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EXHIBIT 2.7
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated
effective as of May 1, 1997, is by and among COCHISE EYE & LASER, P.C., an
Arizona professional corporation, (the "Company"), XXXXXXX X. XXXXXX, M.D. and
XXXXXX X. XXXXXX, M.D. (together, the "Physician"), VISION TWENTY-ONE, INC., a
Florida corporation ("Vision 21"), and VISION 21 OF SIERRA VISTA, INC., a
Florida corporation (the "Subsidiary").
R E C I T A L S
A. Physician is a physician licensed to practice medicine in the State
(as defined herein) and currently conducts an ophthalmology practice through the
Company and through optometrist employees currently conducts an optometry
practice through the Company.
B. Physician owns all of the issued and outstanding shares of capital
stock of the Company.
C. The Company and Vision 21 desire to effect a business combination
and merger of the Company with and into Vision 21's wholly-owned subsidiary, the
Subsidiary, upon the terms and subject to the satisfaction of the conditions
precedent contained herein (the "Merger").
D. It is intended that for federal income tax purposes the Merger shall
qualify as a reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code").
E. The Subsidiary cannot acquire certain of the Company's assets
because of laws prohibiting general business corporations from engaging in the
practice of medicine or optometry, or exercising control over physicians
practicing medicine or optometrists practicing optometry, and accordingly, the
Company, Vision 21 and the Subsidiary desire that the Company divest itself of
such assets prior to the Merger.
F. Prior to the Merger, the Company intends to form a new professional
corporation ("New P.C.") to which it intends to transfer its medical and
optometry business and all of its Medical Assets (as defined herein) and all of
the Excluded Liabilities (as defined herein) in exchange for all of New P.C.'s
capital stock and to distribute such stock to Physician.
G. New P.C. intends to employ the Physician and enter into a Business
Management Agreement (as defined herein) with the Company immediately prior to
the Merger; and
H. As a result of the Merger, the Surviving Corporation (as defined
herein) will acquire the medical and optometry practice management business and
all of the Nonmedical
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Assets (as herein defined) of the Company associated with such business to the
extent permitted by law and assume all of Company's obligations under the
Business Management Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth below:
1.1. AAA. The term "AAA" shall mean the American Arbitration
Association.
1.2. Accountants. The term "Accountants" shall mean the accounting
firm for Vision 21.
1.3. Accounts Receivable. The term "Accounts Receivable" shall have
the meaning set forth in Section 3.39.
1.4. Acquisition Proposal. The term "Acquisition Proposal" shall
have the meaning set forth in Section 3.34.
1.5. Affiliate. The term "Affiliate" with respect to any person or
entity shall mean a person or entity that directly or indirectly through one or
more intermediaries, controls, or is controlled by or is under common control
with, such person or entity.
1.6. Applicable Laws. The term "Applicable Laws" shall have the
meaning set forth in Section 20.5.
1.7. Audit. The term "Audit" shall have the meaning set forth in
Section 3.9.
1.8. Business Management Agreement. The term "Business Management
Agreement" shall mean the Business Management Agreement entered into between the
Company and New P.C. prior to the Closing.
1.9. Cash Compensation. The term "Cash Compensation" shall have the
meaning set forth in Section 3.11(a).
1.10. Claim Notice. The term "Claim Notice" shall have the meaning
set forth in Section 15.3(a).
1.11. Closing. The term "Closing" shall mean the consummation of the
transactions contemplated by this Agreement.
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1.12. Closing Date. The term "Closing Date" shall mean May 30, 1997
or such other date as mutually agreed upon by the parties.
1.13. Code. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.14. Commitments. The term "Commitments" shall have the meaning set
forth in Section 3.15(a).
1.15. Common Stock. The term "Common Stock" or "Vision 21 Common
Stock" shall mean the common stock, par value $.01 per share, of Vision 21.
1.16. Company Balance Sheet. The term "Company Balance Sheet" shall
have the meaning set forth in Section 3.9.
1.17. Company Balance Sheet Date. The term "Company Balance Sheet
Date" shall have the meaning set forth in Section 3.9.
1.18. Company Common Stock. The term "Company Common Stock" shall
mean the common stock, par value $1.00 per share, of the Company.
1.19. Compensation Plans. The term "Compensation Plans" shall have
the meaning set forth in Section 3.11(b)(ii).
1.20. Competing Management Business. The term "Competing Management
Business" shall have the meaning set forth in Section 18.1(b).
1.21. Competitor. The term "Competitor" shall mean any person or
entity which, individually or jointly with others, whether for its own account
or for that of any other person or entity, owns, or holds any ownership or
voting interest in any person or entity engaged in, the practice of
ophthalmology, the practice of optometry, the operation of out patient eye
surgical facilities, the operation of refractive surgery centers and the
operation of optical shops; provided, however, that such term shall not include
any Affiliate of Vision 21 or any entity with which Vision 21 has an agreement
similar to the Business Management Agreement in effect.
1.22. Confidential Information Memorandum. The term "Confidential
Information Memorandum" shall mean that certain disclosure memorandum
distributed by Vision 21 to the Company and Physician dated as of December 1996,
as supplemented on February 28, 1997, and any further amendments or revisions
thereto.
1.23. Controlled Group. The term "Controlled Group" shall have the
meaning set forth in Section 3.12(g).
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1.24. Corporation Law. The term "Corporation Law" shall mean the
statutes, regulations and laws governing business corporations and professional
corporations in the State.
1.25. Damages. The term "Damages" shall have the meaning set forth
in Section 16.1.
1.26. Effective Time. The term "Effective Time" shall have the
meaning set forth in Section 2.3.
1.27. Election Period. The term "Election Period" shall have the
meaning set forth in Section 15.3(a).
1.28. Employee Benefit Plans. The term "Employee Benefit Plans"
shall have the meaning set forth in Section 3.12(a).
1.29. Employee Policies and Procedures. The term "Employee Policies
and Procedures" shall have the meaning set forth in Section 3.11(d).
1.30. Employment Agreements. The term "Employment Agreements" shall
have the meaning set forth in Section 3.11(c).
1.31. Environmental Laws. The term "Environmental Laws" shall have
the meaning set forth in Section 3.27(a).
1.32. ERISA. The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
1.33. Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
1.34. Excluded Liabilities. The term "Excluded Liabilities" shall
mean (i) any and all obligations and liabilities in connection with accrued
shareholder expenses, long-term debt associated with previous liabilities of the
Company and contributions to retirement plans; and (ii) any and all obligations
or liabilities relating to any fees or expenses of Seller's or Physician's
counsel, accountants or other experts incident to the negotiation and
preparation of any of the documents contemplated herein and consummation of the
transactions contemplated thereby.
1.35. FBCA. The term "FBCA" shall mean the Florida Business
Corporation Act.
1.36. Financial Statements. The term "Financial Statements" shall
have the meaning set forth in Section 3.9.
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1.37. GAAP. The term "GAAP" shall mean generally accepted accounting
principles, applied on a consistent basis with prior periods, set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity or other practices and procedures as may be approved by a
significant segment of the accounting profession, which are applicable to the
circumstances as of the date of the determination.
1.38. Governmental Authority. The term "Governmental Authority"
shall mean any national, state, provincial, local or tribunal governmental,
judicial or administrative authority or agency.
1.39. Indemnified Party. The term "Indemnified Party" shall have the
meaning set forth in Section 15.3(a).
1.40. Indemnifying Party. The term "Indemnifying Party" shall have
the meaning set forth in Section 15.3(a).
1.41. Indemnity Notice. The term "Indemnity Notice" shall have the
meaning set forth in Section 15.3(d).
1.42. Initial Public Offering. The term "Initial Public Offering"
shall mean the potential initial underwritten public offering of Vision 21
Common Stock contemplated by Vision 21.
1.43. Insurance Policies. The term "Insurance Policies" shall have
the meaning set forth in Section 3.16.
1.44. IRS. The term "IRS" shall mean the Internal Revenue Service.
1.45. Management Business. The term "Management Business" shall have
the meaning set forth in Section 18.1(b)(i).
1.46. Material Adverse Effect. The term "Material Adverse Effect"
shall mean a material adverse effect on the Nonmedical Assets and the Company's
business, operations, condition (financial or otherwise) or results of
operations, taken as a whole, considering all relevant facts and circumstances.
1.47. Medical Assets. The term "Medical Assets" shall mean the
Company's right, title and interest in any assets as set forth on Schedule 1.47A
which shall also be deemed to include (a) life insurance policies covering the
life of any employee of the Company, and (b) personal effects listed on Schedule
1.47B.
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1.48. Merger. The term "Merger" shall have the meaning set forth in
the Recitals hereto.
1.49. Merger Consideration. The term "Merger Consideration" shall
mean the consideration set forth in Sections 2.8, 2.9 and 2.11 of this
Agreement.
1.50. 1997 Acquisitions. The term "1997 Acquisitions" shall mean the
acquisitions by Vision 21 of third parties which were completed in March 1997.
1.51. Nonmedical Assets. The term "Nonmedical Assets" shall mean all
of the assets of the Company except for the Medical Assets.
1.52. Optometrist Employee. The term "Optometrist Employee" shall
mean those licensed optometrists who are employees of the Company, but are not
shareholders.
1.53. Optometrist Employment Agreement. The term "Optometrist
Employment Agreement" shall mean the Optometrist Employment Agreement to be
executed between any Optometrist Employee and New P.C.
1.54. Payors. The term "Payors" shall have the meaning set forth in
Section 3.30.
1.55. Permitted Encumbrances. The term "Permitted Encumbrances"
shall have the meaning set forth in Section 3.14(b).
1.56. Physician Employee. The term "Physician Employee" shall mean
those licensed physicians who are employees of the Company, but are not
shareholders.
1.57. Physician Employment Agreement. The term "Physician Employment
Agreement" shall mean the Physician Employment Agreement to be executed between
Physician and New P.C., and between any Physician Employee and New P.C.
1.58. Practice. The term "Practice" shall mean the ophthalmology,
optometry and all other vision related health-care practices conducted from time
to time by the Company prior to and on the Closing Date and by the New P.C.
after the Closing Date.
1.59. Professional Employee. The term "Professional Employee" shall
mean any Physician Employee or Optometrist Employee.
1.60. Proposed Merger Consideration Adjustment. The term "Proposed
Merger Consideration Adjustment" shall have the meaning set forth in Section
2.11(b).
1.61. Proprietary Rights. The term "Proprietary Rights" shall have
the meaning set forth in Section 3.17.
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1.62. Recent Acquisitions. The term "Recent Acquisitions" shall mean
the acquisitions by Vision 21 of third parties which were completed in December
1996 and the 1997 Acquisitions.
1.63. Registration Statement. The term "Registration Statement"
shall have the meaning set forth in Section 10.1.
1.64. Reorganization. The term "Reorganization" shall have the
meaning set forth in Section 14.3(a).
1.65. SEC. The term "SEC" shall mean the Securities and Exchange
Commission.
1.66. Securities. The term "Securities" shall mean the shares of
Vision 21 Common Stock to be delivered to Physician at the Closing.
1.67. Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
1.68. State. The term "State" shall mean the State in which the
Company is incorporated.
1.69. Surviving Corporation. The term "Surviving Corporation" shall
have the meaning set forth in Section 2.1.
1.70. Tax Returns. The term "Tax Returns" shall have the meaning set
forth in Section 3.18(a).
1.71. Third Party Claim. The term "Third Party Claim" shall have the
meaning set forth in Section 15.3(a).
1.72. Vision 21 Financial Statements. The term "Vision 21 Financial
Statements" shall have the meaning set forth in Section 5.10.
2. THE MERGER.
2.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company shall be merged with and into the
Subsidiary in accordance with this Agreement and the separate corporate
existence of the Company shall thereupon cease. The Subsidiary shall be the
surviving corporation in the Merger (in such capacity, hereinafter referred to
as the "Surviving Corporation") and shall continue to be governed by the laws of
the State of Florida, and the separate corporate existence of the Subsidiary
with all its rights, privileges, powers, immunities, purposes and franchises
shall continue unaffected by the Merger,
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except as set forth herein. The Merger shall have the effects specified in the
FBCA and the Corporation Law.
2.2. The Closing. The Closing shall take place on the Closing Date
at the offices of Xxxxxxxx, Loop & Xxxxxxxx, 000 X. Xxxxxxx Xxxxxxxxx, Xxxxx
0000, Xxxxx, Xxxxxxx 00000 or at such other location in the State as the parties
shall mutually agree.
2.3. Effective Time. If all the conditions precedent to the Merger
set forth in this Agreement shall have been fulfilled or waived in accordance
herewith and this Agreement shall not have been terminated in accordance with
the terms set forth herein, the parties hereto shall cause to be properly
executed and filed on the Closing Date, a Certificate of Merger meeting the
requirements of the FBCA and the Corporation Law. The Certificate of Merger
shall be filed with the Secretary of State of the State of Florida and of the
State in accordance with the FBCA and the Corporation Law and the Merger shall
become effective on the Closing Date, to be designated in such filings as the
effective time of the Merger (the "Effective Time").
2.4. Articles of Incorporation of Surviving Corporation. Effective
at the Effective Time, the Articles of Incorporation of the Subsidiary shall be
the Articles of Incorporation of the Surviving Corporation unless and until duly
amended in accordance with its terms.
2.5. Bylaws of Surviving Corporation. The Bylaws of the Subsidiary
in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, unless and until duly amended in accordance with their
terms.
2.6. Directors of the Surviving Corporation. The persons who are
directors of the Subsidiary immediately prior to the Effective Time shall, from
and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
2.7. Officers of the Surviving Corporation. The persons who are
officers of the Subsidiary immediately prior to the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation and
shall hold their same respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
2.8. Conversion of Company Common Stock. The manner of converting
shares of Company Common Stock in the Merger shall be as follows:
a. As a result of the Merger and without any action on the part
of the holder thereof, all shares of Company Common Stock issued and outstanding
at the Effective Time shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall thereafter cease to
have any rights with respect to such shares
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of Company Common Stock, except the right to receive upon the surrender of such
certificate, on the Closing Date, validly issued, fully paid and nonassessable
shares of Vision 21 Common Stock determined in accordance with the provisions of
Exhibit 2.8(a) attached hereto.
b. Each share of Company Common Stock held in the Company's
treasury at the Effective Time, by virtue of the Merger, shall cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
c. At the Effective Time, each share of the Subsidiary's common
stock issued and outstanding as of the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereto, continue
unchanged and remain outstanding as a validly issued, fully paid, nonassessable
share of the Subsidiary's common stock.
2.9. Exchange of Certificates Representing Shares of Company Common
Stock.
a. On the Closing Date (i) the Physician, as the holder of a
certificate or certificates representing shares of Company Common Stock, upon
surrender of such certificate or certificates, shall receive, as part of the
Merger Consideration, the number of shares of Vision 21 Common Stock determined
in accordance with the provisions of Exhibit 2.8(a) attached hereto; and (ii)
until the certificate or certificates representing Company Common Stock have
been surrendered by the Physician and replaced by a certificate or certificates
representing Vision 21 Common Stock, the certificate or certificates
representing Company Common Stock shall, for all purposes be deemed to evidence
ownership of the number of shares of Vision 21 Common Stock determined in
accordance with the provisions of Exhibit 2.8(a) attached hereto. All shares of
Vision 21 Common Stock issuable to the Physician in the Merger shall be deemed
for all purposes to have been issued by Vision 21 at the Effective Time,
although the Merger Consideration shall not actually be paid by Vision 21 to the
Physician until the Closing Date.
b. The Physician shall deliver to Vision 21 at Closing the
certificate or certificates representing Company Common Stock owned by him, duly
endorsed in blank by the Physician, or accompanied by duly endorsed stock powers
in blank, and with all necessary transfer tax and other revenue stamps, acquired
at the Physician's expense, affixed and cancelled. The Physician agrees to cure
any deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such Company Common Stock or with
respect to the stock powers accompanying any Company Common Stock. Upon such a
delivery, the Physician shall receive in exchange therefor, a certificate
representing that number of shares of Vision 21 Common Stock that the Physician
is entitled to receive pursuant to Section 2.8 hereof.
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2.10. Fractional Shares. Notwithstanding any other provision herein,
no fractional shares of Vision 21 Common Stock will be issued. Fractional shares
shall be rounded up to the nearest whole number of shares.
