective Time, Acquiror shall make available,
or shall cause to be made available, with an exchange agent selected by
Acquiror, which shall be Acquiror's transfer agent or such other party
reasonably satisfactory to the Corporation (the "Exchange Agent"), for the
benefit of the holders of shares of Corporation Common Stock, for exchange in
accordance with this Article 4, the aggregate Cash Consideration and
certificates representing the aggregate Stock Consideration in each case, less
the Escrow Adjustment, if any (such aggregate Stock Consideration, together
with the amount of any dividends or distributions with respect thereto, the
aggregate Cash Consideration as so deposited, and any of the Escrow Adjustment
so deposited thereafter being hereinafter referred to as the "Exchange Fund")
in exchange for outstanding shares of Corporation Common Stock.
(ii) Within a reasonable period following the Effective Time,
Acquiror shall cause the Exchange Agent to mail to each person who was, at the
Effective Time, a holder of record (other than any of the Acquiror, Acquiror
Subsidiaries or the Corporation) of a Certificate or Certificates (a) a letter
of transmittal which shall specify that delivery shall be effected, and the
risk of loss and title to the Certificates shall pass, upon (and only upon)
delivery of the Certificates to the Exchange Agent, and which shall be in such
form and have
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such other provisions as the Acquiror may reasonably specify, and (b)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing Acquiror Common Stock. Upon surrender to the
Exchange Agent of a Certificate for cancellation together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of shares of Acquiror
Common Stock and unpaid dividends and distributions, if any, which such holder
has the right to receive in respect of the Certificate surrendered pursuant to
the provisions of this Article 4 and a check representing the Cash
Consideration which such holder has the right to receive pursuant to the
provisions of this Article 4 (including any cash payable in lieu of any
fractional share of Acquiror Common Stock in accordance with Section 4.4(v)
hereof), after giving effect to any required tax withholdings, and the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the amount payable upon surrender of Certificates. In the
event of a transfer of ownership of shares of Corporation Common Stock which is
not registered in the transfer records of the Corporation, a check and/or one
or more certificates representing the proper amount of Cash Consideration and
Stock Consideration, respectively, may be issued to such a transferee if the
Certificate representing such shares of Corporation Common Stock is presented
to the Exchange Agent, accompanied by all documents required by the Exchange
Agent to evidence and effect such transfer of shares of Corporation Common
Stock and to evidence that any applicable stock transfer taxes have been paid.
(iii) Notwithstanding any other provisions of this Agreement, no
dividends on Acquiror Common Stock shall be paid with respect to any shares of
Corporation Common Stock or Convertible Preferred Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of certificates
representing shares of Acquiror Common Stock issued in exchange therefor,
without interest, (a) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such shares of Acquiror Common Stock and not paid, less
the amount of any withholding taxes which may be required thereon, and (b) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender thereof and
a payment date subsequent to surrender thereof payable with respect to such
shares of Acquiror Common Stock, less the amount of any withholding taxes which
may be required thereon.
(iv) At or after the Effective Time, there shall be no
transfers on the stock transfer books of the Corporation of shares of
Corporation Common Stock or Convertible Preferred Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates for shares of Stock Consideration and
the Cash Consideration in accordance with the procedures set forth in this
Article 4.
(v) Notwithstanding any other provision of this Article 4, no
fractional shares of Acquiror Common Stock will be issued and any holder of
shares of Corporation Common Stock or Convertible Preferred Stock entitled
hereunder to receive a fractional share of Acquiror
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<PAGE> 15
Common Stock but for this Section 4.4(v) will be entitled hereunder to receive
no such fractional share of Acquiror Common Stock but a cash payment in lieu
thereof, which payment shall represent such holder's proportionate interest in
the net proceeds from the sale by the Exchange Agent on behalf of all such
holders of the aggregate fractional shares of Acquiror Common Stock that such
holders would be entitled to receive but for this Section 4.4(v). Any such
sale shall be made by the Exchange Agent within ten business days after the
date upon which the Certificate(s) that would otherwise result in the issuance
of shares of Acquiror Common Stock have been received by the Exchange Agent.
(vi) Any portion of the Exchange Fund (including the proceeds
of any investments thereof and any shares of Acquiror Common Stock) that is
unclaimed by the former shareholders of the Corporation on the first
anniversary of the Effective Time shall be delivered to the Surviving
Corporation. Any former stockholders of the Corporation who have not
theretofore complied with this Article 4 shall thereafter look to the Surviving
Corporation only as general creditors for payment of their claim for Merger
Consideration, any cash in lieu of fractional shares, and any unpaid dividends
and distributions on shares of Acquiror Common Stock, deliverable in respect of
each share of Corporation Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case without any interest thereon.
(vii) None of the Corporation, the Surviving Corporation, Merger
Sub, the Exchange Agent or any other person shall be liable to any former
holder of shares of Corporation Common Stock or Convertible Preferred Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(viii) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of Acquiror Common Stock,
deliverable in respect thereof pursuant to this Agreement.
ARTICLE 5
Representations and Warranties of the Corporation
The Corporation represents and warrants to Acquiror as of the date of
this Agreement as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance With
Law. The Corporation is a corporation duly incorporated, validly existing and
in good standing under the laws of Florida. The Corporation is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the character
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of the properties owned or leased by it therein or in which the transaction of
its business makes such qualification necessary, except where the failure to be
so qualified would not have a material adverse effect on the business of the
Corporation, the Corporation Subsidiaries (as defined in Section 5.4 hereof),
and the Partnerships (as defined in Section 5.5 hereof) taken as a whole (a
"Corporation Adverse Effect"). As used in this Agreement, the term "material
adverse effect" means, with respect to any entity, a material adverse effect on
the financial condition, properties, business, or results of operations of such
entity and its subsidiaries taken as a whole, and on the ability of such entity
to perform its obligations hereunder or to consummate the transactions
contemplated hereby. The Corporation has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted. The Corporation has delivered to Acquiror complete and correct
copies of its articles of incorporation and bylaws, the articles of
incorporation and bylaws of each Corporation Subsidiary and the partnership
agreement for each Partnership, in each case as amended to the date hereof.
5.2 Authorization, Validity and Effect of Agreements. Subject only
to the approval of this Agreement and the Merger by the holders of a majority
of the outstanding shares of Corporation Common Stock, the Corporation has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby, and the consummation by
the Corporation of the transactions contemplated hereby, have been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of the Corporation enforceable in accordance with their
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
5.3 Capitalization. The authorized capital stock of the Corporation
consists of 10,000,000 shares of Corporation Common Stock and 2,000,000 shares
of preferred stock, par value $0.01 per share, of the Corporation. At the
close of business on September 30, 1996, (a) 2,515,443 shares of Corporation
Common Stock were outstanding and options to acquire 768,500 shares of
Corporation Common Stock (the "Corporation Options") were outstanding under the
American Ophthalmic, Inc. Stock Option Plan (the "Corporation Stock Option
Plan"), (b) warrants to acquire 400,000 shares of Corporation Common Stock were
outstanding ("Corporation Warrants"), (c) 150,000 shares of Series A
Convertible Preferred Stock, par value $0.01 per share, of the Corporation (the
"Convertible Preferred Stock") were outstanding, (d) no shares of Corporation
Common Stock and no shares of preferred stock of the Corporation were held by
the Corporation in its treasury, (e) no shares of the Corporation Common Stock
or preferred stock of the Corporation were held by any of the Corporation's
subsidiaries and (f) $4,320,000 in principal amount of bonds, debentures, notes
or other evidences of indebtedness having the right to vote (or convertible
into securities having the right to vote) on any matters on which the
stockholders of the Corporation may vote ("Voting Debt"), were issued or
outstanding. The Corporation has reserved or available for issuance 796,800
shares of Corporation Common Stock in connection with the Corporation Stock
Option Plan (including the 768,500 shares available for issuance pursuant to
Corporation Options), 400,000 shares of
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Corporation Common Stock in connection with the Corporation Warrants, 3,762,014
shares of Corporation Common Stock in connection with the Convertible Preferred
Stock and 409,321 shares of Corporation Common Stock in connection with the
Voting Debt. No other shares of Corporation Common Stock are reserved for
issuance. All such issued and outstanding shares of Corporation Common Stock
and Convertible Preferred Stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Other than as set forth
above or in the disclosure letter to be delivered by the Corporation to
Acquiror at or prior to October 9, 1996, the captions in which correspond to
the relevant portions of this Agreement (the "Corporation Disclosure Letter"),
or as contemplated by this Agreement, there are not at the date of this
Agreement any existing options, warrants, calls, subscriptions, convertible
securities, or other rights or other agreements or commitments which obligate
the Corporation or any of the Corporation Subsidiaries (hereinafter defined) to
issue, transfer or sell any shares of capital stock of the Corporation or any
of the Corporation Subsidiaries (hereinafter defined). The Corporation
Disclosure Letter will include a true and complete list of all options
currently outstanding under the Corporation Stock Option Plan, including the
names of the holders thereof and the number of shares subject to each option.
After the Effective Time, the Surviving Corporation will have no obligation to
issue, transfer or sell any shares of Corporation Common Stock or common stock
of the Surviving Corporation pursuant to any Employee Benefit Plan (as defined
in Section 5.14).
5.4 Subsidiaries. Except as set forth in the Corporation Disclosure
Letter, the Corporation owns directly or indirectly all of the outstanding
shares of capital stock of each of the Corporation's subsidiaries
(individually, a "Corporation Subsidiary" and collectively, the "Corporation
Subsidiaries"). Except as set forth in the Corporation Disclosure Letter, each
of the outstanding shares of capital stock of each of the Corporation
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by the Corporation free and clear of all
liens, pledges, security interests, claims or other encumbrances other than
liens imposed by local law which are not material. Each Corporation Subsidiary
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each Corporation Subsidiary is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a Corporation Adverse Effect. The following
information for each Corporation Subsidiary will be set forth in the
Corporation Disclosure Letter, if applicable: (i) its name and jurisdiction of
incorporation; (ii) its authorized capital stock or share capital; (iii) the
number of issued and outstanding shares of capital stock or share capital; and
(iv) the names of its directors and officers.
5.5 Affiliated Partnerships. The Corporation Disclosure Letter lists
each entity in which the Corporation or any Corporation Subsidiary holds a
partnership interest (individually, a "Partnership" and collectively, the
"Partnerships"). The Corporation or a Corporation Subsidiary holds its
interests in each Partnership free and clear of all liens, pledges, security or
other interests and encumbrances other than liens imposed by local law which
are not material. Each Partnership is duly organized and in good standing
under the laws of its jurisdiction of
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organization. Each Partnership is duly organized, licensed or qualified to do
business as a foreign partnership and is in good standing under the laws of
each jurisdiction in which the character of the properties owned or leased by
it therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
Corporation Adverse Effect. The following information for each Partnership is
set forth in the Corporation Disclosure Letter: (i) its name and jurisdiction
of organization; (ii) the Corporation or Corporation subsidiary's percentage
interest in the Partnership and whether that interest is a general partnership
interest or a limited partnership interest; (iii) the identity of the general
partner, and if applicable, the general partner's executive officers and (iv)
the nature of the Partnership's business.
5.6 Affiliated Practices. The Corporation Disclosure Letter lists
the following:
(i) Each entity with which the Corporation or a Corporation
Subsidiary has entered into a management services agreement or similar
agreement requiring the Corporation or a Corporation Subsidiary to provide
medical practice management or similar services (each such entity is referred
to herein as an "Affiliated Practice" and collectively such entities are
referred to herein as the "Affiliated Practices");
(ii) Each ambulatory surgery center with respect to which the
Corporation, a Corporation Subsidiary or a Partnership is affiliated (a
"Corporation ASC");
(iii) With respect to each Affiliated Practice, the type of
entity that comprises the Affiliated Practice, its jurisdiction of organization
or formation, the principal location at which the Affiliated Practice conducts
business and nature of its business (i.e., ophthalmology, optometry, ambulatory
surgical center, optical shop, etc.);
(iv) Except as set forth in the Corporation Disclosure Letter
or as would not have a Corporation Adverse Effect, each Affiliated Practice and
Corporation ASC is duly qualified and has all necessary licenses, permits,
approvals, consents, qualifications, authorizations and accreditation of any
governmental agency or authority, including but not limited to, any health care
regulatory authority, and under all applicable laws or regulations as are
required to own its assets and properties as now owned and to carry on its
business as now conducted (the "Approvals"), and the continuation, validity and
effectiveness of all the Approvals will not be adversely affected by the
execution of this Agreement or the consummation of the transactions
contemplated thereby; and
(v) Except for any letter of intent, neither the Corporation
nor any Corporation Subsidiary or Partnership is a party to any binding
agreement with respect to the acquisition of the assets of or entry into a
management services relationship with any medical or optometric practice or
ambulatory surgery center.