2.11. Merger Consideration Adjustments. (a) The Merger Consideration
shall be subject to adjustment to the extent that Current Assets (as defined
herein) or Current Liabilities Assumed (as defined herein) materially differ
from the amounts customarily arising in the ordinary course of business of the
Company as of April 30, 1997. The term "Current Assets" shall mean xxxxx cash,
Accounts Receivable, prepaid expenses, Inventory, supplies and other current
assets (excluding cash in banks, certificates of deposit, other cash
equivalents, current portion of capital leases and prepaid Income Taxes). The
term "Current Liabilities Assumed" shall mean the balances (on an accrual basis)
as of April 30, 1997 of trade accounts payable, accrued payroll, accrued payroll
taxes, accrued benefits, and other current liabilities (excluding notes payable,
current portion of capital leases and long-term debt and income and franchise
taxes and accrued shareholder expenses). The Merger Consideration shall be
increased or reduced to reflect the difference between the Current Assets and
Current Liabilities and the customary amounts referred to hereinabove. The
adjustment shall be settled in cash (which shall be set-off from moneys due New
P.C. pursuant to the Business Management Agreement) or Vision 21 Common Stock at
Vision 21's option. The parties also agree that to the extent the adjustments
materially impact the goodwill created by the transaction, there shall be an
adjustment for the related impact upon net income created by the change in
amortization of such goodwill and the Merger Consideration shall be increased or
reduced to reflect the impact on net income, settled in cash or Vision 21 Common
Stock at Vision 21's option.
(b) Within sixty (60) days following the Closing Date, Vision
21 shall present to the Physician its Merger Consideration Adjustment (the
"Proposed Merger Consideration Adjustment") calculated in accordance with
Section 2.11(a) hereof. The Physician shall, within thirty (30) days after the
delivery by Vision 21 of the Proposed Merger Consideration Adjustment, complete
his review thereof. In the event that the Physician believes that the Proposed
Merger Consideration Adjustment has not been prepared on the basis set forth in
Section 2.11(a) or otherwise contests any item set forth therein, the Physician
shall, on or before the last day of such 30 day period, so object to Vision 21
in writing, setting forth a specific description of the nature of the objection
and the corresponding adjustments the Physician believes should be made. If no
objection is received by Vision 21 on or before the last day of such 30 day
period, then the Proposed Merger Consideration Adjustment delivered by Vision 21
shall be final. If an objection has been made and Vision 21 and the Physician
are unable to resolve all of their disagreements with respect to the proposed
adjustments within 15 days following the delivery of the Physician's objection,
the dispute shall be submitted to arbitration as provided in Section 19.1 except
that the arbitrator shall be instructed to deliver his determination of the
dispute to the parties no later than 30 days after the arbitration hearing.
Vision 21 shall provide to the Physician and his accountants full access to all
relevant books, records and work papers utilized in preparing the Proposed
Merger Consideration Adjustment.
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2.12. Subsequent Actions. If, at any time after the Effective Time,
the Surviving Corporation shall determine 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 the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, and to effect the cancellation of all outstanding
shares of Company Common Stock in return for the consideration set forth in this
Agreement, the officers and directors of the Surviving Corporation shall, at the
sole cost and expense of the Surviving Corporation, be authorized to execute and
deliver, in the name and on behalf of the Company, such deeds, bills of sale,
assignments and assurances, and to take and do, in the name and on behalf of the
Company, 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
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PHYSICIAN. The
Company and the Physician, jointly and severally, represent and warrant to
Vision 21 and the Subsidiary that the following are true and correct as of the
date hereof, and shall be true and correct through the Closing Date as if made
on that date; when used in this Section 3, the term "best knowledge" shall mean
in the case of the Company the best knowledge of those individuals listed on
Schedule 3:
3.1. Organization and Good Standing; Qualification. The Company is a
professional corporation duly organized, validly existing and in good standing
under the laws of the State, with all requisite corporate power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, but it is acknowledged and understood by the Parties that
upon consummation of Merger, the Company will no longer be qualified as a
professional corporation under the Corporation Law. The Company is not duly
qualified and licensed to do business in any other jurisdiction. The Company
does not have any assets, employees or offices in any state other than the
State. Except as set forth on Schedule 3.1, neither the Company, the Physician
nor any Professional Employee owns, directly or indirectly, any of the capital
stock of any other corporation or any equity, profit sharing, participation or
other interest in any corporation, partnership, joint venture or other entity
that is engaged in a business that is a Competitor.
3.2. Capitalization. The authorized capital stock of the Company
consists of 50,000 shares of Company Common Stock, of which 1,225 shares are
issued and outstanding. The Physician owns all of the issued and outstanding
Company Common Stock, free and clear of all security interests, liens, adverse
claims, encumbrances, equities, proxies and shareholder agreements, except to
the extent disclosed on Schedule 3.2. Each outstanding share of Company Common
Stock has been legally and validly issued and is fully paid and nonassessable.
No shares of Company Common Stock are owned by the Company in treasury. No
shares of Company Common Stock of the Company have been issued or disposed of in
violation of the
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preemptive rights, rights of first refusal or similar rights of any of the
Company's stockholders. The Company has no bonds, debentures, notes or other
obligations the holders of which have the right to vote (or are convertible into
or exercisable for securities having the right to vote) with the stockholders of
the Company on any matter.
3.3. Transactions in Capital Stock. The Company has not acquired any
capital stock of the Company within the two (2) year period preceding the
execution of this Agreement. Except as set forth on Schedule 3.3, there exist no
options, warrants, subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, any of the authorized or outstanding
securities of the Company, and no option, warrant, call, conversion right or
commitment of any kind exists which obligates the Company to issue any of its
authorized but unissued capital stock. Except as set forth on Schedule 3.3, the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Neither the equity
structure of the Company nor the relative ownership of shares among any of its
stockholders has been altered or changed within the two (2) year period
preceding the date of this Agreement.
3.4. Continuity of Business Enterprise. Except as set forth on
Schedule 3.4, and except as contemplated by this Agreement, there has not been
any sale, distribution or spin-off of significant assets of the Company or any
of its Affiliates other than in the ordinary course of business within the two
(2) year period preceding the date of this Agreement.
3.5. Corporate Records. The copies of the Articles or Certificate of
Incorporation and Bylaws, and all amendments thereto, of the Company that have
been delivered or made available to Vision 21 are true, correct and complete
copies thereof, as in effect on the date hereof. The minute books of the
Company, copies of which have been delivered or made available to Vision 21,
contain accurate minutes of all meetings of, and accurate consents to all
actions taken without meetings by, the Board of Directors (and any committees
thereof) and the stockholders of the Company in the three (3) years prior to the
Closing Date, and contain all other material minutes and consents of the
directors and stockholders of the Company since its formation.
3.6. Authorization and Validity. The execution, delivery and
performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby to be performed by the Company, have been duly authorized by
the Company. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
Company has obtained, in accordance with applicable law and its Articles or
Certificate of Incorporation and Bylaws, the approval of its stockholders
necessary for the consummation of the transactions contemplated hereby.
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3.7. Compliance. Except as disclosed on Schedule 3.7, the execution
and delivery of the documents contemplated hereunder and the consummation of the
transactions contemplated thereby by the Company will not (i) violate any
provision of the Company's organizational documents, (ii) violate any material
provision of or result in the breach of or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any material
obligation under, any mortgage, lien, lease, contract, license, instrument or
any other agreement to which the Company is a party, (iii) result in the
creation or imposition of any material lien, charge, pledge, security interest
or other material encumbrance upon any property of the Company or (iv) violate
or conflict with any order, award, judgment or decree or other material
restriction or to the best of the Company's knowledge violate or conflict with
any law, ordinance or regulation to which the Company or its property is
subject.
3.8. Consents. No consent, approval, order or authorization of or
registration, declaration, or filing with, any Governmental Authority or other
person is required in connection with the execution and delivery of the
documents contemplated herein by the Company or the consummation by such party
of the transactions contemplated thereby, except for those consents or approvals
set forth on Schedule 3.8.
3.9. Financial Statements. The Company has furnished to Vision 21
its unaudited balance sheet and related unaudited statements of income, retained
earnings and cash flows for its prior three (3) full fiscal years, and its
unaudited interim balance sheet for year to date period ended December 31, 1996
(the "Company Balance Sheet", and the date thereof shall be referred to as the
"Company Balance Sheet Date") and related unaudited statements of income,
retained earnings and cash flows for the period then ended (all collectively,
with the related notes thereto, the "Financial Statements"). The Financial
Statements fairly present the financial condition and results of operations of
the Company as of the dates and for the periods indicated except as otherwise
indicated in the Financial Statements. The Company and the Physician expressly
warrant that they will have prior to the Closing fairly, accurately and
completely provided all necessary information requested in or relevant to the
preparation of the audit to be conducted by the Accountants or their designees
prior to Closing (the "Audit"). The cost of the Audit shall be paid by Vision 21
and all materials prepared by Vision 21's Accountants in connection with the
Audit shall be solely the property of Vision 21. The Company shall pay for all
expenses incurred in connection with the conversion of the Company from cash
basis accounting to accrual accounting and all expenses in connection with the
preparation by the Company's accountants of the audit package for Vision 21's
Accountants.
3.10. Liabilities and Obligations. Except as set forth on Schedule
3.10, the Financial Statements reflect all liabilities of the Company, accrued,
contingent or otherwise that would be required to be reflected thereon, or in
the notes thereto, prepared in accordance with GAAP, except for liabilities and
obligations incurred in the ordinary course of business since the Company
Balance Sheet Date. Except as set forth in the Financial Statements or on
Schedule 3.10, the Company is not liable upon or with respect to, or obligated
in any other way to provide funds in respect of or to guarantee or assume in any
manner, any debt, obligation or dividend of any person, corporation,
association, partnership, joint venture, trust or other entity,
14
and the Company does not know of any valid basis for the assertion of any other
claims or liabilities of any nature or in any amount.
3.11. Employee Matters.
a. Cash Compensation. Schedule 3.11(a) contains a complete and
accurate list of the names, titles and annual cash compensation as of the
Closing Date, including without limitation wages, salaries, bonuses
(discretionary and formula) and other cash compensation (the "Cash
Compensation") of all employees of the Company. In addition, Schedule 3.11(a)
contains a complete and accurate description of (i) all increases in Cash
Compensation of employees of the Company during the current fiscal year and the
immediately preceding fiscal year and (ii) any promised increases in Cash
Compensation of employees of the Company that have not yet been effected.
b. Compensation Plans. Schedule 3.11(b) contains a complete
and accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by the Company or to which the Company
contributes on behalf of its employees, other than Employment Agreements listed
on Schedule 3.11(c) and Employee Benefit Plans listed on Schedule 3.12(a). The
Compensation Plans include without limitation plans, arrangements or practices
that provide for performance awards, and stock ownership or stock options. The
Company has provided or made available to Vision 21 a copy of each written
Compensation Plan and a written description of each unwritten Compensation Plan.
Except as set forth on Schedule 3.11(b), each of the Compensation Plans can be
terminated or amended at will by the Company.
c. Employment Agreements. Except as set forth on Schedule
3.11(c), the Company is not a party to any employment agreement ("Employment
Agreements") with respect to any of its employees. Employment Agreements include
without limitation employee leasing agreements, employee services agreements and
non-competition agreements.
d. Employee Policies and Procedures. Schedule 3.11(d) contains
a complete and accurate list of all employee manuals and all material policies,
procedures and work-related rules (the "Employee Policies and Procedures") that
apply to employees of the Company. The Company has provided or made available to
Vision 21 a copy of all written Employee Policies and Procedures and a written
description of all material unwritten Employee Policies and Procedures.
e. Unwritten Amendments. Except as described on Schedule
3.11(b), 3.11(c), or 3.11(d), no material unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with respect to
any Compensation Plans or Employee Policies and Procedures.
15
f. Labor Compliance. The Company has been and is in compliance
with all applicable laws, rules, regulations and ordinances respecting
employment and employment practices, terms and conditions of employment and
wages and hours, except for any such failures to be in compliance that,
individually or in the aggregate, would not result in a Material Adverse Effect,
and the Company is not liable for any arrearages of wages or penalties for
failure to comply with any of the foregoing. The Company has not engaged in any
unfair labor practices or discriminated on the basis of race, color, religion,
sex, national origin, age, disability or handicap in its employment conditions
or practices that would, individually or in the aggregate, result in a Material
Adverse Effect. Except as set forth on Schedule 3.11(f), there are no (i) unfair
labor practice charges or complaints or racial, color, religious, sex, national
origin, age, disability or handicap discrimination charges or complaints pending
or, to the actual knowledge of the Company and the Physician, threatened against
the Company before any federal, state or local court, board, department,
commission or agency (nor, to the knowledge of the Company and the Physician,
does any valid basis therefor exist) or (ii) existing or, to the actual
knowledge of the Company and the Physician, threatened labor strikes, disputes,
grievances, controversies or other labor troubles affecting the Company (nor, to
the best knowledge of the Company and the Physician, does any valid basis
therefor exist).
g. Unions. The Company has never been a party to any agreement
with any union, labor organization or collective bargaining unit. No employees
of the Company are represented by any union, labor organization or collective
bargaining unit. Except as set forth on Schedule 3.11(g), to the actual
knowledge of the Company, none of the employees of the Company has threatened to
organize or join a union, labor organization or collective bargaining unit.
h. Aliens. All employees of the Company are, to the best
knowledge of the Company, citizens of, or are authorized in accordance with
federal immigration laws to be employed in, the United States.
3.12. Employee Benefit Plans.
a. Identification. Schedule 3.12(a) contains a complete and
accurate list of all employee benefit plans (within the meaning of Section 3(3)
of ERISA sponsored by the Company or to which the Company contributes on behalf
of its employees and all employee benefit plans previously sponsored or
contributed to on behalf of its employees within the three (3) years preceding
the date hereof (the "Employee Benefit Plans"). The Company has provided or made
available to Vision 21 copies of all plan documents, determination letters,
pending determination letter applications, trust instruments, insurance
contracts, administrative services contracts, annual reports, actuarial
valuations, summary plan descriptions, summaries of material modifications,
administrative forms and other documents that constitute a part of or are
incident to the administration of the Employee Benefit Plans. In addition, the
Company has provided or made available to Vision 21 a written description of all
existing practices engaged in by the Company that constitute Employee Benefit
Plans. Except as set forth on Schedule 3.12(a) and subject to the requirements
of the Code and ERISA, each
16
of the Employee Benefit Plans can be terminated or amended at will by the
Company. Except as set forth on Schedule 3.12(a), no unwritten amendment exists
with respect to any Employee Benefit Plan. Except as set forth on Schedules
3.12(b)-(l), each of the following paragraphs is true and correct.
b. Administration. Each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, result in a Material Adverse Effect. The
Company and the Physician have (i) made all necessary filings with respect to
such Employee Benefit Plans, including the timely filing of Form 5500 if
applicable, and (ii) made all necessary filings, reports and disclosures
pursuant to and have complied with all requirements of the IRS Voluntary
Compliance Resolution Program, if applicable, with respect to all profit sharing
retirement plans and pension plans in which employees of the Company
participate.
c. Examinations. Except as set forth on Schedule 3.12(c), the
Company has not received any notice that any Employee Benefit Plan is currently
the subject of an audit, investigation, enforcement action or other similar
proceeding conducted by any state or federal agency.
d. Prohibited Transactions. No prohibited transactions (within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA) have
occurred with respect to any Employee Benefit Plans.
e. Claims and Litigation. No pending or, to the actual
knowledge of the Company and the Physician, threatened claims, suits, or other
proceedings exist with respect to any Employee Benefit Plan other than normal
benefit claims filed by participants or beneficiaries.
f. Qualification. As set forth in more detail on Schedule
3.12(f), the Company has received a favorable determination letter or ruling
from the IRS for each of the Employee Benefit Plans intended to be qualified
within the meaning of Section 401(a) of the Code and/or tax-exempt within the
meaning of Section 501(a) of the Code. Except as set forth on Schedule 3.12(f),
no proceedings exist or, to the actual knowledge of the Company have been
threatened that could result in the revocation of any such favorable
determination letter or ruling.
g. Funding Status. No accumulated funding deficiency (within
the meaning of Section 412 of the Code), whether or not waived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning of Section 412(n)(6)(B) of the Code) in
which the Company is a member ("Controlled Group"). With respect to each
Employee Benefit Plan subject to Title IV of ERISA, the assets of each such plan
are at least equal in value to the present value of accrued benefits determined
on an ongoing basis as of the date hereof. The Company does not sponsor any
Employee
17
Benefit Plan described in Section 501(c)(9) of the Code. None of the Employee
Benefit Plans are subject to actuarial assumptions.
h. Excise Taxes. Neither the Company nor any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA.
i. Multiemployer Plans. Neither the Company nor any member of
a Controlled Group is or ever has been obligated to contribute to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
j. Pension Benefit Guaranty Corporation. None of the Employee
Benefit Plans are subject to the requirements of Title IV of ERISA.
k. Retirees. The Company has no obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired except
as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Code and Sections 501 through 508 of ERISA.
l. Other Compensation. Except as set forth on Schedules
3.11(a), 3.11(b), 3.11(c), 3.11(d) and 3.12(a), neither the Company, the
Physician nor any Professional Employee is a party to any compensation or debt
arrangement with any person relating to the provision of healthcare related
services other than arrangements with the Company or the Physician.
3.13. Absence of Certain Changes. Except as set forth on Schedule
3.13 or as contemplated in this Agreement, since the Company Balance Sheet Date,
the Company has not:
a. suffered a Material Adverse Effect, whether or not caused
by any deliberate act or omission of the Company or the Physician;
b. contracted for the purpose of acquiring any capital asset
having a cost in excess of $5,000 or made any single expenditure in excess of
$5,000;
c. incurred any indebtedness for borrowed money (other than
short-term borrowings in the ordinary course of business), or issued or sold any
debt securities;
d. incurred or discharged any material liabilities or
obligations except in the ordinary course of business;
18
e. paid any amount on any indebtedness prior to the due date,
forgiven or cancelled any claims or any debt in excess of $5,000, or released or
waived any rights or claims except in the ordinary course of business;
f. mortgaged, pledged or subjected to any security interest,
lien, lease or other charge or encumbrance any of its properties or assets
(other than statutory liens arising in the ordinary course of business or other
liens that do not materially detract from the value or interfere with the use of
such properties or assets);
g. suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has, individually or in the
aggregate, resulted in a Material Adverse Effect;
h. acquired or disposed of any assets having an aggregate
value in excess of $5,000, except in the ordinary course of business;
i. written up or written down the carrying value of any of its
assets, other than accounts receivable in the ordinary course of business;
j. changed the costing system or depreciation methods of
accounting for its assets in any material respect;
k. lost or terminated any employee, patient, customer or
supplier that has, individually or in the aggregate, resulted in a Material
Adverse Effect;
l. increased the compensation of any director, officer, key
employee or consultant, except as disclosed on Schedule 3.11(a);
m. increased the compensation of any employee (except for
increases in the ordinary course of business consistent with past practice) or
hired any new employee who is expected to receive annualized compensation of at
least $15,000;
n. made any payments to or loaned any money to any person or
entity referred to in Section 3.25;
o. formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
p. redeemed, purchased or otherwise acquired, or sold, granted
or otherwise disposed of, directly or indirectly, any of its capital stock or
securities, or agreed to change the terms and conditions of any such capital
stock, securities or rights;
q. entered into any agreement providing for total payments in
excess of $5,000 in any twelve (12) month period with any person or group, or
modified or
19
amended in any material respect the terms of any such existing agreement, except
in the ordinary course of business;
r. entered into, adopted or amended any Employee Benefit Plan,
except as contemplated hereby or the other agreements contemplated hereby; or
s. entered into any other commitment or transaction or
experienced any other event that would materially interfere with its performance
under this Agreement or any other agreement or document executed or to be
executed pursuant to this Agreement, or otherwise has, individually or in the
aggregate, resulted in a Material Adverse Effect.
3.14. Title; Leased Assets.
a. Real Property. Except as set forth on Schedule 3.14(a), the
Company does not own any interest (other than leasehold interests referred to on
Schedule 3.14(c)) in real property. The leased real property referred to on
Schedule 3.14(c) constitutes the only real property necessary for the conduct of
the Company's business.
b. Personal Property. Except as set forth on Schedule 3.14(b),
the Company and/or the Physician has good, valid and marketable title to all the
personal property constituting the Nonmedical Assets. The personal property
constituting the Nonmedical Assets constitute the only personal property
necessary for the conduct of the Company's business (except for the Medical
Assets). Upon consummation of the transactions contemplated hereby, such
interest in the Nonmedical Assets shall be free and clear of all security
interests, liens, claims and encumbrances, other than those set forth on
Schedule 3.14(b) (the "Permitted Encumbrances") and statutory liens arising in
the ordinary course of business or other liens that do not materially detract
from the value or interfere with the use of such properties or assets.
c. Leases. A list and brief description of (i) all leases of
real property and (ii) leases of personal property involving rental payments
within any twelve (12) month period in excess of $12,000, in either case to
which the Company is a party, either as lessor or lessee, are set forth on
Schedule 3.14(c). All such leases are valid and, to the knowledge of the
Company, enforceable 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.
3.15. Commitments.
a. Commitments; Defaults. Except as set forth on Schedule 3.15
or as otherwise disclosed pursuant to this Agreement, the Company is not a party
to nor bound by, nor are any of the shares of Company Common Stock subject to,
nor are the Nonmedical Assets or the assets or the business of the Company bound
by, whether or not in writing, any of the following (collectively,
"Commitments"):
20
i) partnership or joint venture agreement;
ii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
iii) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent to
another;
iv) contract to purchase real property;
v) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys (other than
in connection with this Agreement and the transactions contemplated hereby)
involving total payments within any twelve (12) month period in excess of $2,000
and which is not terminable on thirty (30) days' notice or without penalty;
vi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of the Company or the Physician;
vii) agreement for the acquisition of services, supplies,
equipment, inventory, fixtures or other property involving more than $2,000 in
the aggregate;
viii) powers of attorney;
ix) contracts containing non-competition covenants;
x) agreement providing for the purchase from a supplier
of all or substantially all of the requirements of the Company of a particular
product or services;
xi) agreements regarding clinical research;
xii) agreements with Payors and contracts to provide
medical or health care services; or
xiii) any other agreement or commitment not made in the
ordinary course of business or that is material to the business, operations,
condition (financial or otherwise) or results of operations of the Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Vision 21 and the Subsidiary. Except as set forth
on Schedule 3.15 and to the Company's best knowledge, there are no existing or
asserted defaults, events of default or events,
21
occurrences, acts or omissions that, with the giving of notice or lapse of time
or both, would constitute defaults by the Company or, to the best knowledge of
the Company, any other party to a material Commitment, and no penalties have
been incurred nor are amendments pending, with respect to the material
Commitments, except as described on Schedule 3.15. The Commitments are in full
force and effect and are valid and enforceable obligations of the Company, and
to the best knowledge of the Company, are valid and enforceable obligations of
the other parties thereto, in accordance with their respective terms, and no
defenses, off-sets or counterclaims have been asserted or, to the best knowledge
of the Company, may be made by any party thereto (other than the Company), nor
has the Company waived any rights thereunder, except as described on Schedule
3.15. Except as set forth on Schedule 3.15, no consents or approvals are
required under the terms of any agreement listed on Schedule 3.15 in connection
with the transactions contemplated herein; including without limitation the
Merger.
b. No Cancellation or Termination of Commitment. Except as
disclosed pursuant to this Agreement or contemplated hereby, and except where
such default would not have a Material Adverse Effect on the business, (i)
neither the Company nor the Physician has received notice of any plan or
intention of any other party to any Commitment to exercise any right to cancel
or terminate any Commitment, and the Company does not know of any fact that
would justify the exercise of such a right; and (ii) neither the Company nor the
Physician currently contemplates, or has reason to believe any other person
currently contemplates, any amendment or change to any Commitment.
3.16. Insurance. The Company, the Physician and each Professional
Employee carries property, liability, malpractice, workers' compensation and
such other types of insurance pursuant to the insurance policies listed and
briefly described on Schedule 3.16 (the "Insurance Policies"). The Insurance
Policies are all of the insurance policies of the Company, the Physician and
each Professional Employee relating to the business of the Company and the
Nonmedical Assets. All of the Insurance Policies are issued by insurers of
recognized responsibility, and, to the best knowledge of the Company, are valid
and enforceable policies, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. All Insurance Policies shall be maintained
in force without interruption up to and including the Closing Date. True,
complete and correct copies of all Insurance Policies have been provided or made
available to Vision 21. Except as set forth on Schedule 3.16, neither the
Company nor the Physician has received any notice or other communication from
any issuer of any Insurance Policy cancelling such policy, materially increasing
any deductibles or retained amounts thereunder, and to the actual knowledge of
the Company, no such cancellation or increase of deductibles, retainages or
premiums is threatened. Except as set forth on Schedule 3.16, neither the
Company, the Physician nor any Professional Employee has any outstanding claims,
settlements or premiums owed against any Insurance Policy, and the Company, the
Physician and each Professional Employee has given all notices or has presented
all potential or actual claims under any Insurance Policy in due and timely
fashion. Except as set forth on Schedule 3.16, since January 1, 1994, neither
the Company, the Physician nor any Professional Employee has filed a written
application for any professional liability insurance coverage which has been
denied by an
22
insurance agency or carrier, and the Company, the Physician and each
Professional Employee has been continuously insured for professional malpractice
claims for at least the past seven (7) years (or such shorter periods of time
that any Professional Employee has been licensed to practice medicine). Schedule
3.16 also sets forth a list of all claims under any Insurance Policy in excess
of $10,000 per occurrence filed by the Company, the Physician and each
Professional Employee since January 1, 1994.
3.17. Proprietary Rights and Information. Set forth on Schedule 3.17
is a true and correct description of the following ("Proprietary Rights"):
a. all trademarks, trade-names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, and all patents and applications therefor currently owned, in whole or
in part, by the Company, and all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which the Company is a party
(including the expiration date thereof if applicable); and
b. all agreements relating to technology, know-how or
processes that the Company is licensed or authorized to use by others (other
than technology, know-how or processes generally available to other healthcare
providers), or which it licenses or authorizes others to use.
The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, such ownership or use does not conflict, infringe
or violate the rights of any other person. Except as disclosed on Schedule 3.17,
no consent of any person will be required for the use thereof by Vision 21 upon
consummation of the transactions contemplated hereby and the Proprietary Rights
are freely transferable. No claim has been asserted by any person to the
ownership of or for infringement by the Company of the proprietary right of any
other person, and the Company does not know of any valid basis for any such
claim. To the best knowledge of the Company and the Physician, the Company has
the right to use, free and clear of any adverse claims or rights of others, all
trade secrets, customer lists and proprietary information required for the
marketing of all merchandise and services formerly or presently sold or marketed
by it.
3.18. Taxes.
a. Filing of Tax Returns. The Company has duly and timely
filed (in accordance with any extensions duly granted by the appropriate
governmental agency, if applicable) with the appropriate governmental agencies
all federal, state, local or foreign income, excise, corporate, franchise,
property, sales, use, payroll, withholding, provider, value added and other tax
returns and reports (collectively the "Tax Returns") required to be filed by the
United States or any state or any political subdivision thereof or any foreign
jurisdiction. All such Tax Returns or reports are complete and accurate in all
material respects and properly reflect the taxes of the Company for the periods
covered thereby.
23
b. Payment of Taxes. Except for such items as the Company may
be disputing in good faith by proceedings in compliance with applicable law,
which are described on Schedule 3.18, (i) the Company has paid all taxes,
penalties, assessments and interest that have become due with respect to any Tax
Returns that it has filed and has properly accrued on its books and records for
all of the same that have not yet become due, and (ii) the Company is not
delinquent in the payment of any tax, assessment or governmental charge.
c. No Pending Deficiencies, Delinquencies, Assessments or
Audits. Except as set forth on Schedule 3.18, the Company has not received any
notice that any tax deficiency or delinquency has been asserted against the
Company. There is no unpaid assessment, proposal for additional taxes,
deficiency or delinquency in the payment of any of the taxes of the Company that
could be asserted by any taxing authority. There is no taxing authority audit of
the Company pending, or to the actual knowledge of the Company, threatened, and
the results of any completed audits are properly reflected in the Financial
Statements. The Company has not, to its best knowledge, violated any federal,
state, local or foreign tax law.
d. No Extension of Limitation Period. The Company has not
granted an extension to any taxing authority of the limitation period during
which any tax liability may be assessed or collected.
e. All Withholding Requirements Satisfied. All monies required
to be withheld by the Company and paid to governmental agencies for all income,
social security, unemployment insurance, sales, excise, use, and other taxes
have been collected or withheld and paid to the respective governmental
agencies.
f. Foreign Person. Neither the Company nor the Physician is a
foreign person, as such term is referred to in Section 1445(f)(3) of the Code.
g. Safe Harbor Lease. None of the Nonmedical Assets
constitutes property that the Company, Vision 21, or any Affiliate of Vision 21,
will be required to treat as being owned by another person pursuant to the "Safe
Harbor Lease" provisions of Section 168(f)(8) of the Code prior to repeal by the
Tax Equity and Fiscal Responsibility Act of 1982.
h. Tax Exempt Entity. None of the assets of the Company and
none of the Nonmedical Assets are subject to a lease to a "tax exempt entity" as
such term is defined in Section 168(h)(2) of the Code.
i. Collapsible Corporation. The Company has not at any time
consented, and the Physician will not permit the Company to elect, to have the
provisions of Section 341(f)(2) of the Code apply to it.
j. Boycotts. The Company has not at any time participated in
or cooperated with any international boycott as defined in Section 999 of the
Code.
24
k. Parachute Payments. No payment required or contemplated to
be made by the Company will be characterized as an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Code.
l. S Corporation. The Company has not made an election to be
taxed as an "S" corporation under Section 1362(a) of the Code.
m. Personal Service Corporation. The Company is not a personal
service corporation subject to the provisions of Section 269A of the Code.
n. Personal Holding Company. The Company is not or has not
been a personal holding company within the meaning of Section 542 of the Code.
3.19. Compliance with Laws. The Company has not failed, and neither
the Company nor the Physician is aware of any failure by the Physician or any
Professional Employee to comply with all applicable laws, regulations and
licensing requirements relating to the operation of the Practice or failure to
file with the proper authorities all necessary statements and reports except
where the failure to so comply or file would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no existing violations
by the Company, and neither the Company nor the Physician is aware of any
existing violations by the Physician or any Professional Employee of any
federal, state or local law or regulation that could, individually or in the
aggregate, result in a Material Adverse Effect. The Company, the Physician and
each Professional Employee possesses all necessary licenses, franchises, permits
and governmental authorizations for the conduct of the Company's business as now
conducted, all of which are listed (with expiration dates, if applicable) on
Schedule 3.19. Except as set forth on Schedule 3.19, the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded by any such
licenses, franchises, permits or government authorizations, except for any such
default, breach or violation that would not, individually or in the aggregate,
have a Material Adverse Effect. Except as set forth on Schedule 3.19, since
January 1, 1993, neither the Company, the Physician nor, to the knowledge of the
Company based on a certificate in writing obtained from each Professional
Employee, any Professional Employee has received any notice from any federal,
state or other governmental authority or agency having jurisdiction over its,
his or her properties or activities, or any insurance or inspection body, that
its, his or her operations or any of its, his or her properties, facilities,
equipment, or business practices fail to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public or
quasi-public authority or body, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
3.20. Finder's Fee. Except as set forth on Schedule 3.20, the
Company has not incurred any obligation for any finder's, brokers or agent's fee
in connection with the transactions contemplated hereby.