5.7 Other Interests. Except as set forth in the Corporation
Disclosure Letter, to the knowledge of the executive officers of the
Corporation, none of the Corporation, any
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Corporation Subsidiary, or any Partnership owns directly or indirectly any
interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity.
5.8 Noncontravention. Except as set forth in the Corporation
Disclosure Letter, neither the execution and delivery by the Corporation of
this Agreement, nor the consummation by the Corporation of the transactions
contemplated hereby in accordance with the terms hereof, will (i) conflict with
or result in a breach of any provisions of the articles of incorporation or
bylaws of the Corporation or any Corporation Subsidiary or the partnership
agreement of any Partnership; (ii) result in a breach or violation of, a
default under, or the triggering of any payment or other material obligations
pursuant to, or accelerate vesting under the Corporation Stock Option Plan or
any grant or award made thereunder, (iii) violate, or conflict with, or result
in a material breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of,
or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the material
properties of the Corporation, any Corporation Subsidiary or any Partnership
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any material license, franchise, permit, lease,
contract, agreement, management services agreement or other instrument or
commitment or obligation ("Contracts") to which the Corporation, any
Corporation Subsidiary or any Partnership is a party other than Contracts which
require the consent of the other party or parties thereto to assign or transfer
to Merger Sub or Acquiror by reason of the execution of this Agreement or the
consummation of the transactions contemplated herein, which required consents
are set forth in the Corporation Disclosure Letter, or by which the
Corporation, any Corporation Subsidiary or Partnership or any of its properties
is bound or affected except, in the case all the matters described in this
clause (iii), with respect to matters which would not reasonably be expected to
result in a Corporation Adverse Effect; or (iv) other than the filings provided
for in Article 1 hereof, and as required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and under the Securities Act and
applicable state securities laws and in connection with the maintenance of
qualification to do business in other jurisdictions (collectively, the
"Regulatory Filings"), require any material consent, approval or authorization
of, or declaration, filing or registration with, any domestic governmental or
regulatory authority, the failure to obtain which would have Corporation
Adverse Effect.
5.9 Financial Statements. The Corporation Disclosure Letter contains
the consolidated balance sheets of the Corporation (including the related notes
and schedules) dated December 31, 1994 and 1995 and June 30, 1996, and each of
such balance sheets fairly presents the consolidated financial position of the
Corporation as of its date. The Corporation Disclosure Letter contains the
consolidated statements of income, retained earnings and cash flows of the
Corporation (including any related notes and schedules) for the years ended
December 31, 1993, 1994 and 1995 and for the six months ended June 30, 1996,
and each of such statements fairly presents the results of operations, retained
earnings and cash flows, as the case may be, of the Corporation for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which would not be material in amount or effect), in
each
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case in accordance with generally accepted accounting principles consistently
applied during the periods involved, except as may be noted therein. Except as
and to the extent set forth on the consolidated balance sheet of the
Corporation at June 30, 1996 (the "Balance Sheet") including all notes thereto,
neither the Corporation nor any of the Corporation Subsidiaries or Partnerships
has any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on,
or reserved against in, a consolidated balance sheet of the Corporation or in
the notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date. The Corporation Disclosure Letter contains
pro forma financial statements of the Corporation (including a consolidated pro
forma balance sheet dated June 30, 1996 and consolidated statements of
operations for the year ended December 31, 1995 and the six months ended June
30, 1996), and such statements have been prepared in accordance with generally
accepted accounting principles consistently applied in accordance with the
Corporation's past practices and fairly present the pro forma financial
condition and results of operations of the Corporation at and for the time
periods indicated thereon.
5.10 Litigation. Except as disclosed in the Corporation Disclosure
Letter, there are no actions, suits or proceedings pending against the
Corporation, the Corporation Subsidiaries, the Partnerships, the Affiliated
Practices or the Corporation ASC's or, to the knowledge of the executive
officers of the Corporation, threatened against the Corporation, the
Corporation Subsidiaries, the Partnerships, the Affiliated Practices or the
Corporation ASC's, at law or in equity, or before or by any federal, state or
local commission, board, bureau, agency or instrumentality that are reasonably
likely to have a Corporation Adverse Effect.
5.11 Absence of Certain Changes. Except as set forth in the
Corporation Disclosure Letter, since June 30, 1996 the Corporation, the
Corporation Subsidiaries, the Partnerships, the Affiliated Practices and the
Corporation ASC's have conducted their respective businesses only in the
ordinary course and there has not been (i) any damage, destruction or loss (not
covered by insurance) with respect to any material assets of the Corporation or
the Corporation Subsidiaries or Partnerships; (ii) any change in the
Corporation or any Corporation Subsidiary or Partnership or any development or
combination of developments of which its management has knowledge which has
resulted or is reasonably likely to result in a Corporation Adverse Effect;
(iii) any declaration, setting aside or payment of any dividend or other
distribution with respect to the shares of Corporation Common Stock; or (iv)
any material change in the Corporation's accounting principles, practices or
methods.
5.12 Taxes.
(i) Definitions. For purposes of this Agreement, (a) "Taxes"
means all taxes and other governmental charges and obligations of a similar
nature, together with all interest, penalties and other additions to tax in
respect thereof, imposed by any federal, state, local or foreign governmental
authority, including, without limitation, all income, gains, real property
gains, profits, gross receipts, payroll, employment, severance, windfall
profits, environmental, license, occupation, customs, capital stock, franchise,
ad valorem, excise, sales, use, transfer, registration, value added,
alternative minimum, add-on minimum, successor, withholding and
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estimated taxes, duties, premiums, fees or other charges, (b) "Tax Returns"
means all original and amended returns, declarations, statements, elections,
reports, claims for refund and information returns and statements relating to
Taxes required to be filed with any governmental authority, and (c) unless
otherwise clearly required by the context, reference to the Corporation and its
Corporation Subsidiaries includes (A) the Partnerships (but only for purposes
of this Section 5.12) and (B) any person for whose Taxes the Corporation or a
Corporation Subsidiary is liable pursuant to Treasury Regulations Section
1.1502-6 or any other provision of state, local, federal or foreign law, as a
transferee or successor, by contract, or otherwise.
(ii) Filing of Tax Returns. Except as disclosed in the
Corporation Disclosure Letter, all material Tax Returns required to have been
filed by the Corporation and its Corporation Subsidiaries have been duly and
timely (taking into account duly granted extensions) filed and are true,
correct and complete in all material respects. Except as disclosed in the
Corporation Disclosure Letter, (a) neither the Corporation nor any Corporation
Subsidiary is currently the beneficiary of any extension of time within which
to file any material Tax Return, and (b) neither the Corporation nor any
Corporation Subsidiary has received a written communication from any
governmental authority in a jurisdiction where any of the Corporation and its
Corporation Subsidiaries does not file Tax Returns that the Corporation or any
Corporation Subsidiary is or may be subject to taxation by that jurisdiction.
(iii) Payment of Taxes. Except as disclosed in the Corporation
Disclosure Letter, all Taxes due from the Corporation and its Corporation
Subsidiaries (whether or not shown on any Tax Return) have been paid and each
of the Corporation and the Corporation Subsidiaries has withheld and paid over
all material Taxes required to have been withheld and paid over. There are no
liens with respect to Taxes on any of the assets of the Corporation and its
Corporation Subsidiaries, other than liens for Taxes not yet due and payable or
for Taxes being contested in good faith through appropriate proceedings and for
which adequate reserves have been established in the Balance Sheet.
(iv) Tax Accruals. The unpaid Taxes of the Corporation and its
Corporation Subsidiaries for all periods ending on or before the date of the
Balance Sheet did not exceed the amount of the current liability accruals for
Taxes (exclusive of reserves for deferred Taxes established to reflect timing
differences) reflected on the face of the Balance Sheet and the unpaid Taxes of
the Corporation and its Corporation Subsidiaries for all periods ending on or
before the Closing Date will not exceed the amount of such current liability
accruals as adjusted for operations in the ordinary course of business through
the Closing Date in accordance with the most recent custom and practices of the
Corporation and each Corporation Subsidiary.
(v) Deficiencies, Proceedings, Waivers. Except as disclosed
in the Corporation Disclosure Letter, no material deficiencies have been
asserted in writing with respect to Taxes of the Corporation or any Corporation
Subsidiary and neither the Corporation or any Corporation Subsidiary has
received notice in writing that it has not filed a material Tax Return required
to be filed by it. Except as disclosed in the Corporation Disclosure Letter,
the Federal income Tax Returns of the Corporation and each Corporation
Subsidiary have, since the later of the date of inception or acquisition by the
Corporation, never been audited or examined
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by the IRS, nor is any such audit or examination, or any administrative or
judicial action or proceeding with respect to the assessment or collection of
such Taxes of the Corporation or any Corporation Subsidiary, currently in
process or pending. Except as disclosed in the Corporation Disclosure Letter,
no waiver or extension of any statute of limitations is in effect with respect
to material Taxes of the Corporation or any Corporation Subsidiary. There are
no outstanding requests for rulings with any Tax authority with respect to
Taxes of the Corporation or any Corporation Subsidiary.
(vi) Tax Sharing Arrangements, Affiliation Taxes. Except as
disclosed in the Corporation Disclosure Letter, neither the Corporation nor any
Corporation Subsidiary (a) is a party to any tax sharing agreement or
arrangement, or (b) has, since the later of the date of inception or
acquisition by the Corporation, ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code") filing a consolidated federal income Tax Return
or any similar group under analogous provisions of state, local or foreign law
(other than a group the common parent of which was the Corporation).
(vii) Returns Furnished, Attributes. The Corporation has
delivered to Acquiror true and complete copies of all (a) state, local, federal
and foreign income and franchise Tax Returns and (b) examination reports,
statements of deficiencies and closing other agreements relating to Taxes of
the Corporation and the Corporation Subsidiaries filed on or after January 1,
1993.
(viii) Elections, Special Status. Except as disclosed in the
Corporation Disclosure Letter, neither the Corporation nor any Corporation
Subsidiary (a) has filed a consent under Code Section 341(f) concerning
collapsible corporations which is currently in effect; (b) has made any
payments, is obligated to make any payments or is a party to any agreement that
under any circumstance could obligate it or any successor or assignee to make
any payments that are not or will not be deductible under Code Section 280G or
that would be subject to excise Tax under Code Section 4999; (c) is a "foreign
person" as defined in Code Section 1445(f)(3); (d) has been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii); (e)
owns directly or indirectly any asset which is "tax-exempt use property" within
the meaning of Code Section 168(h); (f) is a party to any "safe harbor lease"
within the meaning of Code Section 168(f)(8), as in effect prior to amendment
by the Tax Equity and Fiscal Responsibility Act of 1982; or (g) has agreed or
is required to make any adjustment under Code Section 481(a) by reason of a
change in accounting method or otherwise.
(ix) Partnership Matters. Except as disclosed in the
Corporation Disclosure Letter and as would not have a Corporation Adverse
Effect, each Partnership (A) is and has been continuously since its formation
properly classified as a partnership within the meaning of Code Section
7701(a)(2) and the Treasury Regulations thereunder; (B) has not made an
election to be excluded from any of the provisions of subchapter K of chapter 1
of the Code; and (C) is not and has never been a "publicly traded partnership"
within the meaning of Code Section 7704(b) of the Code.
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5.13 Proprietary Rights. The Corporation, the Corporation
Subsidiaries and the Partnerships own or have valid, binding, enforceable and
adequate rights to use all material patents, trademarks, trade names, service
marks, service names, copyrights, know how, other proprietary intellectual
property rights, applications therefor and, to the knowledge of the executive
officers of the Corporation, licenses or other rights in respect thereof
("Intellectual Property") used or held for use in connection with the business
of the Corporation and the Corporation Subsidiaries and the Partnerships,
without any conflict with the rights of others. Neither the Corporation, any
of the Corporation Subsidiaries nor any of the Partnerships has received any
notice from any other person pertaining to or challenging its right to use any
Intellectual Property or any trade secrets, proprietary information,
inventions, processes and procedures owned or used by or licensed to it, except
with respect to rights the loss of which, individually have not had and are not
reasonably likely to result in a Corporation Adverse Effect. To the knowledge
of the executive officers of the Corporation, none of the key employees of the
Corporation, the Corporation Subsidiaries or the Partnerships is in violation
of any term of any employment contract, or any other contract or agreement
relating to the relationship of any such employee with the Corporation, the
Corporation Subsidiaries or the Partnerships or any other party the result of
which has had or is reasonably likely to result in a Corporation Adverse
Effect.