25
3.21. Litigation. Except as described on Section 3.21 or otherwise
disclosed pursuant to this Agreement, there are no legal actions or
administrative proceedings or investigations instituted or, to the actual
knowledge of the Company or the Physician, threatened, which affect or could
affect the outstanding shares of Company Common Stock, the Nonmedical Assets or
the operation, business, condition (financial or otherwise), or results of
operations of the Company which (i) if successful could, individually or in the
aggregate, have a Material Adverse Effect or (ii) could adversely affect the
ability of the Company or the Physician to effect the transactions contemplated
hereby. Neither the Company nor the Physician is (a) subject to any continuing
court or administrative order, judgment, writ, injunction or decree applicable
specifically to the Nonmedical Assets, the Company or to its business, assets,
operations or employees or (b) in default with respect to any such order,
judgment, writ, injunction or decree. The Company has no knowledge of any valid
basis for any such action, proceeding or investigation. Except as set forth on
Schedule 3.21, all medical malpractice claims asserted, general liability
incidents and incident reports have been submitted to the Company's insurer
therefor. All claims made or threatened against the Company in excess of its
deductible are covered under its Insurance Policies.
3.22. Condition of Fixed Assets. All of the fixtures, structures and
equipment reflected in the Financial Statements and used by the Company in its
business, are in good condition and repair, subject to normal wear and tear, and
conform in all material respects with all applicable ordinances, regulations and
other laws, and the Company has no actual knowledge of any latent defects
therein.
3.23. Distributions and Repurchases. No distribution, payment or
dividend of any kind has been declared or paid by the Company on any of its
capital stock since the Company Balance Sheet Date. No repurchase of any of the
Company's capital stock has been approved, effected or is pending, or is
contemplated by the Board of Directors of the Company.
3.24. Banking Relations. Set forth on Schedule 3.24 is a complete
and accurate list of all borrowing and investing arrangements that the Company
has 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.
3.25. Ownership Interests of Interested Persons; Affiliations.
Except as set forth on Schedule 3.25, no officer, supervisory employee or
director of the Company, or their respective spouses, children or Affiliates,
owns directly or indirectly, on an individual or joint basis, any interest in,
has a compensation or other financial arrangement with, or serves as an officer
or director of, any customer or supplier of the Company or any organization that
has a material contract or arrangement with the Company. Except as may be
disclosed pursuant to this Agreement, neither the Company, nor any of its
directors, officers, employees or consultants, nor any Affiliate of such person
is, or within the last three (3) 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
26
person which is in a position to make or influence referrals to, or otherwise
generate business for, the Company.
3.26. Investments in Competitors. Except as disclosed on Schedule
3.26, neither the Company nor the Physician owns directly or indirectly any
interests or has any investment in any person that is a Competitor of the
Company.
3.27. Environmental Matters.
a. Environmental Laws. To the best knowledge of the Company
and the Physician, neither the Company nor any of the Non-medical assets
(including the leased real property described on Schedule 3.14(c)) are currently
in violation of, or subject to any existing, pending or, to the actual knowledge
of the Company threatened, investigation or inquiry by any governmental
authority or to any remedial obligations under, any federal, state or local laws
or regulations pertaining to health or the environment ("Environmental Laws"),
except for any such violations, investigations or inquiries that would not,
individually or in the aggregate, result in a Material Adverse Effect.
b. Permits. The Company is not required to obtain, and has no
knowledge of any reason Vision 21 or the Surviving Corporation will be required
to obtain, any permits, licenses or similar authorizations to occupy, operate or
use any buildings, improvements, fixtures and equipment owned or leased by the
Company by reason of any Environmental Laws.
c. Superfund List. To the best knowledge of the Company, none
of the Nonmedical Assets (including the Company's leased real property described
on Schedule 3.14(c)) are on any federal or state "Superfund" list or subject to
any environmentally related liens, except such liens as would not, individually
or in the aggregate, result in a Material Adverse Effect.
3.28. Certain Payments. Neither the Company nor any director,
officer or employee of the Company acting for or on behalf of the Company, has
paid or caused to be paid, directly or indirectly, in connection with the
business of the Company:
a. to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
b. any contribution to any political party or candidate (other
than from personal funds of directors, officers or employees not reimbursed by
their respective employers or as otherwise permitted by applicable law).
3.29. Medical Waste. With respect to the generation, transportation,
treatment, storage, and disposal, or other handling of medical waste, to the
best knowledge of
27
the Company and the Physician, the Company has complied with all material
federal, state or local laws or regulations pertaining to medical waste.
3.30. Medicare and Medicaid Programs. The Company, the Physician and
each Professional Employee is qualified for participation in the Medicare and
Medicare programs and is party to provider agreements for such programs which
are in full force and effect with no events of default having occurred
thereunder. The Company, the Physician and each Professional Employee has timely
filed all claims or other reports required to be filed prior to the Closing Date
with respect to the purchase of services by third-party payors ("Payors"),
including but not limited to Medicare and Medicaid programs, except where the
failure to file would not, individually or in the aggregate, result in a
Material Adverse Effect. All such claims or reports are complete and accurate in
all material respects. The Company, the Physician and each Professional Employee
has paid or has properly recorded on the Financial Statements all actually known
and undisputed refunds, discounts or adjustments which have become due pursuant
to such claims, and neither the Company, the Physician nor any Professional
Employee has any material liability to any Payor with respect thereto, except as
has been reserved for in the Company Balance Sheet. There are no pending
appeals, overpayment determinations, adjustments, challenges, audits,
litigation, or notices of intent to reopen Medicare and/or Medicaid claims
determinations or other reports required to be filed by the Company, the
Physician or any Professional Employee in order to be paid by a Payor for
services rendered. Neither the Company, nor any of its directors, officers,
employees, consultants or the Physician has been convicted of, or pled guilty or
nolo contendere to, patient abuse or neglect, or any other Medicare or Medicaid
program-related offense. Neither the Company, nor its directors, officers, the
Physician, or to the best of the Company's knowledge, its employees or
consultants, has committed any offense which may serve as the basis for
suspension or exclusion from the Medicare and Medicaid programs, including but
not limited to, defrauding a government program, loss of a license to provide
health services, and failure to provide quality care.
3.31. Fraud and Abuse. To the best knowledge of the Company and the
Physician, the Company, its officers and directors, the Professional Employees,
and the other persons and entities providing professional services for the
Company, have not engaged in any activities which are prohibited under 42 U.S.C.
xx.xx. 1320-7, 7a or 7b or 42 U.S.C. ss.1395nn (subject to the exceptions set
forth in such legislation), or the regulations promulgated thereunder or
pursuant to similar state or local statutes or regulations, or which are
prohibited by rules of professional conduct, including but not limited to the
following:
a. knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment;
b. knowingly and willfully making or causing to be made a
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
28
c. failure to disclose knowledge by a Medicare or Medicaid
claimant 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 intent
to fraudulently secure such benefit or payment;
d. knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind (i) in return for
referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or (ii) in return for purchasing, leasing, or
ordering, or arranging for or recommending purchasing, leasing, or ordering any
good, facility, service, or item for which payment may be made in whole or in
part by Medicare or Medicaid; and
e. referring a patient for designated health services (as
defined in 42 U.S.C. ss.1395nn) to or providing designated health services to a
patient upon a referral from an entity or person with which the Physician or the
Professional Employee or an immediate family member has a financial
relationship, and to which no exception under 42 U.S.C. ss.1395nn applies.
3.32. Payors. Schedule 3.32 sets forth a true, correct and complete
list of the names and addresses of each Payor, including any private pay patient
as a single payor, of the Company's services which accounted for more than 10%
of the revenues of the Company in the three (3) previous fiscal years. Except as
set forth on Schedule 3.32, the Company has good relations with such Payors and
none of such Payors has notified the Company that it intends to discontinue its
relationship with the Company or to deny any claims submitted to such Payor for
payment.
3.33. Prohibitions on the Corporate Practice of Medicine. To the
best of the Company's and the Physician's knowledge, the actions, transactions
or relationships arising from, and contemplated by this Agreement, do not
violate any law, rule or regulation relating to the corporate practice of
medicine. The Company and the Physician accordingly agree that the Company, the
Physician and New P.C. will not, in an attempt to void or nullify any document
contemplated herein or any relationship involving Vision 21, the Subsidiary or
the Company or the Physician or New P.C., xxx, claim, aver, allege or assert
that any such document contemplated herein or any such relationship violates any
law, rule or regulation relating to the corporate practice of medicine and
expressly warrant that this Section is valid and enforceable by Vision 21 and
the Subsidiary, and recognize that Vision 21 and the Subsidiary have relied upon
the statements herein in closing the transaction.
3.34. Acquisition Proposals. Except for the negotiations, offers and
agreements with Vision 21 and its representatives, the Company has not received
during the twelve (12) month period preceding the date of this Agreement any
proposal or offer (including, without limitation, any proposal or offer of its
stockholders) with respect to a merger,
29
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, the
Company (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") nor has the Company or any of its employees, agents,
representatives or stockholders engaged in any negotiations concerning, or
provided any confidential information or data to, or had any discussions with,
any person relating to an Acquisition Proposal, or otherwise facilitated any
effort or attempted to make or implement an Acquisition Proposal.
3.35. Investment Company Status. The Company is not currently, nor
has it ever been, an "investment company" as that term is defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
3.36. Equal Exchange; Consistent Treatment of Expenses. Physician
and the Company believe that the fair market value of all the Company Common
Stock shall be approximately equal to the fair market value of the Merger
Consideration at the Effective Time. The Company has, in presenting information
concerning the Company's and New P.C.'s expenses to Vision 21 for the purpose of
determining the Company's value, separated out those expenses which shall be
borne by New P.C. in a manner which is consistent with the treatment of expenses
which shall be the responsibility of New P.C. pursuant to the Business
Management Agreement.
3.37. Insolvency Proceedings. The Company is not currently under the
jurisdiction of a Federal or state court in a Title 11 or similar case within
the meaning of Section 368(a)(3)(A) of the Code.
3.38. Positive Net Worth. On the Closing Date the fair market value
of the assets of the Company will equal or exceed the sum of the liabilities of
the Company plus the amount of any other liabilities to which the assets of the
Company are subject.
3.39. Accounts Receivable/Payable. The accounts receivable of the
Company relating to the ownership and operation of the Practice reflected on the
Company Balance Sheet, to the extent uncollected on the date hereof, are, and
the accounts receivable of the Company relating to the ownership and operation
of the Practice to be reflected on the books of the Company on the Closing Date
(the "Accounts Receivable") will be, valid, existing and collectible within six
months from the Closing Date (taking into consideration the allowance for
doubtful accounts set forth in the Financial Statements) using reasonably
diligent collection methods taking into account the size and nature of the
receivable, and represent amounts due for goods sold and delivered or services
performed. There are not, and on the date of Closing there will not be, any
refunds, discounts, set-offs, defenses, counterclaims or other adjustments
payable or assessable with respect to the Accounts Receivable. The Company has
collected Accounts Receivable only in the ordinary course and has not changed
collection procedures or methods nor accelerated the pace of such collection
efforts in anticipation of the transactions contemplated in this Agreement. The
Company has paid accounts payable in the ordinary course
30
and has not changed payment procedures or methods nor delayed the timing of such
payments in anticipation of the transactions contemplated in this Agreement.
3.40. Projections. There is no fact, development or threatened
development with respect to the markets, products, services, clients, patients,
facilities, personnel, vendors, suppliers, operations, assets or prospects of
the Practice which are known to the Company or the Physician which would
materially adversely affect the projected fiscal year 1997 earnings of New P.C.
disclosed to Vision 21 by Physician, other than such conditions as may affect as
a whole the economy or the practice of medicine generally.
3.41. Disclosure. To the best of the Company's and the Physician's
knowledge, no representation, warranty or statement made by the Company or the
Physician in this Agreement or any of the exhibits or schedules hereto, or any
agreements, certificates, documents or instruments delivered or to be delivered
to Vision 21 and the Subsidiary in accordance with this Agreement or the other
documents contemplated herein, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company and the Physician do not know
of any fact or condition (other than general economic conditions or legislative
or administrative changes in health-care delivery) which materially adversely
affects, or in the future may materially affect, the condition, properties,
assets, liabilities, business, operations or prospects of the Practice which has
not been set forth herein or in the Schedules provided herewith.
4. REPRESENTATIONS AND WARRANTIES OF THE PHYSICIAN. The Physician
represents and warrants to Vision 21 and the Subsidiary that the following are
true and correct as of the date hereof, and shall be true and correct through
the Closing Date as if made on that date:
4.1. Validity; Physician Capacity. This Agreement, the Physician
Employment Agreement, and each other agreement contemplated hereby or thereby
have been, or will be as of the Closing Date, duly executed and delivered by the
Physician and constitute or will constitute legal, valid and binding obligations
of the Physician, enforceable against the Physician 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 Physician has legal capacity to enter into and perform
this Agreement and his Physician Employment Agreement.
4.2. No Violation. Except as set forth on Schedule 4.2, neither the
execution, delivery or performance of this Agreement, other agreements of the
Physician contemplated hereby or thereby, nor the consummation of the
transactions contemplated hereby or thereby, will (a) conflict with, or result
in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, any agreement, indenture or other instrument under
which the Physician is bound or to which any of his property or the shares of
Company Common Stock are subject, or result in the creation or imposition of any
security interest, lien,
31
charge or encumbrance upon any of his property or the shares of Company Common
Stock or (b) to the best knowledge of the Physician, violate or conflict with
any judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body.
4.3. Personal Holding Company. The Physician does not own the shares
of Company Common Stock, directly or indirectly, beneficially or of record,
through a personal holding company.
4.4. Transfers of the Company Common Stock. Set forth on Schedule
4.4 is a list of all transfers or other transactions involving capital stock of
the Company since January 1, 1994. All transfers of Company Common Stock by the
Physician have been made for valid business reasons and not in anticipation or
contemplation of the consummation of the transactions contemplated by this
Agreement.
4.5. Consents. Except as set forth on Schedule 4.5 or as may be
required under the Exchange Act, the Securities Act, the Corporation Law and
state securities laws, or otherwise disclosed pursuant to this Agreement, no
consent, authorization, approval, permit or license of, or filing with, any
governmental or public body or authority, or any other person is required to
authorize, or is required in connection with, the execution, delivery and
performance of this Agreement or the agreements contemplated hereby on the part
of the Physician.
4.6. Certain Payments. The Physician has not paid or caused to be
paid, directly or indirectly, in connection with the business of the Company:
a. to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
b. any contribution to any political party or candidate (other
than from personal funds not reimbursed by the Company or as otherwise permitted
by applicable law).
4.7. Finder's Fee. Except as set forth on Schedule 4.7, the
Physician has not incurred any obligation for any finder's, broker's or agent's
fee in connection with the transactions contemplated hereby.
4.8. Ownership of Interested Persons; Affiliations. Except as set
forth on Schedule 4.8, neither the Physician nor his spouse, children or
Affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier of the Company or any
organization that has a material contact or arrangement with the Company.
Neither the Physician nor any of his Affiliates is, or with the last three (3)
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
32
person which is in a position to make or influence referrals to, or otherwise
generate business for, the Company.
4.9. Investments in Competitors. Except as disclosed on Schedule
4.9, the Physician does not own directly or indirectly any interests or have any
investment in any person that is a Competitor of the Company.
4.10. Litigation. Except as disclosed on Schedule 4.10, there are no
claims, actions, suits, proceedings (arbitration or otherwise) or investigations
pending or, to the Physician's knowledge, threatened against the Physician at
law or at equity in any court or before or by any Governmental Authority, and,
to the Physician's knowledge, there are no, and have not been any, facts,
conditions or incidents that may result in any such actions, suits, proceedings
(arbitration or otherwise) or investigations. Except as set forth on Schedule
4.10, there have been no disciplinary, revocation or suspension proceedings or
similar types of claims, actions or proceedings, hearings or investigations
against the Physician or the Company.
4.11. Permits. To the best of the Physician's knowledge, the
Physician has all permits, licenses, orders and approvals of all Governmental
Authorities necessary to perform the services performed by the Physician in
connection with the conduct of the Practice. All such permits, licenses, orders
and approvals are in full force and effect and no suspension or cancellation of
any of them is pending or threatened. To the best of the Physician's knowledge,
none of such permits, licenses, orders or approvals will be adversely affected
by the consummation of the transactions contemplated herein. The Physician is a
participating physician, as such term is defined by the Medicare and Medicaid
programs, and the Physician has not been disciplined, sanctioned or excluded
from either the Medicare or Medicaid programs and has not been subject to any
plan of correction imposed by any professional review body.
4.12. Staff Privileges. Schedule 4.12 lists all hospitals at which
the Physician has full staff privileges. Such staff privileges have not been
revoked, surrendered, suspended or terminated, and to the Physician's knowledge,
there are no, and have not been any, facts, conditions or incidents that may
result in any such revocation, surrender, suspension or termination.
4.13. Intentions. Except as set forth on Schedule 4.13, the
Physician intends to continue practicing medicine on a full-time basis for at
least the next five (5) years with the Company and does not know of any fact or
condition that materially adversely affects, or in the future may materially
adversely affect, his ability or intention to practice medicine on a full-time
basis for the next five (5) years with the Company.
5. REPRESENTATIONS AND WARRANTIES OF VISION 21 AND THE SUBSIDIARY.
Vision 21 and the Subsidiary, jointly and severally, represent and warrant to
the Company and the Physician that the following are true and correct as of the
date hereof and shall be true and correct as of the Closing Date; when used in
this Section 5, the term "best knowledge" shall mean the best knowledge of those
individuals listed on Schedule 5:
33
5.1. Organization and Good Standing. Vision 21 and the Subsidiary
are corporations duly organized, validly existing and in good standing under the
laws of the State of Florida, with all requisite corporation power and authority
to carry on the business in which they are engaged, to own the properties they
own, to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. At or prior to Closing, Vision 21 and the Subsidiary will
be qualified to do business as a foreign corporation in the jurisdictions listed
on Schedule 5.1.
5.2. Capitalization. The authorized capital stock of Vision 21
consists of 50,000,000 shares of Vision 21 Common Stock, of which 8,123,065
shares are issued and outstanding. Immediately prior to the Closing, the
authorized capital stock of Vision 21 will consist of 50,000,000 shares of
Vision 21 Common Stock, of which 8,123,065 shares will be issued and
outstanding.
5.3. Corporate Records. The copies of the Articles of Incorporation
and Bylaws, and all amendments thereto, of Vision 21 and the Subsidiary that
have been delivered or made available to the Company and the Physician are true,
correct and complete copies thereof, as in effect on the date hereof (provided,
however, that the Articles of Incorporation and Bylaws of the Subsidiary shall
be in effect on the Closing Date). The minute books of Vision 21 and the
Subsidiary, copies of which have been delivered or made available to the Company
and the Physician, contain accurate minutes of all meetings of, and accurate
consents to all actions taken without meetings by, the Board of Directors (and
any committees thereof) and the stockholders of Vision 21 and the Subsidiary,
since their formation.
5.4. Authorization and Validity. The execution, delivery and
performance by Vision 21 and the Subsidiary of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by Vision 21 and the
Subsidiary. This Agreement and each other agreement contemplated hereby to be
executed by Vision 21 and the Subsidiary have been or will be as of the Closing
Date duly executed and delivered by Vision 21 and the Subsidiary and constitute
or will constitute legal, valid and binding obligations of Vision 21 and the
Subsidiary, enforceable against Vision 21 and the Subsidiary 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.
5.5. Compliance. The execution and delivery of the documents
contemplated hereunder and the consummation of the transactions contemplated
thereby by Vision 21 and the Subsidiary shall not (i) violate any provision of
Vision 21's or the Subsidiary's organizational documents, (ii) violate any
material provision of or result in the breach of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both) any
material obligation under, any mortgage, lien, lease, contract, license,
instrument or any other agreement to which Vision 21 or the Subsidiary is a
party, (iii) result in the creation or imposition of any material lien, charge,
pledge, security interest or other material encumbrance upon any property of
Vision 21 or the Subsidiary, or (iv) violate or conflict with any order,
34
award, judgment or decree or other material restriction or to the best of Vision
21's and the Subsidiary's knowledge violate or conflict with any law, ordinance
or regulation to which Vision 21 or the Subsidiary or their respective property
is subject.
5.6. Consents. No consent, approval, order or authorization of or
registration, declaration, or filing with, any Governmental Authority or other
person is required in connection with the execution and delivery of the
documents contemplated herein by Vision 21 and the Subsidiary or the
consummation by such parties of the transactions contemplated hereby, except for
those consents or approvals set forth on Schedule 5.6.
5.7. Finder's Fee. Except as disclosed on Schedule 5.7, neither
Vision 21 nor the Subsidiary has incurred any obligation for any finder's,
broker's or agent's fee in connection with the transactions contemplated hereby.
5.8. Capital Stock. The issuance and delivery by Vision 21 of
shares of Vision 21 Common Stock in connection with the Merger have been duly
and validly authorized by all necessary corporate action on the part of Vision
21. The shares of Vision 21 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 will not have been issued in
violation of any preemptive rights, rights of first refusal or similar rights of
any of Vision 21's stockholders, or any federal or state law, including, without
limitation, the registration requirements of applicable federal and state
securities laws.
5.9. Continuity of Business Enterprise. It is the present intention
of the Subsidiary to continue at least one significant historic business line of
the Company, or to use at least a significant portion of the Company's historic
business assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
5.10. Vision 21 Financial Statements. The audited consolidated
balance sheet and related statements of income and cash flows of Vision 21 for
its prior three (3) full fiscal years, and its unaudited interim balance sheet
for the fiscal quarter ended March 31, 1997 and the related unaudited statement
of income of Vision 21 for the period then ended, including the costs incurred
during such periods associated with any Registration Statement (collectively,
with the related notes thereto, the "Vision 21 Financial Statements"), (a)
fairly present the financial condition and results of operations of Vision 21 as
of the dates and for the periods indicated; and (b) have been prepared in
conformity with GAAP (subject to normal year-end adjustments and the absence of
notes for any unaudited interim financial statement), except as otherwise
indicated in the Vision 21 Financial Statements.
5.11. Liabilities and Obligations. Except as disclosed on Schedule
5.11, the Vision 21 Financial Statements reflect all material liabilities of
Vision 21, accrued, contingent or otherwise, that would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in accordance
with GAAP. Except as set forth on Schedule 5.11 or in the Vision 21 Financial
Statements, Vision 21 is not liable upon or with respect to, or obligated in any
other
35
way to provide funds in respect of or to guarantee or assume in any manner, any
debt, obligation or dividend of any person, corporation, association,
partnership, joint venture, trust or other entity, and Vision 21 does not know
of any valid basis for the assertion of any other claims or liabilities of any
nature or in any amount.
5.12. Compliance with Laws. Vision 21 and the Subsidiary have not
failed to comply with any applicable laws, regulations and licensing
requirements or failed to file with the proper authorities any necessary
statements and reports except where the failure to so comply or file would not,
individually or in the aggregate, result in a Material Adverse Effect. There are
no existing violations by Vision 21 or the Subsidiary of any federal, state or
local law or regulation that could, individually or in the aggregate, result in
a Material Adverse Effect. Vision 21 and the Subsidiary possess all necessary
licenses, franchises, permits and governmental authorizations for the conduct of
Vision 21's and the Subsidiary's respective businesses as now conducted and
after the Closing, as contemplated by this Agreement. The transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded by any such
licenses, franchises, permits or government authorizations, except for any such
default, breach or violation that would not, individually or in the aggregate,
have a Material Adverse Effect. Since January 1, 1993, Vision 21 and the
Subsidiary have not received any notice from any federal, state or other
governmental authority or agency having jurisdiction over their respective
properties or activities, or any insurance or inspection body, that their
respective operations or any of their respective properties, facilities,
equipment, or business practices fail to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public or
quasi-public authority or body, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
5.13. Insolvency Proceedings. Neither Vision 21 nor the Subsidiary
are currently under the jurisdiction of a Federal or state court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
5.14. Equal Exchange. Vision 21 and the Subsidiary believe that the
fair market value of all the Company Common Stock shall be approximately equal
to the fair market value of the Merger Consideration at the Effective Time.
5.15. Employment of Company's Employees. Neither Vision 21 nor the
Subsidiary currently intends to change the existing composition or employment
terms of any of the non-professional personnel which have employment
arrangements with the Company on the effective date of this Agreement (except as
is necessary for the Subsidiary and/or Vision 21 to employ such individuals
pursuant to the Business Management Agreement). The Subsidiary and Vision 21
reserve the right, however, to change the number, composition or employment
terms of such non-professional personnel in the future.
36
6. CLOSING DATE REPRESENTATIONS AND WARRANTIES OF THE PHYSICIAN. The
Physician represents and warrants that, except as disclosed in the Schedules,
the following will be true and correct on the Closing Date as if made on that
date:
6.1. Organization and Good Standing; Qualification. New P.C. is a
professional corporation duly organized, validly existing and in good standing
under the laws of the State, with all requisite corporate power and authority to
carry on the business in which it intends to engage, to own the properties it
intends to own, and to execute and deliver the Business Management Agreement and
the Physician Employment Agreements and consummate the transactions and perform
the services contemplated thereby. New P.C. is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
intended business makes such qualification necessary.
6.2. Capitalization. The authorized capital stock of New P.C.
consists of _____ shares of New P.C. Common Stock, of which ______ shares are
issued and outstanding, and no shares of capital stock of New P.C. are held in
treasury. The Physician owns all of the issued and outstanding shares of New
P.C.'s common stock, free and clear of all security interests, liens, adverse
claims, encumbrances, equities, proxies and shareholders' agreements. Each
outstanding share of New P.C.'s common stock has been legally and validly issued
and is fully paid and nonassessable. There exist no options, warrants,
subscriptions or other rights to purchase, or securities convertible into or
exchangeable for, any of the authorized or outstanding securities of New P.C. No
shares of capital stock of New P.C. have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
New P.C.'s stockholders.
6.3. Corporate Records. The copies of the Articles or Certificate of
Incorporation and Bylaws, and all amendments thereto, of New P.C. that have been
delivered or made available to Vision 21 and the Subsidiary are true, correct
and complete copies thereof, as in effect on the Closing Date. The minute books
of New P.C., copies of which have been delivered or made available to Vision 21
and the Subsidiary, contain accurate minutes of all meetings of, and accurate
consents to all actions taken without meetings by, the Board of Directors (and
any committees thereof) and the stockholders of New P.C. since its formation.
6.4. Authorization and Validity. The execution, delivery and
performance by New P.C. of the Business Management Agreement, the Physician
Employment Agreements, the Optometrist Employment Agreements and the other
agreements contemplated thereby, and the consummation of the transactions and
provisions of services contemplated thereby, have been duly authorized by New
P.C. The Business Management Agreement, the Physician Employment Agreements, the
Optometrist Employment Agreements and each other agreement contemplated thereby
will be as of the Closing Date duly executed and delivered by New P.C. and will
constitute legal, valid and binding obligations of New P.C. enforceable against
New P.C. 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.
37
6.5. No Violation. Neither the execution, delivery or performance of
the Business Management Agreement, the Physician Employment Agreements, the
Optometrist Employment Agreements or the other agreements contemplated thereby
nor the consummation of the transactions or provision of services contemplated
thereby will (a) conflict with, or result in a violation or breach of the terms,
conditions or provisions of, or constitute a default under, the Articles or
Certificate of Incorporation or Bylaws of New P.C., or (b) to the actual
knowledge of the Physician, violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
6.6. No Business, Agreements, Assets or Liabilities. New P.C. has
not commenced business since its incorporation. Other than its Articles or
Certificate of Incorporation and Bylaws, and as of the Closing Date, the
Business Management Agreement, the Physician Employment Agreements, the
Optometrist Employment Agreements, the Employee Benefit Plans and the other
contracts or agreements listed on Schedule 6.6, New P.C. is not a party to or
subject to any agreement, indenture or other instrument. New P.C. does not own
any assets (tangible or intangible) other than the consideration received upon
the issuance of shares of capital stock and New P.C. does not have any
liabilities, accrued, contingent or otherwise (known or unknown and asserted or
unasserted).
6.7. Compliance with Laws. New P.C. has complied with all applicable
laws, regulations and licensing requirements and has filed with the proper
authorities all necessary statements and reports, except where failure to so
comply or file would not, individually or in the aggregate, have a material
adverse effect on the business, operations or financial condition of New P.C.
7. SECURITIES LAW MATTERS.
7.1. Investment Representations and Covenants of Physician.
a. Physician understands that the Securities will not be
registered under the Securities Act or any state securities laws on the grounds
that the issuance of the Securities is exempt from registration pursuant to
Section 4(2) of the Securities Act under the Securities Act and applicable state
securities laws, and that the reliance of Vision 21 on such exemptions is
predicated in part on the Physician's representations, warranties, covenants and
acknowledgements set forth in this Section.
b. Except as disclosed on Schedule 7.1(b) attached hereto,
Physician represents and warrants that Physician is an "accredited investor" or
"sophisticated investor" as defined under the Securities Act and state "Blue
Sky" laws, or that Physician has utilized, to the extent necessary to be deemed
a sophisticated investor under the Securities Act and State "Blue Sky" laws, the
assistance of a professional advisor.
c. Physician represents and warrants that the Securities to be
acquired by Physician upon consummation of the transactions described in this
Agreement will
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be acquired by Physician for Physician's own account, not as a nominee or agent,
and without a view to resale or other distribution within the meaning of the
Securities Act and the rules and regulations thereunder, except as contemplated
in this Agreement, and that Physician will not distribute any of the Securities
in violation of the Securities Act. All Securities shall bear a restrictive
legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAWS."
In addition, the Securities shall bear any legend required by the
securities or "Blue Sky" laws of any state where Physician resides as well as
any other legend deemed appropriate by Vision 21 or its counsel.
d. Physician represents and warrants that the address set forth
below Physician's name on Schedule 7.1(d) is Physician's principal residence.
e. Physician (i) acknowledges that the Securities issued to
Physician at the Closing must be held indefinitely by Physician unless
subsequently registered under the Securities Act or an exemption from
registration is available, (ii) is aware that any routine sales of Securities
made pursuant to Rule 144 under the Securities Act may be made only in limited
amounts and in accordance with the terms and conditions of that Rule and that in
such cases where the Rule is not applicable, compliance with some other
registration exemption will be required, (iii) is aware that Rule 144 is not
currently available for use by Physician for resale of any of the Securities to
be acquired by Physician upon consummation of the transactions described in this
Agreement, and (iv) acknowledges and agrees that the transfer of the Securities
shall be further restricted by the "lock-up" provisions contained in the
Registration Rights Agreement in the form of Exhibit 13.1(o), whereby Physician
shall be treated as an "affiliate" of Vision 21 under Rule 144.
f. Physician represents and warrants to Vision 21 that
Physician, either alone or together with the assistance of Physician's own
professional advisor, has such knowledge and experience in financial and
business matters such that Physician is capable of evaluating the merits and
risks of Physician's investment in any of the Securities to be acquired by
Physician upon consummation of the transactions described in this Agreement.
g. Physician confirms that Physician has received and read the
Confidential Information Memorandum of Vision 21 dated December 17, 1996, as
supplemented on February 28, 1997, and any further amendments or revisions
thereto. Physician also confirms that Physician has had the opportunity to ask
questions of and receive answers from Vision 21 concerning the terms and
conditions of Physician's investment in the Securities, and the Physician has
received to Physician's satisfaction, such additional information, in addition
39
to that set forth herein, about Vision 21's operations and the terms and
conditions of the offering as Physician has requested.
h. In order to ensure compliance with the provisions of
paragraph (c) hereof, Physician agrees that after the Closing Physician will not
sell or otherwise transfer or dispose of Securities or any interest therein
(unless such shares have been registered under the Securities Act) without first
complying with either of the following conditions, the expenses and costs of
satisfaction of which shall be fully borne and paid for by Physician:
i) Vision 21 shall have received a written legal opinion
from legal counsel, which opinion and counsel shall be satisfactory to Vision 21
in the exercise of its reasonable judgment, or a copy of a "no-action" or
interpretive letter of the Securities and Exchange Commission specifying the
nature and circumstances of the proposed transfer and indicating that the
proposed transfer will not be in violation of any of the registration provisions
of the Securities Act and the rules and regulations promulgated thereunder; or
ii) Vision 21 shall have received an opinion from its own
counsel to the effect that the proposed transfer will not be in violation of any
of the registration provisions of the Securities Act and the rules and
regulations promulgated thereunder.