5.14 Employee Benefit Plans.
(i) The Corporation Disclosure Letter sets forth all
compensation plans, funds and programs (the "Compensation Plans") and employee
benefit plans (the "Employee Benefit Plans") within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
sponsored or administered by the Corporation, the Corporation Subsidiaries, the
Partnerships, the Affiliated Practices, the Corporation ASCs, or any person,
entity or arrangement which is aggregated with the Corporation under Section
414(b) or (c) of the Code (an "ERISA Affiliate" and, together with the
Corporation, the Corporation Subsidiaries, the Partnerships, the Affiliated
Practices and the Corporation ASCs, the "Corporation ERISA Entities") to which
any Corporation ERISA Entity contributes, is required to contribute, or has at
any time since the later of its formation or the date of such entity's
acquisition by the Corporation been maintained for the employees of any
Corporation ERISA Entity. The Compensation Plans consist of all such plans,
funds and programs that provide benefits to employees or former employees
including without limitation severance pay, deferred compensation, incentive,
bonus or performance awards, stock ownership, stock options, legal services,
executive compensation, plans within the meaning of Section 125 of the Code,
and any trust fund, plan or program funding any Compensation Plan or Employee
Benefit Plan as hereinafter defined (including any voluntary employee
beneficiary association within the meaning of Section 501(c)(9) of the Code).
(ii) The Corporation Disclosure Letter contains a complete and
accurate list of all employment agreements (the "Employment Agreements") to
which any Corporation and any Corporation Subsidiary or any Partnership Entity
is a party with respect to employees of the Corporation and of the Corporation
Subsidiaries or any Partnership. The Employment Agreements consist of employee
leasing agreements, employee services agreements,
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noncompetition agreements and any other agreement except an Employee Benefit
Plan (as hereafter defined), between the Corporation and any employee as of the
date hereof.
(iii) Intentionally Deleted.
(iv) Each Employee Benefit Plan, trust agreement, annuity
contract or other funding arrangement has been administered and maintained in
compliance in all material respects with all applicable laws, rules and
regulations, and all reports required by any governmental agency have been
timely filed. No Employee Benefit Plan or Compensation Plan is currently the
subject of an audit, investigation, enforcement action or other similar
proceeding conducted by any state or federal agency. There is no proceeding,
claim (other than routine claims for benefits), lawsuit, or investigation
pending or, to the knowledge of the executive officers of the Corporation,
threatened, concerning or involving any Compensation Plan or Employee Benefit
Plan. There is no litigation involving, and there are no proceedings before,
the U.S. Department of Labor or any other commission or administrative or
regulatory authority pending against the Corporation, any of the Corporation
Subsidiaries, or any ERISA Affiliate, or against any fiduciary of any
Compensation Plan or Employee Benefit Plan, relating to claims for benefits,
breaches of duties or relating in any way to the maintenance or operation of
such plans, and, to the knowledge of the executive officers of the Corporation,
no such claim exists or has been threatened.
(v) No prohibited transactions (within the meaning of Section
4975 of the Code and Section 406 of ERISA) have occurred with respect to any
Employee Benefit Plan nor has there been any transaction which could subject
any Corporation ERISA Entity to any material liability under Section 4972 and
4976 through 4980B of the Code, or any other section of the Code or ERISA with
respect to the Compensation Plans or the Employee Benefit Plans.
(vi) A Corporation ERISA Entity has received a current
favorable determination letter or ruling from the Internal Revenue Service for
each Employee Benefit Plan, and each amendment thereto, 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. No proceedings exist or, to
the knowledge of the executive officers of the Corporation, have been
threatened that could result in the revocation of any such favorable
determination letter or ruling. In the event any Corporation ERISA Entity
sponsors or maintains a voluntary employee beneficiary association within the
meaning of Section 501(c)(9) of the Code, all necessary governmental approvals
for obtaining tax exempt status have been obtained, and such determination
letter is dated on or after January 1, 1985.
(vii) As of the last day of the most recent plan year ended
prior to the date hereof, all contributions required to be made by any
Corporation ERISA Entity under the terms of any Employee Benefit Plan have been
timely made or have been reflected on its balance sheet and (A) no accumulated
funding deficiency within the meaning of Section 412 of the Code or 302(f) of
ERISA, whether waived or unwaived, exists with respect to any Employee Benefit
Plan or any plan sponsored or maintained by any Corporation ERISA Entity, (B)
no Corporation ERISA Entity will be required to provide security under Section
401(a)(29) of the Code, (C) no
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lien exists or will arise within 60 days after the Closing Date pursuant to
Section 412(n) of the Code or Section 302(f) of ERISA due to any failure to
make any contributions required thereby and (D) the fair market value of the
assets of each funded defined benefit pension plan equals or exceeds the
actuarial present value of the vested and nonvested accrued benefits under such
pension plan as calculated upon a standard termination of a defined benefit
plan subject to Title IV of ERISA with such actuarial present value determined
by application of the actuarial methods and assumptions set forth in such
defined benefit pension plan or the methods and assumptions prescribed by the
Pension Benefit Guaranty Corporation ("PBGC") for the valuation of such
benefits in connection with such plans being terminated thereunder.
Administrative expenses, trustee fees, similar charges and taxes if any, shall
be taken into account for purposes of the foregoing computations. The assets
of each voluntary employees beneficiary association maintained by each
Corporation ERISA Entity equal or exceed the present value of benefit
obligations incurred under each such plan (determined in accordance with
actuarial standards applied in the ongoing administration of such plans) as of
the last day of the most recent plan year ended prior to the date hereof.
(viii) No Corporation ERISA Entity is obligated to contribute to
a multi-employer plan within the meaning of Sections 3(37) and 4001(a)(3) of
ERISA and no Corporation ERISA Entity has incurred any "withdrawal liability"
(as defined in Section 4201 et seq. of ERISA) which has not been satisfied as
of the Closing.
(ix) No facts or circumstances exist that would result in the
imposition of liability against any Corporation ERISA Entity by the PBGC as a
result of any act or omission by any Corporation ERISA Entity. No reportable
event (within the meaning of Section 4043 of ERISA) for which the notice
requirement has not been waived has occurred with respect to any Employee
Benefit Plan subject to the requirements of Title IV of ERISA. No liability to
the PBGC has been incurred by any Corporation ERISA Entity on account of any
termination of any employee pension benefit plan subject to Title IV of ERISA.
No Corporation ERISA Entity has (A) ceased operations at a facility so as to
become subject to Section 4203 of ERISA; (B) withdrawn as a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA;
(C) ceased making contributions on or before the Closing Date, to any employee
pension benefit plan subject to Section 4064 of ERISA and to which any
Corporation ERISA Entity made contributions during the five (5) years prior to
the Closing Date; (D) any liability under Section 4062 of ERISA; or (E) any
liability or lien under Section 4068 of ERISA.
(x) The Corporation ERISA Entities have complied with all
applicable notices and provided coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") (the continuation coverage
requirement of group health plans), and have no liability for any violations
under COBRA prior to and as of the Closing Date for which the Corporation ERISA
Entity might incur liability.
(xi) Except as required by COBRA, no Corporation ERISA Entity
has any obligation or commitment to provide medical, dental or life insurance
benefits to or on behalf of any employees of a Corporation ERISA Entity who may
retire or any former employee of a
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Corporation ERISA Entity who have retired from employment with any Corporation
ERISA Entity.
(xii) There are no legal restrictions on the rights of any
Corporation ERISA Entity to amend or terminate any Employee Benefit Plan or
Compensation Plan without incurring any material liability thereunder.
5.15 Labor Matters.
(i) None of the Corporation, any of the Corporation
Subsidiaries, any of the Partnerships, or any of the Affiliated Practices is a
party to any agreement with any union, labor organization or collective
bargaining unit. No employees of the Corporation, any of the Corporation
Subsidiaries, any of the Partnerships or, to the knowledge of the executive
officers of the Corporation, any of the Affiliated Practices are represented by
any union, labor organization or collective bargaining unit. To the knowledge
of the executive officers of the Corporation, the Corporation's, the
Corporation Subsidiaries' and the Partnership's employees have not threatened
to organize or join a union, labor organization or collective bargaining unit,
and there are no existing or, to the knowledge of the executive officers of the
Corporation, threatened labor strikes, disputes, grievances, controversies or
other labor troubles affecting the Corporation or any of the Corporation
Subsidiaries or Partnerships nor does any basis therefor exist.
(ii) The Corporation and all of the Corporation Subsidiaries
and Partnerships have been and are in compliance in all material respects with
all applicable laws, rules, regulations and ordinances respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and are not liable for any arrears of wages or penalties in any material
amount for failure to comply with any of the foregoing. Neither the
Corporation nor any of the Corporation Subsidiaries or Partnerships has engaged
in any unfair labor practice or discriminated on the basis of race, color,
religion, sex, national origin, age or handicap in its employment conditions or
practices. Except as set forth in the Corporation Disclosure Letter, there are
no material unfair labor practice charges or complaints or racial, color,
religious, sex, national origin, age or handicap discrimination charges or
complaints pending or, to the knowledge of the executive officers of the
Corporation, threatened against the Corporation, any of the Corporation
Subsidiaries, any of the Partnerships or any of the Affiliated Practices before
any federal, state or local court, board, department, commission or agency nor
to their knowledge, does any basis therefor exist.
5.16 Related Parties. Except as set forth in the Corporation
Disclosure Letter, to the knowledge of the executive officers of the
Corporation, none of the executive officers or directors of the Corporation or
the Corporation Subsidiaries, or any entity controlled by any of the foregoing
or any member of the immediate family of any of the foregoing:
(i) has any relationship with the Corporation that would be
required to be disclosed by Item 404 of Regulation S-K under the Securities Act
if the Corporation were subject to such regulation; or
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(ii) is competing or at any time since January 1, 1994 has
competed, directly or indirectly with the Corporation or any Corporation
Subsidiary or any Partnership.
As used in this Section 5.16, a person's immediate family shall mean
such person's spouse, parents, children, siblings, mothers and fathers-in-law,
sons and daughters-in-law, and brothers and sisters-in-law.
5.17 No Brokers. Neither the Corporation nor any Corporation
Subsidiary or any Partnership has entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Acquiror, the Surviving Corporation or any of its subsidiaries or affiliates,
to pay any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, except that the
Corporation has retained Furman Selz LLC as its financial advisor, the
arrangements with which have been set forth in the Corporation Disclosure
Letter.
5.18 [Intentionally Deleted].
5.19 Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Corporation Common Stock, treating as outstanding
the shares of Corporation Common Stock issuable upon conversion of the
Convertible Preferred Stock, is the only vote of the holders of any class or
series of capital stock of the Corporation necessary to approve the Merger.
5.20 Contracts; No Default.
(i) The Corporation Disclosure Letter sets forth as of the
date of this Agreement a list of each Contract of the Corporation and the
Corporation Subsidiaries and the Partnerships:
(a) involving an aggregate payment or commitment per Contract
on the part of any party of more than $100,000 during the 12-month
period ending December 31, 1996;
(b) with an individual or entity rendering services as an
employee of or contractor to the Corporation or any Corporation
Subsidiary or any Partnership under which, during the last 12 months,
the Corporation or one of the Corporation Subsidiaries or Partnerships
was obligated or became committed to pay in excess of $100,000 or under
which, during the next 12 months, the Corporation or one of the
Corporation Subsidiaries or Partnerships is reasonably expected to pay
or to become obligated to pay in excess of $100,000;
(c) concerning a partnership or joint venture with another
person; or
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(d) involving the provision by the Corporation or any
Corporation Subsidiary or Partnership of medical practice management or
similar services;
(e) except with respect to the letters of intent, involving an
acquisition of assets or securities, which acquisition has not yet been
consummated or has been consummated during the 24 months immediately
preceding the date of this Agreement; or
(f) evidencing Indebtedness of the Corporation or any
Corporation Subsidiary or any Partnership in an amount greater than
$100,000. "Indebtedness" means any liability in respect of (w) borrowed
money, (x) capitalized lease obligations, (y) the deferred purchase
price of property or services (other than trade payables in the ordinary
course of business) and (z) guarantees of any of the foregoing incurred
by any other person other than the Acquiror or the Corporation, as
appropriate, or any of the Corporation Subsidiaries or any Partnership,
except that Indebtedness shall not include short term credit facilities
entered into in the ordinary course of business.