Physician also agrees that the certificates or instruments representing the
Securities to be issued to Physician pursuant to this Agreement may contain a
restrictive legend noting the restrictions on transfer described in this Section
and required by federal and applicable state securities laws, and that
appropriate "stop-transfer" instructions will be given to Vision 21's transfer
agent, if any, provided that this Section 7.1(h) shall no longer be applicable
to any Securities following their transfer pursuant to a registration statement
effective under the Securities Act or in compliance with Rule 144 or if the
opinion of counsel referred to above is to the further effect that transfer
restrictions and the legend referred to herein are no longer required in order
to establish compliance with any provisions of the Securities Act.
i. Physician understands that although an Initial Public
Offering is contemplated by Vision 21, there are no assurances that an Initial
Public Offering will occur or if it does occur that it will be successful.
j. Physician agrees that he shall be considered an "affiliate"
of Vision 21 for purposes of Rule 144 and agrees to the restrictions and
limitations imposed by Rule 144 on affiliates. Physician further agrees that he
shall be considered an affiliate of Vision 21 for Rule 144 purposes even if he
does not meet the technical definition of "affiliate" under Rule 144.
7.2. Current Public Information. At all times following the
registration of any of Vision 21's securities under the Securities Act or
Exchange Act pursuant to which Vision 21 becomes subject to the reporting
requirements of the Exchange Act, Vision 21 shall use
40
commercially reasonable efforts to comply with the requirements of Rule 144
under the Securities Act, as such Rule may be amended from time to time (or any
similar rule or regulation hereafter adopted by the SEC) regarding the
availability of current public information to the extent required to enable any
holder of shares of Common Stock to sell such shares without registration under
the Securities Act pursuant to Rule 144 (or any similar rule or regulation).
8. COVENANTS OF THE COMPANY AND THE PHYSICIAN. The Company and the
Physician, jointly and severally, agree that between the date hereof and the
Closing (with respect to the Company's covenants, the Physician agrees to use
his best efforts to cause the Company to perform):
8.1. Consummation of Agreement. The Company and the Physician shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions; provided,
however, that this covenant shall not require the Company or the Physician to
make any expenditures that are not expressly set forth in this Agreement or
otherwise contemplated herein.
8.2. Business Operations. The Company shall operate its business in
the ordinary course. The Company and the Physician shall use their best efforts
to preserve the business of the Company intact. Neither the Company nor the
Physician shall take any action that would, individually or in the aggregate,
result in a Material Adverse Effect.
8.3. Access. The Company and the Physician shall, at reasonable
times during normal business hours and on reasonable notice, permit Vision 21
and its authorized representatives, including without limitation, the
Accountants, reasonable access to, and make available for inspection, all of the
assets and business of the Company, including its employees, customers and
suppliers, and permit Vision 21 and its authorized representatives to inspect
and, at Vision 21's sole cost and expense, make copies of all documents, records
(other than patient medical records) and information with respect to the affairs
of the Company, including, without limitation, the Financial Statements, as
Vision 21 and its representatives may request, all for the sole purpose of
permitting Vision 21 to become familiar with the business and assets and
liabilities of the Company.
8.4. Notification of Certain Matters. The Company and the Physician
shall promptly inform Vision 21 in writing of (a) any notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by the Company or the Physician
subsequent to the date of this Agreement and prior to the Effective Time under
any Commitment material to the Company's condition (financial or otherwise),
operations, assets, liabilities or business and to which it is subject; or (b)
any material adverse change in the Company's condition (financial or otherwise),
operations, assets, liabilities or business.
41
8.5. Approvals of Third Parties. As soon as practicable after the
date hereof, the Company and the Physician shall secure all necessary approvals
and consents of landlords to the consummation of the transactions contemplated
hereby and shall use their best efforts to secure all necessary approvals and
consents of other third parties to the consummation of the transactions
contemplated hereby; provided, however, that this covenant shall not require the
Company or the Physician to make any material expenditures that are not
expressly set forth in this Agreement or otherwise contemplated herein.
8.6. Employee Matters. Except as set forth in Schedule 3.13 or as
otherwise contemplated by this Agreement, the Company shall not, without the
prior written approval of Vision 21, except as required by law:
a. increase the cash compensation of the Physician or any other
employees of the Company (other than in the ordinary course of business and
consistent with past practice);
b. adopt, amend or terminate any Compensation Plan;
c. adopt, amend or terminate any Employment Agreement;
d. adopt, amend or terminate any Employee Policies and
Procedures;
e. adopt, amend or terminate any Employee Benefit Plan;
f. take any action that could deplete the assets of any
Employee Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
g. fail to pay any premium or contribution due or with respect
to any Employee Benefit Plan;
h. fail to file any return or report with respect to any
Employee Benefit Plan;
i. institute, settle or dismiss any employment litigation
except as could not, individually or in the aggregate, result in a Material
Adverse Effect;
j. enter into, modify, amend or terminate any agreement with
any union, labor organization or collective bargaining unit; or
k. take or fail to take any action with respect to any past or
present employee of the Company that would, individually or in the aggregate,
result in a Material Adverse Effect.
42
8.7. Contracts. Except with Vision 21's prior written consent, the
Company shall not assume or enter into any contract, lease, license, obligation,
indebtedness, commitment, purchase or sale except in the ordinary course of
business that is material to the Company's business, nor will it waive any
material right or cancel any material contract, debt or claim.
8.8. Capital Assets; Payments of Liabilities. The Company shall not,
without the prior written approval of Vision 21 (a) acquire or dispose of any
capital asset having a fair market value of $5,000 or more, or acquire or
dispose of any capital asset outside of the ordinary course of business or (b)
discharge or satisfy any lien or encumbrance or pay or perform any obligation or
liability other than (i) liabilities and obligations reflected in the Financial
Statements or (ii) current liabilities and obligations incurred in the usual and
ordinary course of business since the Company Balance Sheet Date and, in either
case (i) or (ii) above, only as required by the express terms of the agreement
or other instrument pursuant to which the liability or obligation was incurred.
8.9. Mortgages, Liens and Guaranties. The Company shall not, without
the prior written approval of Vision 21, enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its assets
(other than statutory liens arising in the ordinary course of business and other
liens that do not materially detract from the value or interfere with the use of
such assets), whether now owned or hereafter acquired, or guarantee or otherwise
become contingently liable for any obligation of another, except obligations
arising by reason of endorsement for collection and other similar transactions
in the ordinary course of business, or make any capital contribution or
investment in any person.
8.10. Acquisition Proposals. The Company and the Physician agree
that from the date of this Agreement through the earlier of the Closing Date or
January 1, 1997, (a) neither the Physician nor the Company nor any of its
officers and directors shall, and the Physician and the Company shall direct and
use their best efforts to cause the Company's employees, agents, and
representatives not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any 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 an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) the Physician and the Company will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing and
each will take the necessary steps to inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 8.10; and (c) the Physician and the Company will notify Vision 21
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company or the Physician.
43
8.11. Distributions and Repurchases. Except as contemplated in this
Agreement, no distribution, payment or dividend of any kind will be declared or
paid by the Company with respect of its capital stock, nor will any repurchase
of any of the Company's capital stock be approved or effected.
8.12. Requirements to Effect the Merger. The Company and the
Physician shall use their best efforts to take, or cause to be taken, all
actions necessary to effect the Merger under applicable law, including without
limitation the filing with the appropriate government officials of all necessary
documents in form approved by counsel for the parties to this Agreement.
8.13. Physician Accounts Payable and Physician Retained Equity. The
Company shall, and the Physician shall cause the Company to, pay in a timely
manner the accounts payable of the Physician. Except as contemplated in this
Agreement, the Company shall not, and the Physician shall not permit the Company
to, make payment of all or any portion of any retained equity of the Company at
any time prior to Closing.
8.14. New P.C. Spinoff. The Company shall form, organize and
incorporate New P.C. in the State and the Articles or Certificate of
Incorporation and Bylaws of New P.C. shall be in form and substance reasonably
satisfactory to Vision 21. The Company shall not permit New P.C. to commence
business until the Closing Date. On or prior to the Closing, Company shall take
all actions and execute all documents, agreements or instruments necessary to
transfer to New P.C. the Company's medical business and to transfer good,
valuable, and marketable title to all of the Company's Medical Assets in
exchange for the assumption by New P.C. of the Excluded Liabilities and the
issuance by the New P.C. to the Company of all of the issued and outstanding
shares of New P.C. common stock. Prior to the Closing, the Company shall declare
and make a distribution to Physician of all of the issued and outstanding shares
of New P.C. common stock.
8.15. Licenses and Permits. The Company and the Physician shall
cooperate fully with Vision 21 to obtain all licenses, permits, approvals or
other authorizations required under any law, statute, rule, regulation or
ordinance, or otherwise necessary or desirable to provide the services of New
P.C., the Physician and the Professional Employees contemplated by the Business
Management Agreement and the Physician Employment Agreements, and to conduct the
intended business of New P.C.
8.16. Physician Employment Agreements. The Company and the Physician
shall cause, at or immediately prior to Closing, each Physician Employee (except
for those non-shareholder Physician Employees identified on Schedule 8.16) who
is then an employee of the Company and Physician agrees at or immediately prior
to Closing (i) to terminate his employment agreement, if any, with the Company
by mutual consent without any liability therefor on the part of the Company and
(ii) to enter into a new Physician Employment Agreement with New P.C. in
accordance with the terms of the Business Management Agreement.
44
8.17. Optometrist Employment Agreements. The Company and the
Physician shall cause, at or immediately prior to Closing, each Optometrist
Employee (except for those Optometrist Employees identified on Schedule 8.17)
who is then an employee of the Company (i) to terminate his employment
agreement, if any, with the Company by mutual consent without any liability
therefor on the part of the Company and (ii) to enter into a new Optometrist
Employment Agreement with New P.C. in accordance with the Business Management
Agreement.
8.18. Termination of Retirement Plans. Prior to Closing, the
Physician shall cause the Company to take all steps necessary to discontinue
benefits accruals under any Employee Benefit Plan that is intended to be a
qualified employee retirement plan under Section 401(a) of the Code (a
"Retirement Plan") effective as of Closing or as soon thereafter as may be
practical. Effective at the time of Closing, the Company shall cause New P.C. to
assume all of the obligations of the Company as the sponsoring employer and/or
plan administrator of the Retirement Plan in compliance with applicable law.
Subsequent to Closing, New P.C. and Vision 21 shall review the
extent to which New P.C. can resume contributions to the Retirement Plan without
violating the qualification requirements of Sections 410(b) and 401(a)(4) of the
Code taking into account any employees of Vision 21 or the Subsidiary who would
be "leased employees" of New P.C. under Section 414(n) of the Code. If Vision 21
and New P.C. mutually agree that such qualification requirements can be
satisfied, New P.C. may elect to continue the Retirement Plan and make
contributions in accordance with its terms, provided that New P.C. shall agree
to cover at its own expense any Vision 21 or Subsidiary employees who are leased
employees if such coverage is required to maintain the tax-qualified status of
the Retirement Plan.
8.19. Delivery of Schedules. The Company and the Physician shall
deliver to Vision 21 and the Subsidiary all Schedules required to be delivered
by them prior to the Closing.
8.20. Conversion of Company. After the transfer of the Medical
Assets of the Company to New P.C. and the assumption of the Excluded Liabilities
by New P.C. and prior to Closing, Physician shall cause the Company to take such
action and file such documents or instruments as may be necessary to convert the
Company into a general business corporation in accordance with applicable law.
8.21. Assignment of Fees for Medical and Optometry Services. On or
prior to the Closing Date, the Company shall obtain an irrevocable assignment
from all Professional Employees of any and all of their rights to receive
payment for the provision of ophthalmology or optometry services which are part
of the Accounts Receivable to the Company existing on the Closing Date, except
for those fees specified and set forth on Schedule 8.21. Each Professional
Employee shall undertake to endorse any payments received on account of such
services to the order of the Company and to take such other action as may be
necessary to confirm to the Company the rights to collect and retain for its own
account such Accounts Receivable. The
45
Company shall cause its Professional Employees to agree that such security
interest of such lender(s) is intended to be a first priority security interest
and is superior to any right, title or interest which may be asserted by such
Professional Employees with respect to the Accounts Receivable or the proceeds
thereof. In the event that the assignment of rights described in this Section
shall be deemed, for any reason, to be ineffective as an outright assignment,
the Company shall cause each Professional Employee to agree that such
Professional Employee shall be deemed, effective as of the Closing Date, to have
granted to the Company a first priority lien on and security interest in and to
any and all interests of such Professional Employee in any of the Accounts
Receivable, and all proceeds with respect thereto, to secure the collection by
the Company of all Accounts Receivable, and this Agreement shall be deemed to be
a security agreement to the extent necessary to give effect to the foregoing.
The Company shall cause each Professional Employee to execute and deliver, all
such financing statements as the Company or Vision 21 may request in order to
perfect such security interest. The Company shall not suffer any Professional
Employee to grant any other lien on or security interest in or to such Accounts
Receivable or any proceeds thereof.
9. COVENANTS OF VISION 21 AND THE SUBSIDIARY. Vision 21 and the
Subsidiary agree that between the date hereof and the Closing:
9.1. Consummation of Agreement. Vision 21 and the Subsidiary shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions and take all
corporate and other actions necessary to approve the Merger; provided, however,
that this covenant shall not require Vision 21 or the Subsidiary to make any
expenditures that are not expressly set forth in this Agreement or otherwise
contemplated herein.
9.2. Efforts to Effect. Vision 21 and the Subsidiary will use their
best efforts to take, or cause to be taken, all actions necessary to effect the
Merger under applicable law, including without limitation the filing with the
appropriate government officials of all necessary documents in form approved by
counsel for the parties to this Agreement.
9.3. Notification of Certain Matters. Vision 21 and the Subsidiary
shall promptly inform the Company and the Physician in writing of (a) any notice
of, or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by Vision 21 or the
Subsidiary subsequent to the date of this Agreement and prior to the Effective
Time under any agreement or commitment entered into by Vision 21 material to
Vision 21's condition (financial or otherwise), operations, assets, liabilities
or business and to which it is subject; or (b) any material adverse change in
Vision 21's condition (financial or otherwise), operations, assets, liabilities
or business.
9.4. Approvals of Third Parties. Vision 21 and the Subsidiary shall
use their best efforts to secure, as soon as practicable after the date hereof,
all necessary approvals and consents of third parties to the consummation of the
transactions contemplated hereby.
46
9.5. Licenses and Permits. Vision 21 and the Subsidiary shall use
their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, statute, rule, regulation or ordinance,
or otherwise necessary or desirable to consummate the transactions or provide
the services contemplated by the Business Management Agreement and to conduct
the intended business of Vision 21 and the Subsidiary.
9.6. Release of Physician From Practice Liabilities. Vision 21 and
the Subsidiary shall use their best efforts to obtain from third party creditors
the release of Physician from any personal liabilities relating to the Practice
which are identified on Schedule 9.6 and assumed by the Subsidiary pursuant to
the terms of this Agreement.
10. COVENANTS OF VISION 21, THE SUBSIDIARY, THE COMPANY AND THE
PHYSICIAN. Vision 21, the Subsidiary, the Company and the Physician agree as
follows (with respect to New P.C.'s covenants, the Physician agrees to cause New
P.C. to perform):
10.1. Filings; Other Action.
a. Vision 21, the Subsidiary and the Physician shall
cooperate to promptly prepare and file at Vision 21's expense with the SEC, a
Registration Statement on Form S-1 (or other appropriate form) to be filed by
Vision 21 in connection with any Initial Public Offering of Vision 21 (including
the prospectus constituting a part thereof, the "Registration Statement").
Vision 21 and the Subsidiary shall obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and the Company and the Physician shall furnish
all information concerning the Company, the New P.C., the Nonmedical Assets and
the Physician as may be reasonably requested in connection with any such action.
b. Each of the Company, the Physician, Vision 21 and the
Subsidiary represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in a Registration
Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment and supplement thereof, if any, becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company, the Physician, Vision 21 and the Subsidiary
shall agree as to the information and documents supplied by the Company and the
Physician for inclusion in the Registration Statement and shall indicate such
information and documents in a letter to be delivered at least ten (10) days
prior to the initial filing of the Registration Statement with the SEC. The
Company and the Physician shall be entitled to review the Registration Statement
and each amendment thereto, if any, prior to the time each becomes effective
under the Securities Act.
c. The Physician and the Company shall, upon request,
furnish Vision 21 and the Subsidiary with all information concerning himself,
itself, their respective partners, the Company's subsidiaries, directors,
officers, and stockholders, and including
47
financial statements with respect to the same, any consents (and information
necessary to obtain such consents) and such other matters as may be reasonably
requested by Vision 21 in connection with the preparation of the Registration
Statement and each amendment or supplement thereto, or any other statement,
filing, notice or application made by or on behalf of each such party or any of
the Company's subsidiaries to any governmental entity in connection with the
Merger, any Initial Public Offering and the other transactions contemplated by
this Agreement.
10.2. Amendment of Schedules. Each party hereto agrees that,
with respect to the representations and warranties of such party contained in
this Agreement, such party shall have the continuing obligation until the
Closing to attach, supplement or amend promptly the Schedules with respect to
any matter that would have been or would be required to be set forth or
described in the Schedules in order to not materially breach any representation,
warranty or covenant of such party contained herein; provided that no amendment
or supplement to a Schedule that constitutes or reflects a material adverse
change to the Company or the Nonmedical Assets may be made unless Vision 21
consents to such amendment or supplement, and no amendment or supplement to a
Schedule that constitutes or reflects a material adverse change to Vision 21 may
be made unless the Company and the Physician consent to such amendment or
supplement. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 11.1 and
12.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 10.2. In the event
that the Company is required to amend or supplement a Schedule in accordance
with this Section 10.2 and Vision 21 does not consent to such amendment or
supplement, or Vision 21 is required to amend or supplement a Schedule in
accordance with this Section 10.2 and the Company and the Physician do not
consent, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 16.1(d) or Section 16.1(e) as appropriate.
10.3. Business Management Agreement. The Company and the
Physician shall use their best efforts to cause the Business Management
Agreement to be executed and delivered by New P.C. on or prior to the Closing
Date, which shall be considered a Nonmedical Asset of the Company and shall be
acquired by the Subsidiary in the Merger.
10.4. Fees and Expenses.
a. If the Merger closes, Vision 21 shall pay all costs of
the Audit of the Company's Financial Statements and financial records by Vision
21's auditors (or auditors designated by Vision 21's auditors). All items
prepared by Vision 21's auditors in connection with the Audit ("Prepared Audit
Materials") shall be for use solely by Vision 21; provided, however, that the
Company may utilize the Prepared Audit Materials solely in connection with its
review of Vision 21's calculation of the Merger Consideration. The Prepared
Audit Materials shall not be deemed to include those items which customarily
remain the property of auditors such as their working papers and memos. If the
Merger does not close, the Company shall pay for or reimburse Vision 21 for all
expenses of Vision 21's auditors in connection with the audit.
48
b. In the event the Merger is not consummated, the
Company and Physician shall not be entitled to copies or originals of the
Prepared Audit Materials unless the Company or Physician pays for or reimburses
Vision 21 for all expenses of the auditor in connection with the Audit in
advance of receiving the Prepared Audit Materials (either from Vision 21 or its
auditor). For purposes of this Agreement, Audit expenses shall include all
expenses related to the Audit as well as all expenses incurred to present the
financial statements in accordance with GAAP and all schedules related thereto.
c. Vision 21 shall pay all cost of a medicare audit of
the Company. The Company shall agree in writing that all information obtained in
connection with the Medicare audit shall be made available to Vision 21. The
Company and Physician shall not be entitled to copies or originals of the
Medicare audit material unless the Company or Physician pays for or reimburses
Vision 21 for such audit expenses in advance of receiving the Medicare audit
materials (either from Vision 21 or its auditor).
d. Each of the Company, Physician and Vision 21 shall pay
the costs and expenses of their own legal counsel with respect to legal services
rendered in connection with the preparation and negotiation of this Agreement
and the Merger contemplated hereby.
e. In the event that an Initial Public Offering does not
take place for any reason whatsoever, Vision 21 (but not the Company or the
Physician) shall have sole responsibility for the payment of all legal fees
(except as set forth in Section 11.4(c)), accounting fees (except as set forth
in Section 10.4(a)), underwriters' expenses and other fees, costs and expenses
associated solely in connection with the preparation of any Registration
Statement relating to such Initial Public Offering.
f. If any Initial Public Offering is consummated as
contemplated by this Agreement, all legal fees, audit fees, printing costs,
filing fees, blue sky fees and underwriters' discounts and fees associated
solely with the Initial Public Offering shall be paid by Vision 21 from the
proceeds of the Initial Public Offering, except for those expenses, fees and
underwriters' discounts related to any shares sold by the Physician.
11. CONDITIONS PRECEDENT OF VISION 21 AND THE SUBSIDIARY. Except as may
be waived in writing by Vision 21 and the Subsidiary, the obligations of Vision
21 and the Subsidiary hereunder are subject to the fulfillment at or prior to
the Closing Date of each of the following conditions precedent:
11.1. Representations and Warranties. The representations and
warranties of the Company and the Physician contained herein shall have been
true and correct in all material respects when initially made and shall be true
and correct in all material respects as of the Closing Date.
49
11.2. Covenants. The Company and the Physician shall have
performed and complied in all material respects with all covenants required by
this Agreement to be performed and complied with by the Company or the Physician
prior to the Closing Date.
11.3. Legal Opinion. Counsel to the Company and the Physician
shall have delivered to Vision 21 and the Subsidiary their opinions, dated as of
the Closing Date, in form and substance substantially similar to Exhibit 11.3
which Vision 21, the Subsidiary, Vision 21's and the Subsidiary's counsel, the
underwriters of the Initial Public Offering and their counsel shall be permitted
to rely upon.
11.4. Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
11.5. No Material Adverse Change. No material adverse change in
the condition (financial or otherwise), operations, assets, liabilities or
business of the Company shall have occurred since the Company Balance Sheet
Date, whether or not such change shall have been caused by the deliberate act or
omission of the Company or the Physician.
11.6. Government Approvals and Required Consents. The Company, the
Physician, New P.C., Vision 21 and the Subsidiary shall have obtained all
necessary government and other third-party approvals and consents (other than
consents technically required as a result of the transactions contemplated
hereby under the terms of managed care contracts to which the Company or any of
its employees are a party).
11.7. Certification. None of the Company, the Physician or New
P.C. shall have received any notice of or been made a party to any judicial or
administrative proceeding, or threatened to so be made a party, in any action or
proceeding that seeks to deny the continued use or receipt of any necessary
permit, license, authorization, certification or approval under the Medicare and
Medicaid programs to provide ophthalmology or optometry services.
11.8. Closing Deliveries. Vision 21 and the Subsidiary shall have
received all documents and agreements, duly executed and delivered in form
reasonably satisfactory to Vision 21 and the Subsidiary, referred to in Section
13.1.
11.9. Due Diligence. Vision 21 shall have completed to its
satisfaction a due diligence review of the Company and the Physician.
11.10. Financial Audit. Vision 21 shall have approved in Vision
21's sole discretion an audit of the Company and the Practice which audit shall
have been performed by an accounting firm designated by Vision 21 at the sole
expense of Vision 21.
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11.11. Medicare Audit. Vision 21 shall have approved in Vision 21's
sole discretion a Medicare audit of the Company and the Practice which audit
shall be at the sole expense of Vision 21.
11.12. Exemption Under State Securities Laws. The transfer of
Vision 21's Securities to the Physician as contemplated in this Agreement shall
qualify for one or more exemptions from registration under the State's
securities laws. Vision 21 shall pay all filing fees in connection with any
filing required to qualify the transfer of the Securities for such exemption(s).
11.13. Assignment of Professional Employees' Rights in Accounts
Receivable. The Company shall have caused the Professional Employees to assign
any and all of their rights with respect to Accounts Receivable to the Company
and shall cause such Professional Employees to execute such other agreements and
instruments as contemplated in Section 8.21.
12. CONDITIONS PRECEDENT OF THE COMPANY AND THE PHYSICIAN. Except as
may be waived in writing by the Company and the Physician, the obligations of
the Company and the Physician hereunder are subject to fulfillment at or prior
to the Closing Date of each of the following conditions precedent:
12.1. Representations and Warranties. The representations and
warranties of Vision 21 and the Subsidiary contained herein shall be true and
correct in all respects when initially made and shall be true and correct in all
material respects as of the Closing Date.
12.2. Covenants. Vision 21 and the Subsidiary 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 them prior to the Closing
Date.
12.3. Legal Opinions. Counsel to Vision 21 and the Subsidiary shall
have delivered to the Company and the Physician their opinion, dated as of the
Closing Date, in form and substance substantially similar to Exhibit 12.3.
12.4. Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
12.5. Government Approvals and Required Consents. The Company, the
Physician, New P.C., Vision 21 and the Subsidiary shall have obtained all
necessary government and other third-party approvals and consents (other than
consents technically required as a result of the transactions contemplated
hereby under the terms of managed care contracts to which the Company or any of
its employees are a party).
51
12.6. Closing Deliveries. The Company, New P.C. and the Physician
shall have received all documents, instruments and agreements, duly executed and
delivered in form reasonably satisfactory to the Company, referred to in Section
13.2.
12.7. No Change in Voting or Ownership Control. There shall have
been no changes in the voting or ownership control of Vision 21 from the date
first above written to the Closing Date.
12.8. No Material Adverse Change. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of Vision 21 shall have occurred since the end of the last fiscal period
reported in the Vision 21 Financial Statements, whether or not such change shall
have been caused by the deliberate act or omission of Vision 21.
13. CLOSING DELIVERIES; ESCROW OF DOCUMENTS.
13.1. Deliveries of the Company, New P.C. and the Physician. At or
prior to May 30, 1997, the Company, New P.C. and the Physician shall deliver to
Vision 21 and the Subsidiary, c/x Xxxxxxxx, Loop & Xxxxxxxx, LLP, counsel to
Vision 21 and the Subsidiary, the following, all of which shall be in a form
reasonably satisfactory to Vision 21 and the Subsidiary and shall be held by
Xxxxxxxx, Loop & Xxxxxxxx, LLP in escrow pending Closing, pursuant to an escrow
agreement or letter in form and substance mutually acceptable to the parties
hereto:
a. a copy of resolutions of the Board of Directors of the
Company authorizing (i) the execution, delivery and performance of this
Agreement and all related documents and agreements, and (ii) the consummation of
the Merger, certified by the Secretary of the Company as being true and correct
copies of the originals thereof subject to no modifications or amendments;
b. a copy of resolutions of the Board of Directors of New
P.C. authorizing the execution, delivery and performance of the Business
Management Agreement, the Physician Employment Agreements, and all other
documents to be executed and delivered by New P.C. as contemplated by this
Agreement, certified by the Secretary of New P.C. as being true and correct
copies of the originals thereof subject to no modifications or amendments;
c. a certificate of the President of the Company, and of the
Physician, dated the Closing Date, as to the truth and correctness of the
representations and warranties of the Company and the Physician contained
herein, on and as of the Closing Date;
d. a certificate of the President of the Company, and of the
Physician, dated the Closing Date, (i) as to the performance of and compliance
in all material respects by the Company and the Physician with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of the Company and the Physician to the Closing have been
satisfied;
52
e. a certificate of the Secretary of the Company and the
Secretary of New P.C. certifying as to the incumbency of the directors and
officers of each such corporation and as to the signatures of such directors and
officers who have executed documents delivered pursuant to the Agreement on
behalf of each such corporation;
f. a certificate, dated within ten (10) days prior to the
Closing Date, of the Secretary of State of the respective states of
incorporation for the Company and New P.C. establishing that each such
corporation is in existence, has paid all franchise or similar taxes, if any,
and, if applicable, otherwise is in good standing to transact business in its
state of organization;
g. certificates, dated within ten (10) days prior to the
Closing Date, of the Secretaries of State of the states in which the Company and
New P.C. are qualified to do business, to the effect that each such corporation
is qualified to do business and, if applicable, is in good standing as a foreign
corporation in each of such states;
h. an opinion of counsel to the Company and Physicians dated
as of the Closing Date, in form and substance satisfactory to Vision 21 and the
Subsidiary, which Vision 21, the Subsidiary, Vision 21's and the Subsidiary's
counsel and the underwriters of any Initial Public Offering and their counsel
are permitted to rely upon and which shall include an opinion, subject to normal
and customary exceptions, that to the best of their knowledge the transactions
and arrangements contemplated by this Agreement are in conformity with State
laws, rules and regulations governing the practice of medicine.
i. all authorizations, consents, permits and licenses
referenced in Section 3.8;
j. the resignations of the directors and officers of the
Company as requested by Vision 21;
k. the executed Business Management Agreement in
substantially the form attached hereto as Exhibit 13.1(k), as revised in
accordance with changes reasonably deemed necessary or advisable by legal
counsel retained by Vision 21 and the Subsidiary in the State to address
regulatory and compliance issues;
l. an executed Physician Employment Agreement between New
P.C. and the Physician in substantially the form attached hereto as Exhibit
13.1(l);
m. an executed Physician Employment Agreement between New
P.C. and each Physician Employee who is then an employee of the Company in
substantially the form attached hereto as Exhibit 13.1(m);
53
n. an executed Optometrist Employment Agreement between New
P.C. and each Optometrist Employee who is then an employee of the Company in
substantially the form attached hereto as Exhibit 13.1(n);
o. an executed Registration Rights Agreement between Vision
21 and the Physician in substantially the form attached hereto as Exhibit
13.1(o) (the "Registration Rights Agreement");
p. an executed Certificate of Merger necessary to effect the
Merger;
q. a non-foreign affidavit, as such affidavit is referred to
in Section 1445 (b) (2) of the Code, of the Physician, signed under a penalty of
perjury and dated as of the Closing Date, to the effect that the Physician is a
United States citizen or a resident alien (and thus not a foreign person) and
providing the Physician's United States taxpayer identification number;
r. if desired by Vision 21, a new lease or leases between the
landlords under each lease for real property described on Schedule 3.14(c) and
Vision 21 or the Subsidiary in form and substance reasonably satisfactory to
Vision 21 and the Subsidiary;
s. the Shares of Company Common Stock to be delivered
pursuant to Section 2.9(b); and
t. such other instrument or instruments of transfer prepared
by Vision 21 as shall be necessary or appropriate, as Vision 21 or its counsel
shall reasonably request, to carry out and effect the purpose and intent of this
Agreement.
13.2. Deliveries of Vision 21 and the Subsidiary. At or prior to
May 30, 1997, Vision 21 and the Subsidiary shall deliver to the Company and the
Physician, c/x Xxxxxxxx, Loop & Xxxxxxxx, LLP, counsel to Vision 21, the
following, all of which shall be in a form reasonably satisfactory to the
Company and the Physician and shall be held by Xxxxxxxx, Loop & Xxxxxxxx, LLP
in escrow pending Closing, pursuant to an escrow agreement or letter in form
and substance mutually acceptable to the parties hereto:
a. a copy of the resolutions of the Board of Directors of
Vision 21 authorizing (i) the execution, delivery and performance of this
Agreement, and all related documents and agreements, and (ii) the consummation
of the Merger, certified by Vision 21's Secretary as being true and correct
copies of the originals thereof subject to no modifications or amendments;
b. a copy of the resolutions of the Board of Directors of the
Subsidiary authorizing (i) the execution, delivery and performance of this
Agreement, and all related documents and agreements, and (ii) the consummation
of the Merger, certified by the
54
Subsidiary's Secretary as being true and correct copies of the originals
thereof subject to no modifications or amendments;
c. a certificate of an officer of Vision 21 dated the Closing
Date as to the truth and correctness of the representations and warranties of
Vision 21 contained herein, on and as of the Closing Date;
d. a certificate of an officer of the Subsidiary dated the
Closing Date as to the truth and correctness of the representations and
warranties of the Subsidiary contained herein, on and as of the Closing Date;
e. a certificate of an officer of Vision 21 dated the Closing
Date, (i) as to the performance and compliance of Vision 21 with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of Vision 21 to the Closing have been satisfied;
f. a certificate of an officer of the Subsidiary dated the
Closing Date, (i) as to the performance and compliance of the Subsidiary with
all covenants contained herein on and as of the Closing Date and (ii) certifying
that all conditions precedent of the Subsidiary to the Closing have been
satisfied;
g. certificates, dated within ten (10) days prior to the
Closing Date, of the Secretary of State of the State of Florida establishing
that Vision 21 and the Subsidiary are in existence, have paid all franchise or
similar taxes, if any, and, if applicable, otherwise are in good standing to
transact business in such state;
h. certificates (or photocopies thereof), dated within ten
(10) days prior to the Closing Date, of the Secretary of State of each state in
which Vision 21 and the Subsidiary are qualified to do business, to the effect
that Vision 21 and the Subsidiary are qualified to do business and, if
applicable, are in good standing as a foreign corporation in each of such
states;
i. an opinion of Xxxxxxxx, Loop & Xxxxxxxx, LLP, counsel to
Vision 21, dated as of the Closing Date, pursuant to Section 12.3;
j. the executed Registration Rights Agreement;
k. the executed Lease Assignments;
l. the Shares of Vision 21 Common Stock to be delivered
pursuant to Section 2.9(a); and
m. such other instrument or instruments of transfer, prepared
by the Company or the Physician as shall be necessary or appropriate, as the
Company, the
55
Physician or their counsel shall reasonable request, to carry out and effect the
purpose and intent of this Agreement.