(ii) The Corporation Disclosure Letter lists each Contract to
which the Corporation, any of the Corporation Subsidiaries or any Partnership
is a party limiting the right of the Corporation, any of the Corporation
Subsidiaries or any Partnership prior to the Effective Time, or the Surviving
Corporation or any of its subsidiaries or affiliates (other than individuals)
at or after the Effective Time, to engage in, or to compete with any person in,
any business, including each contract or agreement containing exclusivity
provisions restricting the geographical area in which, or the method by which,
any business may be conducted by the Corporation, any of the Corporation
Subsidiaries or any Partnership prior to the Effective Time, or Surviving
Corporation or any of its subsidiaries or affiliates (other than individuals),
including the Affiliated Practices, after the Effective Time.
(iii) Each Contract, and each other contract or agreement of the
Corporation, the Corporation Subsidiaries and the Partnerships which would have
been required to be disclosed in the Corporation Disclosure Letter had such
contract or agreement been entered into prior to the date of this Agreement, is
in full force and effect and is a legal, valid and binding Contract and there
is no material default (or any event which, with the giving of notice or lapse
of time or both, would be a material default) by the Corporation, any
Corporation Subsidiary, or any Partnership, or, to the knowledge of the
executive officers of the Corporation, any other party, in the timely
performance of any obligation to be performed or paid under any of Contracts or
any such other contract or agreement, except where the failure to be in full
force and effect or to be valid and binding, or where such default,
individually or in the aggregate could not reasonably be expected to result in
a Corporation Adverse Effect.
5.21 Real Property.
(i) Except as set forth in the Corporation Disclosure Letter,
neither the Corporation, any of the Corporation Subsidiaries, any Partnership
nor any of the Affiliated Practices owns or has the option or right to acquire
any real property.
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(ii) With respect to the lease dated January 10, 1994, relating
to the Corporation's principal executive officers in Winter Park, Florida:
(a) such lease is in full force and effect and is a legal,
valid and binding obligation of the Corporation, enforceable by the
Corporation in accordance with its terms;
(b) no notice of default under such lease has been received by
the Corporation which is still in effect, the Corporation is not in
breach or default of such lease, and no event has occurred which, with
notice or lapse of time, would constitute such a breach or default or
permit termination, modification or acceleration under such lease;
(c) as of the date of this Agreement, to the knowledge of the
executive officers of the Corporation, there are no pending or
threatened condemnation or eminent domain proceedings with respect to
the real property subject to such lease; and
(d) as of the date of this Agreement, the Corporation has not
received notice of any special assessments relating to the real property
subject to such lease.
5.22 Information. No representation or warranty made by the
Corporation contained in this Agreement and no statement contained in any
certificate, list, exhibit or other instrument specified in this Agreement,
including without limitation the Corporation Disclosure Letter, contains 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.
5.23 Compliance with Applicable Laws. Except as disclosed in the
Corporation Disclosure Letter, the Corporation, the Corporation Subsidiaries,
the Partnerships, the Corporation ASC's and, to the knowledge of the executive
officers of the Corporation, the Affiliated Practices hold all permits,
licenses, variances, exemptions, orders and approvals of all courts,
administrative agencies or commissions or other governmental authorities or
instrumentalities, domestic or foreign (each, a "Governmental Entity"), except
for such permits, licenses, variances, exemptions, orders and approvals the
failure to hold which would not have a Corporation Adverse Effect (the
"Corporation Permits"). The Corporation, the Corporation Subsidiaries, the
Partnerships, the Corporation ASC's and, to the knowledge of the executive
officers of the Corporation, the Affiliated Practices are in compliance with
the terms of the Corporation Permits, except for such failures to comply,
which, singly or in the aggregate, would not have a Corporation Adverse Effect.
The businesses of the Corporation, the Corporation Subsidiaries, the
Partnerships, the Corporation ASC's and, to the knowledge of the executive
officers of the Corporation, the Affiliated Practices are not being conducted
in violation of any law, ordinance or regulation of any Governmental Entity,
including, but not limited to laws, rules and regulations relating to
professional and specialty licensing, the corporate practice of medicine,
prohibitions on kickbacks and referrals under Medicare and Medicaid programs,
health care, drug enforcement, zoning ordinances, building codes, occupational
health and safety, employee benefits, immigration, wages, workplace safety,
equal
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employment opportunity and race, religious, sex and age discrimination, except
for possible violations which individually or in the aggregate do not and could
not reasonably be expected to have a Corporation Adverse Effect. Except as set
forth in the Corporation Disclosure Letter, no investigation or review by any
Governmental Entity with respect to the Corporation, any of the Corporation
Subsidiaries, the Partnerships, the Corporation ASC's or the Affiliated
Practices is pending, or, to the knowledge of the executive officers of the
Corporation, threatened.
5.24 Accounts Receivable. The accounts receivable of the
Corporation, the Corporation Subsidiaries and the Partnerships as reflected in
the Balance Sheet, to the extent uncollected on the date hereof, and the
accounts receivable reflected on the books of the Corporation, the Corporation
Subsidiaries and the Partnerships are valid and existing and represent monies
due, and the Corporation has made reserves reasonably considered adequate for
receivables not collectible in the ordinary course of business of the
Corporation and consistent with past practices, and (subject to the aforesaid
reserves) are subject to no refunds or other adjustments and to no defenses,
rights of setoff, assignments, restrictions, encumbrances or conditions
enforceable by third parties on or affecting any thereof, except for such
refunds, adjustments, defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions as would not have a Corporation Adverse Effect.
5.25 Product Liability. Except as disclosed in the Corporation
Disclosure Letter, the Corporation is not aware of any claim, or the basis of
any claim, against the Corporation, any of the Corporation Subsidiaries or any
Partnership for injury to person or property of employees or any third parties
suffered as a result of the sale of any product or performance of any service
by the Corporation, any of the Corporation Subsidiaries or any Partnership,
including claims arising out of the defective or unsafe nature of its products
or services, which could have a Corporation Adverse Effect.
5.26 Environment. As used herein, the term "Environmental Laws"
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including without limitation laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or industrial,
toxic or hazardous substances or wastes into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of chemicals, pollutants, contaminants, or
industrial, toxic or hazardous substances or wastes, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder. Except as
disclosed in the Corporation Disclosure Letter, there are, with respect to the
Corporation, any of the Corporation Subsidiaries, any Partnership, any
Corporation ASC or any Affiliated Practice, no past or present violations of
Environmental Laws, releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law liability or any liability
under the Comprehensive Environmental Response Compensation and Liability Act
of 1980 ("CERCLA") or similar state or local laws, which liabilities, either
individually or in the aggregate, would reasonably be expected to have a
Corporation Adverse
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Effect. With respect to the generation, transportation, treatment, storage and
disposal, or other handling of Medical Waste, the Corporation, each Corporation
Subsidiary, each Partnership, each Corporation ASC and each Affiliated Practice
has complied with all Medical Waste Laws, except as would not reasonably be
expected to result in a Corporation Adverse Effect.
As used herein, "Medical Waste" includes, but is not limited to, (i)
pathological waste, (ii) blood, (iii) sharps, (iv) wastes from surgery or
autopsy, (v) dialysis waste, including contaminated disposable equipment and
supplies, (vi) cultures and stocks of infectious agents and associated
biological agents, (vii) contaminated animals, (viii) isolation wastes, (ix)
contaminated equipment, (x) laboratory waste, (xi) any substance, pollutant,
material, or contaminant listed or regulated under the Medical Waste Tracking
Act ("MWTA"), and (xii) various other biological waste and discarded materials
contaminated with or exposed to blood, excretion, or secretions from human
beings or animals. As used herein, "Medical Waste Laws" shall mean the
following, including regulations promulgated and orders issued thereunder, all
as may be amended from time to time: (i) the MWTA, (ii) the U.S. Public Vessel
Medical Waste Anti- Dumping Act of 1988, 33 USCA Sections 2501 et seq., (iii)
the Marine Protection, Research, and Sanctuaries Act of 1972, 33 USCA Sections
1401 et seq., (iv) The Occupational Safety and Health Act, 29 USCA Sections 651
et seq., (v) the Unites States Department of Health and Human Services,
National Institute for Occupational Safety and Health, Infectious Waste
Disposal Guidelines, Publication No. 88-119, and (vi) and any other federal,
state, regional, county, municipal, or other local laws, regulations, and
ordinances insofar as they purport to regulate Medical Waste, or impose
requirements relating to Medical Waste.
5.27 Recoupment Proceedings. There are no material Medicare or
Medicaid recoupments or recoupments of any third-party payor being requested or
claimed, or to the knowledge of the executive officers of the Corporation,
threatened against the Corporation, any of the Corporation Subsidiaries, any of
the Partnerships, any of the Corporation ASC's or any of the Affiliated
Practices.
5.28 Insurance.
(i) The Corporation, the Corporation Subsidiaries, the
Partnerships, the Corporation ASC's and the Affiliated Practices and (a) have
property, fire and casualty insurance policies, with extended coverage (subject
to reasonable deductibles), sufficient to allow them to replace any of their
properties that might be damaged or destroyed, and (b) except for professional
liability insurance which is specifically covered in Section 5.28(ii) below,
have liability, workers compensation insurance and bond and surety arrangements
reasonably adequate, in light of the business in which they are engaged, to
protect them and their financial condition against the risks involved in the
business conducted by them. The Corporation Disclosure Letter sets forth a
list of all such policies.
(ii) The Corporation Disclosure Letter contains a list of
each policy of professional liability insurance and errors and omissions
insurance, and all amendments and endorsements thereto currently in effect,
which provide insurance for the Corporation, the Corporation Subsidiaries, the
Partnerships, the Corporation ASC's and the Affiliated Practices,
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including the name of each insurer, the amount of coverage provided under the
policy, all persons, groups and entities that are afforded coverage under the
policies, the term of the policy and type of coverage (whether "claims made" or
otherwise and whether such policies include "tail" coverage) and whether the
policy is in effect as of the date hereof. The Corporation, the Corporation
Subsidiaries, the Partnerships, the Corporation ASC's and the Affiliated
Practices have been covered by one or more policies of professional liability
insurance continuously since the later of January 1, 1994 or the date of such
entity's acquisition by the Corporation for all services provided pursuant to
all management services or other professional activities of the Corporation,
the Corporation Subsidiaries, the Partnerships, the Corporation ASC's and the
Affiliated Practices, and any of their predecessors or affiliates, whether
currently in effect or previously in effect, with limits at least as great as
those set forth in the Corporation Disclosure Schedule.
(iii) The Corporation Disclosure Letter sets forth any
pending claims under each of the policies listed therein, and there are no
other pending claims under any of such policies, and no event has occurred and
no condition exists that could reasonably be expected to give rise to or serve
as a basis for any such claim.
(iv) None of the Corporation, any Corporation Subsidiary,
any Partnership, any Corporation ASC or any Affiliated Practice is in default
under any insurance policy or bond described in Section 5.28, and no event
which would (with the passage of time, notice or both) constitute a breach or
default thereunder by the Corporation, any Corporation Subsidiary, any
Partnership, any Corporation ASC or any Affiliated Practice or, to the
knowledge of the executive officers of the Corporation, the insurer thereunder,
has occurred, or, to the knowledge of the executive officers of the
Corporation, will occur as a result of the transactions contemplated herein.
Consummation of the transactions contemplated herein will not (and will not
give any person or entity a right to) terminate or modify any material rights
of, or accelerate or augment any material obligation of the Corporation, any
Corporation Subsidiary, any Partnership, any Corporation ASC or any Affiliated
Practice under any insurance policy or bond insofar as such policy or bond
relates to or covers incidents that give rise to claims for incidents taking
place prior to the Closing Date. Neither the Corporation, any Corporation
Subsidiary, any Partnership, any Corporation ASC nor any Affiliated Practice
have done anything by way of action or inaction which might invalidate or
diminish coverage under any of such policies in whole or in part. There are no
outstanding requirements or recommendations of any insurance company that has
issued a policy to the Corporation, any Corporation Subsidiary, any
Partnership, any Corporation ASC or any Affiliated Practice which require or
recommend any material changes to the conduct of the business of the
Corporation, any Corporation Subsidiary, any Partnership, any Corporation ASC
or any Affiliated Practice, or any material repair or other work with respect
to any of its or their respective properties.
5.29 Title to Assets; Liens. Except as disclosed in the
Corporation Disclosure Letter, to the extent material to the business or
operations of the Corporation, the Corporation Subsidiaries and the
Partnerships taken as a whole, the Corporation, the Corporation Subsidiaries
and the Partnerships have good and marketable title to all of their respective
inventory, accounts receivable, property, equipment and other assets, and such
assets are free and clear of any
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material mortgages, liens, charges, encumbrances, or title defects of any
nature whatsoever, except for such mortgages, liens, charges, encumbrances or
title defects which would not materially and adversely affect the value of such
property as carried on the Corporation's consolidated financial statements
contained in the Preliminary Prospectus or would not have a material adverse
effect on the Corporation, any Corporation Subsidiary or any Partnership. The
Corporation, the Corporation Subsidiaries and the Partnerships have valid and
enforceable leases for the premises and the equipment, furniture and fixtures
purported to be leased by them, except for leases, the failure of which to have
or be enforceable, would not have a Corporation Adverse Effect.
5.30 No Material Adverse Effect. Except as disclosed in the
Corporation's financial reports set forth in the Preliminary Prospectus or in
the Corporation Disclosure Letter, the Corporation is not aware of any fact
which, alone or together with another fact, has resulted in or is likely to
result in a Corporation Adverse Effect.
5.31 Acquisition Targets. The Corporation has had ongoing
discussions with each of the Acquisition Targets for at least thirty (30) days
prior to the date of this Agreement.
ARTICLE 6
Representations and Warranties of Acquiror
Acquiror represents and warrants to the Corporation as of the date of
this Agreement as follows:
6.1 Existence; Good Standing; Corporate Authority; Compliance With
Law. Acquiror is a corporation duly incorporated, validly existing in good
standing under the laws of Delaware. Acquiror is duly licensed or qualified to
do business as a foreign corporation and in good standing under the laws of
each jurisdiction in which the character of the properties owned or leased by
it therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the business of Acquiror taken as a whole, which for
purposes of this Agreement shall mean the business of Acquiror and the Acquiror
Subsidiaries (as defined in Section 6.4 hereof) taken as a whole (a "Acquiror
Adverse Effect"). Acquiror has all requisite corporate power and authority to
own, operate and lease its properties and carry on its business as now
conducted. The copies of Acquiror's certificate of incorporation and bylaws
previously delivered to the Corporation are true and correct. Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware. Merger Sub has not conducted any business or incurred any
liabilities other than in connection with the negotiation and execution of this
Agreement. Merger Sub is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary.
Merger Sub has the corporate power and authority to execute and deliver this
Agreement and consummate the transactions contemplated hereby.
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6.2 Authorization, Validity and Effect of Agreements. The sole
stockholder of Merger Sub has approved this Agreement. The execution and
delivery of this Agreement and all agreements and documents specified herein,
and the consummation by them of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents specified herein (when
executed and delivered pursuant hereto for value received) will constitute, the
valid and legally binding obligations of Acquiror and Merger Sub, enforceable
in accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
generally the enforcement of creditors' rights and by general principles of
equity.
6.3 Capitalization. The authorized capital stock of Acquiror
consists of 100,000,000 shares of Acquiror Common Stock and 10,000,000 shares
of Preferred Stock, par value $0.01 per share ("Acquiror Preferred Stock"). As
of August 31, 1996, there were 27,278,364 shares of Acquiror Common Stock
issued and outstanding and no shares of Acquiror Preferred Stock issued and
outstanding. Acquiror has no shares of Acquiror Common Stock or Acquiror
Preferred Stock reserved for issuance, except that, as of August 31, 1996,
2,000,000 shares of Acquiror Common Stock were reserved for issuance pursuant
to Acquiror's Amended and Restated 1995 Stock Option Plan, 1,000,000 shares of
Acquiror Common Stock were reserved for issuance pursuant to Acquiror's Health
Care Professionals Stock Option Plan, 344,563 shares of Acquiror Common Stock
were reserved for issuance pursuant to the EyeCorp, Inc. 1995 Incentive and
Nonqualified Stock Option Plan and 40,000 shares of Acquiror Common Stock were
reserved for issuance pursuant to a Common Stock Purchase Warrant. Acquiror
has no outstanding Voting Debt. All such issued and outstanding shares of
Acquiror Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Other than as set forth above or
in the disclosure letter to be delivered by the Acquiror to the Corporation
prior to October 9, 1996, the captions in which correspond with the relevant
sections of this Agreement (the "Acquiror Disclosure Letter"), or as
contemplated by this Agreement, there are not at the date of this Agreement any
existing options, warrants, calls, subscriptions, convertible securities, or
other rights or other agreements or commitments which obligate Acquiror or any
of the Acquiror Subsidiaries (hereinafter defined) to issue, transfer or sell
any shares of capital stock of Acquiror or any of the Acquiror Subsidiaries
(hereinafter defined).
6.4 Subsidiaries. Except as set forth in the Acquiror Disclosure
Letter, Acquiror owns directly or indirectly each of the outstanding shares of
capital stock of each of Acquiror's subsidiaries (individually, a "Acquiror
Subsidiary" and collectively, the "Acquiror Subsidiaries"). Each Acquiror
Subsidiary is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which the character of the properties owned or leased by it therein or in which
the transaction of its business makes such qualification necessary, except
where the failure to be so qualified would not have an Acquiror Adverse Effect.
6.5 Noncontravention. Except as set forth in the Acquiror
Disclosure Letter, neither the execution and delivery by Acquiror of this
Agreement, nor the consummation by Acquiror
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of the transactions contemplated hereby in accordance with the terms hereof,
will: (i) conflict with or result in a breach of any provisions of the
certificate of incorporation or bylaws of Acquiror; (ii) violate, or conflict
with, or result in a material breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any material lien, security interest, charge or
encumbrance upon any of the material properties of Acquiror under, or result in
being declared void, voidable, or without further binding effect, any of the
terms, conditions or provisions of any Contract to which Acquiror is a party,
or by which Acquiror or any of its properties is bound or affected except with
respect to matters which are not material to the business of Acquiror taken as
a whole; or (iii) other than the filings specified in Article 1 hereof and the
Regulatory Filings, require any material consent, approval or authorization of,
or declaration, filing or registration with, any domestic governmental or
regulatory authority, of which the failure to obtain would have an Acquiror
Adverse Effect.
6.6 Financial Statements. Acquiror has delivered to the
Corporation Acquiror's Annual Report on Form 10-K for the year ended December
31, 1995, together with all amendments thereto, Acquiror's Quarterly Report on
Form 10-Q for the quarter ended March 31 and June 30, 1996, and Acquiror's
definitive proxy statement for the 1996 annual meeting of stockholders of
Acquiror held on May 21, 1996, and each of the Acquiror's Current Reports on
Form 8-K, each in the form (including exhibits and any amendments or
supplements thereto) filed with the Securities and Exchange Commission ("SEC")
(collectively, the "Acquiror Reports"). As of their respective dates, the
Acquiror Reports (i) were prepared in accordance with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder and (ii) did 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 made therein, in the light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Acquiror included in the Acquiror Reports
(including any related notes and schedules) fairly presents the consolidated
financial position of Acquiror and the Acquiror Subsidiaries as of its date and
each of the consolidated statements of income, retained earnings and cash flows
of Acquiror included in the Acquiror Reports (including any related notes and
schedules) fairly presents the consolidated results of operations, retained
earnings and cash flows, as the case may be, of Acquiror and the Acquiror
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Except as and to the extent set
forth on the unaudited consolidated balance sheet of Acquiror and the Acquiror
Subsidiaries at June 30, 1996, including all notes thereto, neither Acquiror
nor any of the Acquiror Subsidiaries has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a
consolidated balance sheet of Acquiror or in the notes thereto, prepared in
accordance with generally accepted accounting principles consistently applied,
except liabilities arising in the ordinary course of business since such date.
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6.7 Litigation. Except as disclosed in the Acquiror Disclosure
Letter, there are no actions, suits or proceedings pending against Acquiror or
any Acquiror Subsidiary or, to the knowledge of the executive officers of
Acquiror, threatened against Acquiror or any Acquiror Subsidiary, at law or in
equity, or before or by any federal, state or local commission, board, bureau,
agency or instrumentality that are reasonably likely to have an Acquiror
Adverse Effect.
6.8 Absence of Certain Changes. Except as disclosed in the
Acquiror Disclosure Letter or Acquiror Reports filed with the SEC prior to the
date hereof and except for changes arising from the public announcement of the
transactions contemplated by this Agreement, since June 30, 1996, Acquiror has
conducted its business only in the ordinary course of such business and there
has not been (i) any material adverse change in such business; (ii) any
declaration, setting aside or payment of any dividend or other distribution
with respect to its capital stock; or (iii) any material change in its
accounting principles, practices or methods.
6.9 Taxes and Tax Returns. Acquiror (i) has timely filed all
federal, state, local and foreign tax returns required to be filed by it for
the years ended prior to the date of this Agreement or requests for extensions
have been timely filed and any such request shall have been granted and not
expired and all such filed returns are complete in all material respects, (ii)
has paid or accrued all taxes shown to be due and payable on such returns and
(iii) has properly accrued all such taxes for periods subsequent to the periods
covered by such returns.
6.10 Labor Matters. Acquiror is not a party to or bound by any
collective bargaining agreement. There is no unfair labor practice or labor
arbitration proceeding pending or, to the actual knowledge of the executive
officers of Acquiror, threatened relating to its business. To the actual
knowledge of the executive officers of Acquiror, there are not any
organizational efforts presently being made or threatened involving employees
of Acquiror.
6.11 No Brokers. Acquiror has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Acquiror to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that Acquiror has retained Smith Barney Inc. as its financial advisor,
the arrangements with which have been set forth in the Acquiror Disclosure
Letter.
6.12 Capital Stock. The shares of Common Stock of Merger Sub are
validly issued, fully paid and nonassessable and are owned directly by
Acquiror, free and clear of all liens, claims and encumbrances. The issuance
and delivery by Acquiror of shares of Acquiror Common Stock in connection with
the Merger have been duly and validly authorized by all necessary corporate
action on the part of Acquiror. The shares of Acquiror Common Stock to be
issued in connection with the Merger, when issued in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable and
listed on the NYSE.
6.13 Opinion of Acquiror's Financial Advisor. The Board of
Directors of Acquiror has received the opinion of Smith Barney Inc., financial
advisor to Acquiror, to the effect that,
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as of the date of this Agreement, the Merger Consideration is fair to Acquiror
from a financial point of view.
6.14 Compliance with Applicable Laws. Acquiror and the Acquiror
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities, except for such permits, licenses,
variances, exemptions, orders and approvals the failure of which to hold would
not have an Acquiror Adverse Effect (the "Acquiror Permits"). Acquiror and the
Acquiror Subsidiaries are in compliance with the terms of the Acquiror Permits,
except for such failures to comply, which singly or in the aggregate, would not
have an Acquiror Adverse Effect. Except as disclosed in the Acquiror Reports
filed prior to the date of this Merger Agreement, the businesses of Acquiror
and the Acquiror Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations which individually or in the aggregate do not and would not have an
Acquiror Adverse Effect. No investigation or review by any Governmental Entity
with respect to Acquiror or any of the Acquiror Subsidiaries is pending, or, to
the knowledge of the executive officers of Acquiror, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, other than
those the outcome of which would not have an Acquiror Adverse Effect.
6.15 Certain Agreements. Except as disclosed in the Acquiror
Reports filed prior to the date of this Agreement or as set forth in the
Acquiror Disclosure Letter, neither Acquiror nor any of the Acquiror
Subsidiaries is a party to any oral or written (i) agreement, contract,
indenture or other instrument relating to Indebtedness in an amount exceeding
$1,000,000 or (ii) other contract, agreement or commitment (except those
entered into in the ordinary course of business). Neither Acquiror nor any of
the Acquiror Subsidiaries is in default (with or without notice or lapse of
time, or both) under any indenture, note, credit agreement, loan document,
lease, license or other agreement including, but not limited to, any benefit
plan, whether or not such default has been waived, which default, alone or in
the aggregate with other such defaults, would have an Acquiror Adverse Effect.
6.16 Accounts Receivable. The accounts receivable of Acquiror and
the Acquiror Subsidiaries as reflected in the most recent financial statements
contained in the Acquiror Reports, to the extent uncollected on the date
hereof, and the accounts receivable reflected on the books of Acquiror and the
Acquiror Subsidiaries are valid and existing and represent monies due, and
Acquiror has made reserves reasonably considered adequate for receivables not
collectible in the ordinary course of business, and (subject to the aforesaid
reserves) are subject to no refunds or other adjustments and to no defenses,
rights of setoff, assignments, restrictions, encumbrances or conditions
enforceable by third parties on or affecting any thereof, except for such
refunds, adjustments, defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions as would not have an Acquiror Adverse Effect.
6.17 No Material Adverse Effect. Except as disclosed in the
Acquiror Reports or the Acquiror Disclosure Letter, Acquiror is not aware of
any fact which, alone or together with another fact, has resulted in or is
likely to result in an Acquiror Adverse Effect.
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6.18 Information. No representation or warranty made by Acquiror
contained in this Agreement and no statement contained in any certificate,
list, exhibit or other instrument specified in this Agreement, including
without limitation the Acquiror Disclosure Letter, contains 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.
6.19 Inventory. The inventories of Acquiror and the Acquiror
Subsidiaries as reflected in the most recent financial statements contained in
the Acquiror Reports, or acquired by Acquiror or any of the Acquiror
Subsidiaries after the date thereof, (i) are carried as provided in the
Acquiror Reports not in excess of the lower of cost or net realizable value and
(ii) do not include any inventory which is obsolete, surplus or not usable or
saleable in the lawful and ordinary course of business of Acquiror and the
Acquiror Subsidiaries as heretofore conducted, in each case net of reserves
provided therefor.
6.20 Patents, Trademarks, Etc. Acquiror and the Acquiror
Subsidiaries have all patents, trademarks, trade names, service marks, trade
secrets, copyrights and licenses and other proprietary intellectual property
rights and licenses as are necessary in connection with the businesses of
Acquiror and the Acquiror Subsidiaries, the lack of which would have an
Acquiror Adverse Effect, and Acquiror does not have any knowledge of any
conflict with the rights of Acquiror and the Acquiror Subsidiaries therein or
any knowledge of any conflict by them with the rights of others therein which,
insofar as reasonably can be foreseen, could have an Acquiror Adverse Effect.
6.21 Product Liability. Except as disclosed in the Acquiror
Disclosure Letter, Acquiror is not aware of any claim, or the basis of any
claim, against Acquiror or any of the Acquiror Subsidiaries for injury to
person or property of employees or any third parties suffered as a result of
the sale of any product or performance of any service by Acquiror or any of the
Acquiror Subsidiaries, including claims arising out of the defective or unsafe
nature of its products or services, which could have an Acquiror Adverse
Effect. Acquiror and the Acquiror Subsidiaries have, and on the Effective Date
will have, full and adequate insurance coverage for potential product liability
claims against it.
6.22 Environment. Except as disclosed in the Acquiror Disclosure
Letter, there are, with respect to Acquiror or any of the Acquiror
Subsidiaries, no past or present violations of Environmental Laws, releases of
any material into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise
to any common law liability or any liability under CERCLA or similar state or
local laws, which liabilities, either individually or in the aggregate, would
have an Acquiror Adverse Effect.
6.23 Title to Assets; Liens. Except as disclosed in the Acquiror
Disclosure Letter, to the extent material to the business or operations of
Acquiror and the Acquiror Subsidiaries, Acquiror has good and marketable title
to all of its inventory, accounts receivable (other than Medicare/Medicaid
accounts receivable), property, equipment and other assets, and such assets are
free and clear of any material mortgages, liens, charges, encumbrances, or
title defects of
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any nature whatsoever, except for such mortgages, liens, charges, encumbrances
or title defects which would not materially and adversely affect the value of
such property as carried on Acquiror's financial statements contained in the
Acquiror Reports or would not have an Acquiror Adverse Effect. Acquiror and
the Acquiror Subsidiaries have valid and enforceable leases for the premises
and the equipment, furniture and fixtures purported to be leased by them,
except for leases, the failure of which to have or be enforceable, would not
have an Acquiror Adverse Effect.
6.24 Shelf Registration Statement. The Acquiror's registration
statement on Form S-4 (registration no. 333- 09905), in the form in which it
became effective, and the prospectus forming a part thereof comply in all
material respects with the provisions of the Securities Act and do not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The transaction pursuant to which the Stock Consideration will be
issued has been registered pursuant to such registration statement and the
Stock Consideration, upon its issuance pursuant to the terms hereof, shall be
freely tradeable, subject to the provisions of Rule 145 under the Securities
Act.
ARTICLE 7
Covenants
7.1 Acquisition Proposals. Subject to the fiduciary duties of the
Board of Directors of the Corporation, as advised by outside counsel, neither
the Corporation, any of the Corporation Subsidiaries nor any Partnership shall,
directly or indirectly, take (nor shall the Corporation, Corporation
Subsidiaries or any Partnerships authorize or permit their respective officers,
directors, employees, representatives, investment bankers, attorneys,
accountants or other agents or affiliates, to take) any action to (i)
encourage, solicit or initiate the submission of any Acquisition Proposal
(defined below), (ii) enter into any agreement with respect to any Acquisition
Proposal or (iii) participate in any way in discussions or negotiations with,
or furnish any information to, any person in connection with, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal. The Corporation will promptly communicate to Acquiror any
solicitation by or of the Corporation and the terms of any proposal or inquiry,
including the identity of the person and its affiliates making the same, that
it may receive in respect of any such transaction, or of any such information
requested from it or of any such negotiations or discussions being sought to be
initiated with it. "Acquisition Proposal" shall mean any proposed (a) merger,
consolidation or similar transaction involving the Corporation, (b) sale, lease
or other disposition directly or indirectly by merger, consolidation, share
exchange or otherwise of assets of the Corporation, the Corporation
Subsidiaries or the Partnerships representing 15% or more of the consolidated
assets of the Corporation, the Corporation Subsidiaries and the Partnerships,
(c) issue, sale, or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) in a transaction or series of transactions representing 15% or more
of the voting power of the Corporation or (D) transaction in which
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any person shall acquire beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act), or the right to acquire beneficial ownership or
any "group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial ownership
of 15% or more of the outstanding shares of Corporation Common Stock.
7.2 Interim Operations of the Corporation. Except with respect to
obtaining letters of intent from Acquisition Targets, the Corporation covenants
and agrees as to itself, the Corporation Subsidiaries and the Partnerships of
which the Corporation or a Corporation Subsidiary is general partner that, from
and after the date hereof until the Effective Time (except as Acquiror shall
otherwise agree in writing or except as otherwise contemplated by this
Agreement):
(i) The business of the Corporation and the Corporation
Subsidiaries shall be conducted only in the ordinary course and, to the extent
consistent therewith, the Corporation and the Corporation Subsidiaries shall
use their commercially reasonable efforts to preserve their business
organization intact.
(ii) The Corporation shall not (a) sell or pledge or agree
to sell or pledge any stock owned by it in any of the Corporation Subsidiaries
or any interest owned by the Corporation or any Corporation Subsidiary in any
Partnership; (b) amend its certificate of incorporation or bylaws; (c) split,
combine or reclassify any outstanding capital stock; (d) declare, set aside or
pay any dividend payable in cash, stock or property with respect to any of its
capital stock or (e) except as disclosed in the Corporation Disclosure Letter,
repurchase, redeem or otherwise acquire, or permit any Corporation Subsidiary
to purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock.
(iii) None of the Corporation, the Corporation Subsidiaries
or the Partnerships shall (a) issue, sell, pledge, dispose of or encumber, or
authorize or propose the issuance, sale, pledge, disposition or encumbrance of
(x) any shares of, or securities convertible or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
its capital stock of any class or Voting Debt (in the case of the Corporation
or any Corporation Subsidiary) and (y) any partnership interests in a
Partnership (in the case of the Partnerships), other than shares of Corporation
Common Stock issuable pursuant to Corporation Options, Corporation Warrants and
Convertible Preferred Stock outstanding on the date hereof; (b) transfer,
lease, license, guarantee, sell, mortgage, pledge or dispose of any other
property or assets or encumber any property or assets or incur or modify any
indebtedness or other liability other than in the ordinary course of business;
(c) authorize capital expenditures other than in the ordinary course of
business; (d) make any acquisitions of, or investment in, substantially all the
assets of or stock of any other person or entity; or (e) make any payment to
third parties for goods or services which are not commercially reasonable or on
an arm's length basis.
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(iv) None of the Corporation, any of the Corporation
Subsidiaries or any Partnership shall grant any bonus or pay increase or any
severance or termination pay to, or enter into any employment agreement with,
or modify any existing employment agreement with or Corporation Options granted
to, any director, officers or other employee of the Corporation, any of the
Corporation Subsidiaries or any Partnership, except as (x) may be required to
satisfy existing contractual obligations of the Corporation, the Corporation
Subsidiaries and the Partnerships as of the date hereof or (y) required by
applicable law.
(v) Except as may be required to satisfy existing
contractual obligations of the Corporation, the Corporation Subsidiaries and
the Partnerships existing as of the date hereof and the requirements of
applicable law, none of the Corporation, any of the Corporation Subsidiaries or
any of the Partnerships shall establish, adopt, enter into, make or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, employee stock ownership,
deferred compensation, employment, termination, severance or other plan, trust,
fund, policy or arrangement for the benefit of any class of directors, officers
or employees or make, or accelerate the vesting of, any grants, awards,
benefits or options under any such plans.
(vi) None of the Corporation, any Corporation Subsidiaries
or any Partnership shall, except in the ordinary and usual course of business
and on commercially reasonable terms, modify, amend or terminate any of its
Contracts or waive, release or assign any rights or claims.
(vii) None of the Corporation, any of the Corporation
Subsidiaries or any Partnership will change in any material respect the
accounting methods or practices followed by Corporation, any Corporation
Subsidiary or any Partnership (including any material change in any assumption
underlying, or any method of calculating, any bad debt, contingency or other
reserve), except as may be required by generally accepted accounting
principles.
(viii) Except in the ordinary course of business consistent
with past practice, none of the Corporation, any of the Corporation
Subsidiaries or any Partnership will, make any material Tax election change any
material Tax election already made, adopt any Tax accounting method or change
any Tax accounting method.
(ix) None of the Corporation, any of the Corporation
Subsidiaries or any Partnership will authorize or enter into an agreement to do
any of the actions referred to in paragraphs (i) through (viii) above unless
such agreement is conditioned upon the consent of Acquiror.
Notwithstanding the foregoing, prior to the Effective Time, the
Corporation may pay liabilities to third parties previously incurred by the
Corporation attributable to the Corporation's proposed initial public offering
and a Corporation Subsidiary may redeem its redeemable preferred stock that is
outstanding on the date hereof.
7.3 Interim Operations of Acquiror. The business of Acquiror will
be conducted in its ordinary and usual course, which Acquiror and the
Corporation acknowledge includes the
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acquisition from time to time of the assets or stock of eye care practices,
ambulatory surgery centers, medical management service organizations or other
businesses.
7.4 Shareholder Action. The Corporation will take all action
necessary as promptly as practicable in accordance with applicable law and its
articles of incorporation and bylaws to convene a meeting of its shareholders
to consider and vote upon, or take shareholder action by written consent under
Florida Law to obtain, the approval of this Agreement. If shareholder approval
of the Merger is sought at a meeting, the Board of Directors of the Corporation
shall, except to the extent the Board of Directors of the Corporation
reasonably believes is required by fiduciary obligations under applicable law,
recommend such approval and the Corporation shall take all lawful action to
solicit such approval. The Corporation and Acquiror shall coordinate and
cooperate with respect to the timing of any such meeting. At any such meeting,
all of the shares of Corporation Common Stock, if any, then owned by Acquiror
(or as to which Acquiror shall have received a proxy) will be voted in favor of
this Agreement.
7.5 Filings; Other Action. Subject to the terms and conditions
herein provided, the Corporation and Acquiror shall (i) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act with respect to the Merger; (ii) use all reasonable efforts to
cooperate with one another in (a) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits
or authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several States
and foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby and (b) timely making all such filings and timely seeking all such
consents, approvals, permits or authorizations; and (iii) use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things, necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purpose of this Agreement, the proper officers and/or directors of
Acquiror and Merger Sub shall take all such necessary action.
7.6 Access. Each of the Acquiror and Corporation shall, and shall
cause each of its respective subsidiaries to, afford to the other party and to
the officers, employees, accountants, counsel, financial advisors and other
representatives of such other party, reasonable access during normal business
hours during the period prior to the Effective Time to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, each of the Acquiror and Corporation shall, and shall cause each
of its respective subsidiaries to, furnish promptly to the other party (a) a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of Federal or state
securities laws and (b) all other information concerning its business,
properties and personnel as such other party may reasonably request.
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7.7 Merger Indemnification and Insurance.
(i) Acquiror and Merger Sub agree that all rights to
indemnification for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers of
the Corporation and the Corporation Subsidiaries as provided in their
respective certificates or articles of incorporation or bylaws shall survive
the Merger and shall continue in full force and effect in accordance with their
terms.
(ii) In the event Acquiror, the Surviving Corporation or
any of their successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Acquiror or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 7.7.
(iii) This Section 7.7 shall survive the consummation of
the Merger at the Effective Time, is intended to benefit the Corporation,
Acquiror, the Surviving Corporation and the persons indemnified pursuant to
Section 7.7(i), and shall be binding on all successors and assigns of Acquiror
and the Surviving Corporation.
7.8 Fees and Expenses. Except as provided in Section 9.5, all
fees and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
7.9 Publicity. The initial press release announcing the
transactions contemplated hereby shall be a joint press release and thereafter
the Corporation and Acquiror shall consult with each other in issuing any press
releases or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
7.10 Information Statement.
(i) If shareholder approval of the Merger is sought at a
meeting of the Corporation's shareholders, Acquiror and the Corporation shall
cooperate and promptly prepare as soon as practicable a proxy statement with
respect to the meetings of the stockholders of the Corporation to approve the
Merger (the "Information Statement"). The respective parties will cause the
Information Statement to comply as to form in all material respects with the
provisions of any applicable Federal and state securities laws. Acquiror shall
use its reasonable efforts to obtain, prior to the mailing of the definitive
Information Statement, all necessary state securities law permits or approvals
required to carry out the transactions contemplated by this Agreement and will
pay all expenses incident thereto. Acquiror agrees that the Information
Statement will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply
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to the extent that any such untrue statement of a material fact or omission to
state a material fact was made by Acquiror in reliance upon and in conformity
with written information concerning the Corporation furnished to Acquiror by
the Corporation specifically for use in the Information Statement. The
Corporation agrees that the information provided by it for inclusion in the
Information Statement, when the Information Statement is mailed to
Corporation's stockholders, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. No amendment or supplement to the
Information Statement will be made by Acquiror until it has consulted with the
Corporation and its counsel.
(ii) Acquiror intends to file with the SEC a Current
Report on Form 8-K (the "8-K") related to the transactions contemplated hereby.
The Corporation agrees to cooperate fully with Acquiror in connection with
providing information related to the Corporation, including financial
statements, that is required to be included in the 8-K.
7.11 Listing Application. Acquiror shall prepare and submit to the
NYSE a listing application covering Acquiror Common Stock to be issued in
connection with the Merger and shall use its best efforts to obtain, prior to
the Effective Time, approval for the listing of such Acquiror Common Stock upon
official notice of issuance.
7.12 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effectuate the
Merger.
7.13 Notification of Certain Matters.
(i) The Corporation shall give prompt notice to Acquiror
of: (a) any notice of, or other communication which becomes known to an
executive officer of the Corporation relating to, a default or event that, with
notice or lapse of time or both, would become a default, received by the
Corporation, any of the Corporation Subsidiaries, or any Partnership,
subsequent to the date of this Agreement and prior to the Effective Time, under
any Contract material to the businesses of the Corporation, the Corporation
Subsidiaries and the Partnerships taken as a whole and to which the
Corporation, one of the Corporation Subsidiaries or a Partnership is a party or
is subject; and (b) any change that results in a Corporation Adverse Effect.
The Corporation shall give prompt notice to Acquiror when any notice or other
communication from any third party becomes known to an executive officer of the
Corporation alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement.
(ii) The Corporation shall give prompt notice to Acquiror,
and Acquiror or Merger Sub shall give prompt notice to the Corporation, of (a)
any representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect and (b) the failure by it to comply with
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or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
7.14 Legal Conditions to Merger. Each party shall use its best
efforts to take, or cause to be taken, all actions necessary to comply promptly
with all legal requirements which may be imposed on such party or its
subsidiaries with respect to the Merger and, subject to the terms and
conditions set forth in this Agreement, to consummate the transactions
contemplated by this Agreement. Each party will promptly cooperate with and
furnish information to each other party in connection with any such restriction
suffered by, or requirement imposed upon, it or any of its subsidiaries or
affiliated partnerships in connection with the foregoing.
7.15 Agreements by Affiliated Stockholders of the Corporation and
Acquiror.
At least ten days prior to the shareholders' meeting date for the
Corporation or the date upon which the shareholders take action by written
consent, the Corporation shall deliver to Acquiror a list of names and address
of those persons who were, in the Corporation's reasonable judgment, at the
record date for the stockholders' meeting, "affiliates" of the Corporation
within the meaning of Rule 145 (each such person, together with the persons
identified below, an "Affiliate") of the rules and regulations promulgated
under the Securities Act ("Rule 145"). The Corporation shall provide Acquiror
such information and documents as Acquiror shall reasonably request for
purposes of reviewing such list. There shall be added to such list the names
and addresses of any other person (within the meaning of Rule 145) which
Acquiror reasonably identifies (by written notice to the Corporation within
five business days after Acquiror's receipt of such list) as being a person who
may be deemed to be an Affiliate of the Corporation within the meaning of Rule
145; provided that no such person identified by Acquiror shall be added to the
list of Affiliates of the Corporation if Acquiror shall receive from the
Corporation, on or before the Effective Time, an opinion of counsel reasonably
satisfactory to Acquiror to the effect that such person is not an Affiliate.
The Corporation shall use all reasonable efforts to deliver or cause to be
delivered to Acquiror, prior to the Effective Time, from each Affiliate who
will, upon consummation of the Merger, beneficially own in excess of 1% of the
outstanding shares of Acquiror Common Stock, Affiliates Letters in the form
attached hereto as Exhibit 7.15. Acquiror and Merger Sub shall be entitled to
place legends as specified in such Affiliates Letters on the Certificate(s)
evidencing any Acquiror Common Stock to be received by such Affiliates pursuant
to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for Acquiror Common Stock, consistent with
the terms of such Affiliate Letters.
7.16 Service Agreements. Following the review of the management
services agreements to which Corporation and the Corporation Subsidiaries are
parties, Acquiror may require certain modifications to conform those management
services agreements and other agreements with the Affiliated Practices to
similar agreements to which Acquiror or the Acquiror Subsidiaries are parties.
The Corporation shall use its best efforts to effect such modifications.
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7.17 Employees.
(i) The Corporation shall, at or prior to the Effective
Time, obtain the resignations of the officers and directors of the Corporation
from their positions with the Corporation, the Corporation Subsidiaries and the
Partnerships.
(ii) In the event that within the six months following the
Closing Date, the Surviving Corporation terminates the employment of a person
who was employed by the Corporation prior to the Closing Date, the Surviving
Corporation will provide such employee at least one month's salary as severance
pay, provided that if such employee either (A) was an officer of the
Corporation or (B) was employed by the Corporation continuously for three years
prior to the Closing Date, the Surviving Corporation shall provide such
terminated employee at least two month's salary as severance pay.
(iii) Following Closing, all employees of the Surviving
Corporation (including its subsidiaries and affiliated partnerships) shall be
entitled to participate in Acquiror's benefit plans, including stock option
plans, on the same terms afforded Acquiror's other employees and shall receive
credit for prior service with the Corporation.
7.18 First Union Debt. The Corporation will use its best efforts
to obtain the consent of the Corporation's bank lender, First Union National
Bank of North Carolina ("First Union") to the Merger and a waiver from First
Union of the acceleration of any Indebtedness that would or could be caused by
consummation of the Merger.
7.19 Reasonable Assistance. Acquiror will use its best efforts to
assist the Corporation and the individuals identified in Section 4.2(iv) in
obtaining letters of intent pursuant to Section 4.2, including attending
meetings with Acquisition Targets.
ARTICLE 8
Conditions
8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment in all material respects at or prior to the Effective Time
of the following conditions:
(i) The Merger and this Agreement shall have been
approved in the manner required by law by the holders of the issued and
outstanding shares of the Corporation's capital stock entitled to vote thereon.
(ii) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
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(iii) None of the parties hereto shall be subject to any
order or injunction against the consummation of the transaction contemplated by
this Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any such
injunction lifted.
(iv) The shares of Acquiror Common Stock issuable to the
Corporation's stockholders pursuant to this Agreement shall have been approved
for listing on the New York Stock Exchange, subject to official notice of
issuance.
(v) No more than 5% of the outstanding shares of
Corporation Common Stock immediately prior to the Merger shall constitute
Dissenting Shares.
(vi) The issuance of the shares of Acquiror Common Stock
in connection with the Merger shall have been registered under the Securities
Act.
8.2 Conditions to Obligation of the Corporation to Effect the
Merger. The obligation of the Corporation to effect the Merger shall be
subject to the fulfillment in all material respects at or prior to the
Effective Time of the following conditions:
(i) Acquiror and Merger Sub shall have performed each
agreement contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties of Acquiror contained
in this Agreement (A) in the case thereof that are expressly qualified by any
materiality qualification, shall be true and correct, subject to such
materiality qualification, and (B) in the case of all other representations and
warranties, shall be true and correct in all material respects, in each case on
and as of the Effective Time (other than any failure to so perform or any
misrepresentation or omission which would not materially influence the
investment decision of a reasonable purchaser of securities); and the
Corporation shall have received a certificate of the President of Acquiror
certifying to such effect.
(ii) Jackson & Walker, L.L.P., counsel for the Acquiror,
shall have furnished to the Corporation their written opinions dated the
Closing Date, in form and substance reasonably satisfactory to the Corporation
and its counsel.
(iii) The Acquiror Disclosure Letter shall have been
furnished to the Corporation.
(iv) Acquiror shall have made severance payments to
Messrs. Whatley, Billing and Robbins in an aggregate amount equal to the
Severance Adjustment.
(v) Acquiror shall have made all the payments in respect
of currently outstanding options contemplated by Section 4.3(v) hereof.
(vi) Acquiror shall have executed and delivered
immediately prior to the Effective Time a registration rights agreement in form
and substance reasonably acceptable to
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the Corporation and its counsel pursuant to which the Stock Consideration,
following demand from the shareholders who become parties to the registration
rights agreement, would be registered for resale under the Securities on Form
S-3 (or successor form) for a period not to exceed two years from the Effective
Time, to the extent that it is reasonably determined that the Stock
Consideration is not freely tradeable.
(vii) At the Effective Time, Acquiror shall retire
outstanding Indebtedness of the Corporation to Welsh, Carson, Anderson & Stowe
VI, L.P. and WCAS Capital Partners II, L.P. in an aggregate amount not to
exceed $16 million.
8.3 Conditions to Obligation of Acquiror and Merger Sub to Effect
the Merger. The obligation of Acquiror and Merger Sub to effect the Merger
shall be subject to the fulfillment in all material respects at or prior to the
Effective Time of the following conditions:
(i) The Corporation shall have performed its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time and the representations and warranties of the Corporation
contained in this Agreement (A) in the case thereof that are expressly
qualified by any materiality qualification, shall be true and correct, subject
to such materiality qualification, and (B) in the case of all other
representations and warranties, shall be true and correct in all material
respects, in each case on and as of the Effective Time (other than any failure
to so perform or any misrepresentation or omission which would not materially
influence the investment decision of a reasonable purchaser of securities); and
Acquiror shall have received a certificate of the President of the Corporation
certifying to such effect. The parties acknowledge that the failure to obtain
the consent of First Union to the Merger or a waiver from First Union of the
acceleration of any Indebtedness that would or could be caused by consummation
of the Merger shall not constitute a breach of the Corporation's
representations and warranties hereunder.
(ii) Neither the Board of Directors of the Corporation nor
any committee thereof shall have amended, modified, rescinded or released the
resolutions adopted by the Board of Directors on October 6, 1996 (an accurate
and complete copy of which has been provided to Acquiror), and shall not have
adopted any other resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such resolutions.
(iii) Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel
for the Corporation, shall have furnished to Acquiror their written opinions
dated the Closing Date, in form and substance reasonably satisfactory to
Acquiror and its counsel.
(iv) Acquiror shall have received the resignation of all
directors and executive officers of each of the Corporation and the Corporation
Subsidiaries or such directors and executive officers shall have been removed,
and shall have received a release from each of Thomas R. Whatley, Mitchell G.
Billing and Lee A. Robbins in form and substance reasonably acceptable to the
Corporation and its counsel from any and all claims based upon any Employee
Benefit Plan, Compensation Plan, Employment Agreement or other contract,
arrangement or understanding between such executive officer and the
Corporation.
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(v) Acquiror shall have received such other certificates,
instruments and documents as it may reasonably require to demonstrate the
satisfaction of the conditions set forth in this Section 8.3.
(vi) The holders of all outstanding options and warrants
of the Corporation shall have executed binding agreements in accordance with
Section 4.3 hereof.
(vii) At the Effective Time, the aggregate Indebtedness of
the Corporation and the Corporation Subsidiaries to First Union shall not
exceed $28.5 million and to Welsh, Carson, Anderson & Stowe, VI, L.P. and its
affiliates shall not exceed $16 million, and other indebtedness (consisting
substantially of indebtedness to physicians associated with Affiliated
Practices) shall not exceed $13.7 million.
(viii) The Corporation shall have obtained (a) such
modifications to the management services agreements and related agreements that
the Acquiror has identified to the Corporation in writing on or before October
20, 1996 as necessary or advisable to rectify a material regulatory problem or
(b) the Corporation shall have obtained the written opinions of counsel with
healthcare law expertise who are reasonably acceptable to Acquiror that the
management services agreement and related agreements in question comply in all
material respects with applicable healthcare laws or written opinions of local
counsel referenced in Section 7.16.
(ix) The Corporation shall have established to Acquiror's
satisfaction that the Corporation recognized earnings before interest and
taxes, calculated in accordance with generally accepted accounting principles,
consistently applied in accordance with the Corporation's past practices, but
excluding documented initial public offering expenses, for the month of August,
1996 of at least $673,000;
(x) The Corporation shall have established to the
Acquiror's satisfaction that the Corporation recognized earnings before
interest and taxes, calculated in accordance with generally accepted accounting
principles, consistently applied in accordance with the Corporation's past
practices, but excluding documented initial public offering expenses, of (x) at
least $550,000 for September, 1996 and, if the Merger has not been consummated
by November 7, 1996, for such amount in October, 1996, and (y) if the Merger
has not been consummated by November 7, 1996, aggregating at least $1,346,000
for the months of September, 1996 and October, 1996 combined; and
(xi) The Corporation shall have established to the
Acquiror's satisfaction that the Corporation has, at the Closing Date, working
capital (defined as current assets less current liabilities calculated in
accordance with generally accepted accounting principles, consistently applied
in accordance with the Corporation's past practices) of at least $2,000,000.
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(xii) The Corporation Disclosure Letter Shall have been
furnished to Acquiror.
8.4 Frustration of Closing Conditions. None of the Corporation,
Acquiror and Merger Sub may rely on the failure of any condition set forth in
Section 8.1, 8.2 or 8.3, as the case may be, to be satisfied if such failure
was caused by such party's failure to act in good faith or to use its best
efforts to consummate the Merger and the other transactions contemplated by
this Agreement, as required by Section 7.14.
ARTICLE 9
Termination
9.1 Termination by Mutual Consent. This Agreement may be
terminated and may be abandoned at any time prior to the Effective Time, before
or after the approval of this Agreement by the shareholders of the Corporation,
by the mutual consent of Acquiror, Merger Sub and the Corporation.
9.2 Termination by Either Acquiror or the Corporation. This
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of either Acquiror or the Corporation if: (i) the Merger
shall not have been consummated by January 31, 1997; or (ii) the approval of
the Corporation's shareholders required by Section 8.1(i) shall not have been
obtained at a meeting duly convened therefor or at any adjournment thereof or
pursuant to written consent by the shareholders, by January 31, 1997; provided,
in the case of a termination pursuant to clause (i) above, the terminating
party shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in such clause.
9.3 Termination by the Corporation. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the adoption and approval by stockholders of the
Corporation referred to in Section 8.1(i), by action of the Board of Directors
of the Corporation, if (i) the Board of Directors of Acquiror shall have
withdrawn or modified in a manner adverse to the Corporation its approval or
recommendation of this Agreement or the Merger, (ii) there has been a breach by
Acquiror or Merger Sub of any representation, warranty, covenant or agreement
contained in this Agreement which would have an Acquiror Adverse Effect which
is not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by the Corporation to the party committing such breach,
or (iii) within three business days after receipt of the Acquiror Disclosure
Letter if, in the judgment of the Board of Directors of the Corporation, the
matters described in the Acquiror Disclosure Letter could, individually or in
the aggregate, have or could reasonably be expected to have an Acquiror Adverse
Effect.
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9.4 Termination by Acquiror.
(i) This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time by action of the Board of
Directors of Acquiror, if (a) the Board of Directors of the Corporation shall
have recommended to shareholders of the Corporation an Acquisition Proposal, or
(b) there has been a breach by the Corporation of any representation, warranty,
covenant or agreement contained in this Agreement which would have a
Corporation Adverse Effect which is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by Acquiror to the
party committing such breach. The parties acknowledge that the failure to
obtain the consent of First Union to the Merger or a waiver from First Union of
the acceleration of any Indebtedness that would or could be caused by
consummation of the Merger shall not afford the Acquiror a right of termination
hereunder.
(ii) This Agreement may be terminated and the Merger may
be abandoned at any time on or prior to the close of business on October 14,
1996 by the Chairman and Chief Executive Officer or the Chief Financial Officer
of Acquiror by notice in writing to the Corporation if Acquiror determines in
its sole discretion as the result of its legal, financial, environmental and
operational due diligence with respect to the Corporation, that such due
diligence reveals a material adverse change or difference in the financial
condition of the Corporation together with the Corporation Subsidiaries and the
Partnerships, taken as a whole, from that reflected in the consolidated
financial statements of the Corporation set forth in Section 5.9 hereof.
Notwithstanding the foregoing sentence, the Agreement may be terminated and the
Merger may be abandoned at any time on or prior to the close of business on
November 5, 1996 by any such person delivering such notice if Acquiror
determines in its reasonable judgment as a result of its regulatory due
diligence with respect to the Corporation, that such due diligence reveals a
material issue(s) with respect to the regulatory compliance at any one of the
Affiliated Practices or Corporation ASCs. None of the matters disclosed in the
Corporation Disclosure Letter shall give rise to a right of termination under
this Section 9.4(ii).
9.5 Effect of Termination and Abandonment.
(i) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, no party hereto (or any
of its directors or officers) shall have any liability or further obligation to
any other party to this Agreement except as provided in Section 9.5(ii),
Section 7.8 (subject to Section 9.5(ii)) and Section 10.6 below, and except
that nothing herein will relieve any party from liability for any breach of
this Agreement.
(ii) In the event that any person shall have made an
Acquisition Proposal for the Corporation and thereafter the Agreement is
terminated by either party (other than pursuant to the breach of this Agreement
by Acquiror or termination by Acquiror pursuant to Section 9.4(ii)) then the
Corporation, if requested by Acquiror, shall, subject to the provisions set
forth below, on the earlier of January 31, 1997 or the date the Corporation
consummates a transaction with any person who has made an Acquisition Proposal,
pay Acquiror a fee equal to all fees and expenses incurred by Acquiror in
connection with the transactions contemplated by this Agreement as reflected
upon an invoice prepared by Acquiror and delivered to the Corporation
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and an amount equal to $2,450,000, which amount shall be payable by wire
transfer of same day funds (collectively, the "Break-Up Fee"); provided that no
fee shall be payable to Acquiror pursuant to this Section 9.5(ii) unless and
until (i) any person (other than Acquiror) (an "Acquiring Party") and the
Corporation have entered into a definitive agreement to consummate an
Acquisition Proposal. Notwithstanding the foregoing in the event that the
Merger has not been consummated on or before November 30, 1996 and failure to
consummate the Merger by that time has not resulted from the action or inaction
of the Corporation (which action or inaction would include entertainment of an
Acquisition Proposal), Acquiror shall not be entitled to any Break-Up Fee;
provided that the November 30, 1996 date shall be subject to extension for up
to two 30-day periods (i) automatically if failure to close has been delayed by
third parties or events not within the control of any party hereto, or (ii) by
mutual written consent of the parties which shall not be unreasonably withheld.
The Corporation acknowledges that the agreements contained in this
Section 9.5(ii) are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Acquiror and Merger Sub would
not enter into this Agreement; accordingly, if the Corporation fails to
promptly pay the amount due pursuant to this Section 9.5(ii), and, in order to
obtain such payment, Acquiror or Merger Sub commences a suit which results in a
final judgment, the non-prevailing party shall pay to the prevailing party its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of the fee at the prime rate of
NationsBank Texas, N.A. in effect on the date such payment was required to be
made.
(iii) In the event of termination of this Agreement
pursuant to Section 9.2(ii) hereof, the Corporation shall promptly pay Acquiror
a fee equal to all fees and expenses incurred by Acquiror in connection with
the transactions contemplated by this Agreement as reflected upon an invoice
prepared by Acquiror and delivered to the Corporation and an amount equal to
$2,450,000.
9.6 Extension; Waiver. At any time prior to the Effective Time of
the Merger, any party hereto (other than Merger Sub), by action taken by its
Board of Directors or a committee thereof, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
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ARTICLE 10
General Provisions
10.1 Nonsurvival of Representations, Warranties and Agreements.
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and shall not survive
the Merger, provided, however, that the agreements contained in Article 4 and
in Sections 7.7, 7.8, 7.9, 9.5 and 10.6 shall survive this Agreement
indefinitely.
10.2 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to the Corporation:
American Ophthalmic, Inc.
250 South Park Avenue, Suite 600
Winter Park, Florida 32789
Attention: Thomas R. Whatley
FAX: 407-647-5648
Copy to: Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Karen C. Wiedemann
FAX: 212-841-5725
If to Acquiror or Merger Sub:
Physicians Resource Group, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1540
Dallas, Texas 75240
Attention: Chief Executive Officer
FAX: 214-982-8299
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Copy to: Physicians Resource Group, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1540
Dallas, Texas 75240
Attention: General Counsel
FAX: 214-982-8299
Copy to: Jackson & Walker, L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: James S. Ryan, III
FAX: (214) 953-5822
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3 Binding Effect; Benefit. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement
to the contrary, except for the provisions of Article 4 and Sections 7.11,
7.13, 7.14, and 10.6 nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.4 Entire Agreement. This Agreement, the Exhibits, Corporation
and Acquiror Disclosure Letters and other documents and agreements among the
parties hereto, constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.5 Amendment. This Agreement may be amended by the parties
hereto, by action taken by their respective Boards of Directors or committees
thereof, at any time before or after approval of matters presented in
connection with the Merger by the stockholders of the Corporation, but after
any such stockholder approval no amendment shall be made which by law requires
the further approval of stockholders without obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to its rules of conflict of laws.
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10.7 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
10.8 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
10.9 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
10.10 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.11 Incorporation of Exhibits and Disclosure Letters. All
Exhibits attached hereto and referred to herein and the Corporation Disclosure
Letter and Acquiror Disclosure Letter referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
10.12 Severability. If for any reason whatsoever, any one or more
of the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid as applied to any particular case or in all cases,
such circumstances shall not have the effect of rendering such provision
invalid in any other case or of rendering any of the other provisions of this
Agreement inoperative, unenforceable or invalid.
10.13 Obligation of Acquiror. Acquiror shall cause Merger Sub to
perform each of its duties and obligations under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
hereinabove written.
THE CORPORATION:
---------------
ATTEST: AMERICAN OPHTHALMIC INCORPORATED
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- ------------------------------
ACQUIROR:
--------
ATTEST: PHYSICIANS RESOURCE GROUP, INC.
By: By:
------------------------------ --------------------------------
Richard J. D'Amico,
Secretary --------------------------------
Title:
------------------------------
MERGER SUB:
----------
ATTEST: PRG ACQUISITION CORPORATION
By: By:
------------------------------ ---------------------------------
Richard J. D'Amico,
Secretary ---------------------------------
Title:
------------------------------
51