13.3. Release of Escrow Materials. Xxxxxxxx, Loop & Xxxxxxxx, LLP
shall release the agreements, certificates, instruments, documents and other
materials described in Sections 13.1 and 13.2 to the appropriate parties to
effectuate the transactions contemplated in this Agreement only after all such
materials have been delivered by all applicable parties (or the parties
receiving such documents have waived in writing such delivery requirement). In
the event that all of the Practice, Vision 21, the Subsidiary and the Physician
have not notified the Escrow Agent in writing that they are satisfied with or
have waived all of the foregoing documents and issues by 5:00 p.m. on June 5,
1997, the Escrow Agent shall immediately return any consideration by Vision 21
held by it to Vision 21 and shall destroy all of the other Escrowed Materials
held by it.
14. POST CLOSING MATTERS.
14.1. Further Instruments of Transfer. From and after the Closing
Date, at the request of Vision 21 and at Vision 21's sole cost and expense, the
Physician and the Company shall deliver any further instruments of transfer and
take all reasonable action as may be necessary or appropriate to carry out the
purpose and intent of this Agreement.
14.2. Practice Advisory Council; Local Advisory Council; National
Appeals Council. Vision 21 and New P.A. shall establish a practice advisory
council composed of delegates from Vision 21 and New P.A. which shall advise
Vision 21 and New P.A. and determine certain issues as more fully described in
the Business Management Agreement. Vision 21 shall also establish a local
advisory council composed of delegates from certain practice groups acquired by
Vision 21 in connection with Recent Acquisitions. Such delegates shall be
appointed from practice groups which are located in a market area to be
identified by Vision 21 and in which New P.A. is located. The local advisory
council board shall advise Vision 21 and the practice groups within the market
area as to policy and strategy issues and shall determine certain types of
issues and disputes between Vision 21 and such practice groups which issues and
disputes are identified in the Business Management Agreement and other
management agreements entered into between Vision 21 and practice groups. New
P.A. shall have the right to appoint one (1) member to a local advisory council
who shall serve an initial two (2) year term. After the initial two-year term,
election of members to the local advisory council shall be in accordance with
by-laws which shall be adopted and amended by the local advisory council. Vision
21 shall also establish a national appeals council which shall have, among other
duties and responsibilities, the power to adopt and amend its by-laws, to review
and approve as limited herein certain decisions of the local advisory councils,
and to resolve deadlocks among the members of such local advisory councils.
56
15. REMEDIES.
15.1. Indemnification by the Physician. Subject to the terms and
conditions of this Agreement, the Physician agrees to indemnify, defend and hold
Vision 21, the Surviving Corporation and their respective directors, officers,
members, managers, employees, agents, attorneys and affiliates harmless from and
against all losses, claims, obligations, demands, assessments, penalties,
liabilities, costs, damages, reasonable attorneys' fees and expenses
(collectively, "Damages") asserted against or incurred by such entities and
individuals (including, but not limited to, any reduction in payments to or
revenues of New P.C.), arising out of or resulting from:
a. a breach of any representation, warranty or covenant of
the Company or the Physician contained herein or in any schedule or certificate
delivered hereunder;
b. any liability under the Securities Act, the Exchange Act
or any other federal or state "Blue Sky" or securities law or regulation, at
common law or otherwise, (i) arising out of or based upon any untrue statement
or alleged untrue statement of a material fact relating to the Physician, the
Company (including its subsidiaries, if any) or New P.C., and provided to Vision
21 or its counsel by the Company or the Physician, specifically for inclusion in
a Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, (ii) arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Physician, the Company (including its subsidiaries, if any) or New P.C. required
to be stated therein or necessary to make the statements therein not misleading,
and not provided to Vision 21 or its counsel by the Company or the Physician,
provided, however, that such indemnity shall not inure to the benefit of Vision
21 to the extent that such untrue statement (or alleged untrue statement) was
made, in, or omission (or alleged omission) occurred in, any preliminary
prospectus, and such information was not so included by Vision 21 and properly
delivered to shareholders of Vision 21 who acquire Vision 21 Common Stock in any
Initial Public Offering;
c. any and all liability for any actions, suits, claims,
proceedings or investigations that relate to Physician or the Practice in which
the event giving rise thereto occurred prior to the Closing Date or which result
from or arise out of any action of Physician or any director, officer, employee,
agent or representative of the Practice prior to the Closing Date; or
d. any filings, reports or disclosures made pursuant to the
IRS Voluntary Compliance Resolution Program, if applicable;
e. any failure of the Merger to qualify as a reorganization
within the meaning of Section 368(a)(1)(A) or Section 368(a)(2)(D) of the Code;
f. any liability arising from the spin off of the Company's
medical business and Medical Assets;
57
g. any liability arising from any alleged unlawful sale or
offer to sell or transfer any of the Common Stock by Physician; and
h. any liability of Physician or the Practice of any nature
whatsoever not disclosed in this Agreement and expressly assumed by Vision 21 or
the Subsidiary.
15.2. Indemnification by Vision 21 and the Subsidiary. Subject to
the terms and conditions of this Agreement, Vision 21 and the Subsidiary,
jointly and severally, hereby agree to indemnify, defend and hold the Physician
harmless from and against all damages asserted against or incurred by him
arising out of or resulting from:
a. a breach by Vision 21 or the Subsidiary of any
representation, warranty or covenant of Vision 21 or the Subsidiary contained
therein or in any schedule or certificate delivered hereunder;
b. any liability under the Securities Act, the Exchange Act
or any other federal or state "Blue Sky" or securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to Vision 21 or the
Subsidiary, contained in any preliminary prospectus, Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to Vision 21 (including the Subsidiary and
Vision 21's other subsidiaries), required to be stated therein or necessary to
make the statements therein not misleading; and
c. any filings, reports or disclosures made pursuant to the
IRS Voluntary Compliance Resolution Program, if applicable.
Notwithstanding anything in this Section 15.2, Vision 21 and the
Subsidiary shall not be liable for any Damages resulting from any matter not
disclosed to Vision 21 by any of the third parties acquired by Vision 21 in
connection with the Recent Acquisitions.
15.3. Conditions of Indemnification. All claims for indemnification
under this Agreement shall be asserted and resolved as follows:
a. A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (and, in any event, at least ten (10) days
prior to the due date for any responsive pleadings, filings or other documents)
(i) notify the party from whom indemnification is sought (the "Indemnifying
Party") of any third-party claim or claims asserted against the Indemnified
Party ("Third Party Claim") that could give rise to a right of indemnification
under this Agreement and (ii) transmit to the Indemnifying Party a written
notice ("Claim Notice") describing in reasonable detail the nature of the Third
Party Claim, a copy of all papers served with respect to such claim (if any), an
estimate of the amount of damages
58
attributable to the Third Party Claim and the basis of the Indemnified Party's
request for indemnification under this Agreement. Except as set forth in Section
15.6, the failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the related Third Party Claim except to the extent that the resulting delay is
materially prejudicial to the defense of such claim. Within thirty (30) days
after receipt of any Claim Notice (the "Election Period"), the Indemnifying
Party shall notify the Indemnified Party (i) whether the Indemnifying Party
disputes its potential liability to the Indemnified Party under this Article 16
with respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party elects to assume the
defense of the Third Party Claim, then the Indemnifying Party shall have the
right to defend, at its sole cost and expense, such Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 15.3(b). The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is entitled to indemnification hereunder), to file, during the Election
Period, any motion, answer or other pleadings that the Indemnified Party shall
deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is adverse to the Indemnifying
Party, the Indemnifying Party shall be relieved of its obligations hereunder
with respect to such Third Party Claim). If requested by the Indemnifying Party,
the Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to
Section 15.3(b) and shall bear its own costs and expenses with respect to such
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and
upon written notification thereof, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of the Indemnified Party;
provided further that the Indemnifying Party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party.
59
b. If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects to defend
the Indemnified Party pursuant to Section 15.3(b), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 15.3(b) but fails
diligently and promptly to prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article 16 and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnifying Party's defense pursuant to this Section
or of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control any defense or settlement controlled by the
Indemnified Party pursuant to this Section 15.3(c), and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to the Indemnified Party, then the
Indemnifying Party may employ separate counsel and upon written notification
thereof, the Indemnified Party shall not have the right to assume the defense of
such action on behalf of the Indemnifying Party.
c. In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim and
the basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within sixty (60) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by mediation or arbitration as
provided in Section 19.1 if the parties do not reach a settlement of such
dispute within thirty (30) days after notice of a dispute is given.
d. Payments of all amounts owing by an Indemnifying Party
pursuant to this Article 16 relating to a Third Party Claim shall be made within
thirty (30) days after the latest of (i) the settlement of such Third Party
Claim, (ii) the expiration of the period
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for appeal of a final adjudication of such Third Party Claim or (iii) the
expiration of the period for appeal of a final adjudication of the Indemnifying
Party's liability to the Indemnified Party under this Agreement. Payments of all
amounts owing by an Indemnifying Party pursuant to Section 15.3(d) shall be made
within thirty (30) days after the later of (i) the expiration of the sixty (60)
day Indemnity Notice period or (ii) the expiration of the period for appeal, if
any, of a final adjudication or arbitration of the Indemnifying Party's
liability to the Indemnified Party under this Agreement.
15.4. Remedies Not Exclusive. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity. This Article 16
regarding indemnification shall survive Closing.
15.5. Costs, Expenses and Legal Fees. Each party hereto agrees to
pay the costs and expenses (including attorneys' fees and expenses) incurred by
the other parties in successfully (a) enforcing any of the terms of this
Agreement, or (b) proving that another party breached any of the terms of this
Agreement.
15.6. Indemnification Limitations. Notwithstanding the provisions
of Sections 15.1 and 15.2, (a) no party shall be required to indemnify another
party with respect to a breach of a representation, warranty or covenant unless
the claim for indemnification is brought within two (2) years after the Closing
Date, except that a claim for indemnification for a breach of the
representations and warranties contained in Sections 3.1, 3.2, 3.3., 3.4, 3.5,
3.6, 3.14, 3.17, 3.20, 3.23, 4.1, 4.3, 4.4, 4.8, 5.1, 5.2, 5.3, 5.4, 5.6, 5.7,
6.1, 6.2, 6.3 and 6.4 may be made at any time, and a claim for indemnification
for a breach of the representations and warranties contained in Sections 3.12,
3.18, 3.21, 3.27, 3.28, 3.29, 3.30, 3.31, 3.33, 4.5, 4.7, 4.11, 5.8 and 7.1 may
be made at any time within the applicable statute of limitations; (b)
indemnification based upon Sections 15.1(b) through (f) and 15.2(b) may be made
at any time within the applicable statute of limitations; and (c) the Physician
shall not be required to indemnify Vision 21 and the Subsidiary pursuant to
Section 15.1 unless, and to the extent that, the aggregate amount of Damages
incurred by Vision 21 shall exceed an amount equal to two percent (2%) of the
total Merger Consideration; and (d) the Physician shall not be required to
indemnify Vision 21 and the Subsidiary with respect to a breach of a
representation, warranty or covenant for Damages in excess of the aggregate
Merger Consideration received by the Physician (other than pursuant to a
requirement to indemnify Vision 21 and the Subsidiary under Sections 3.30 and
3.31, or unless the breach involves an intentional breach or fraud by the
Physician or the Company, which shall be unlimited).
15.7. Tax Benefits; Insurance Proceeds. The total amount of any
indemnity payments owed by one party to another party to this Agreement shall be
reduced by any correlative tax benefit received by the party to be indemnified
or the net proceeds received by the party to be indemnified with respect to
recovery from third parties or insurance proceeds and such correlative insurance
benefit shall be net of the insurance premium, if any, that becomes due as a
result of such claim.
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15.8. Payment of Indemnification Obligation. In the event that the
Physician has an indemnification obligation to Vision 21 or the Subsidiary
hereunder, subject to Vision 21's approval as set forth below, the Physician may
satisfy such obligation by transferring to Vision 21 or the Subsidiary (as the
case may be) such number of shares of Vision 21 Common Stock owned by the
Physician having an aggregate fair market value (which is prior to any Initial
Public Offering based upon the valuation given at Closing hereof or after an
Initial Public Offering the fair market value at such time based on the last
reported sale price of Vision 21 Common Stock on a principal national securities
exchange or other exchange on which the Vision 21 Common Stock is then listed or
the last quoted ask price on any over-the-counter market through which the
Vision 21 Common Stock is then quoted on the last trading day immediately
preceding the day on which the Physician transfers shares of Vision 21 Common
Stock to Vision 21 or the Subsidiary hereunder) equal to the indemnification
obligation, provided that each of the following conditions are satisfied:
a. The Physician shall transfer to Vision 21 or the Subsidiary
good, valid and marketable title to the shares of Vision 21 Common Stock, free
and clear of all adverse claims, security interests, liens, claims, proxies,
options, stockholders' agreements and encumbrances;
b. The Physician shall make such representation and
warranties as to title to the stock, absences of security interests, liens,
claims, proxies, stockholders' agreements and other encumbrances and other
matters as reasonably requested by Vision 21 or the Subsidiary; and
c. The other terms and conditions of any transaction
contemplated pursuant to this Section and the effects thereof, including any
legal or tax consequences, shall be reasonably satisfactory to Vision 21 and the
Subsidiary.
16. TERMINATION.
16.1. Termination. This Agreement may be terminated and the Merger
may be abandoned:
a. at any time prior to the Closing Date by mutual agreement
of all parties;
b. at any time prior to the Closing Date by Vision 21 if any
representation or warranty of the Company or the Physician contained in this
Agreement or in any certificate or other document executed and delivered by the
Company or the Physician pursuant to this Agreement is or becomes untrue or
breached in any material respect or if the Company or the Physician fails to
comply in any material respect with any covenant or agreement contained herein,
and any such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
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c. at any time prior to the Closing Date by the Company if
any representation or warranty of Vision 21 or the Subsidiary contained in this
Agreement is or becomes untrue in any material respect or if Vision 21 or the
Subsidiary fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
or written notice thereof;
d. at any time prior to the Closing Date by the Company in
the event of the failure of any of the conditions precedent set forth in Article
13 of this Agreement;
e. at any time prior to the Closing Date by Vision 21 in the
event of the failure of any of the conditions precedent set forth in Article 12
of this Agreement;
f. by Vision 21 if at any time prior to the Closing Date,
Vision 21 deems termination to be advisable, provided, however, that if Vision
21 exercises its right to terminate this Agreement under this subsection, Vision
21 shall reimburse the Company and the Physician for all reasonable attorneys'
and accountants' fees incurred by the Company and the Physician in connection
with this Agreement; provided that Vision 21 shall only reimburse the Company
and the Physician up to an aggregate maximum amount of One Hundred Thousand and
No/100 Dollars ($100,000.00) for such fees; or
g. by Vision 21 or the Company if the Merger shall not have
been consummated by June 5, 1997.
16.2. Effect of Termination. In the event this Agreement is
terminated pursuant to Section 16.1, Vision 21, the Subsidiary, the Company and
the Physician, shall each be entitled to pursue, exercise and enforce any and
all remedies, rights, powers and privileges available at law or in equity,
subject to the limitations set forth in Section 16.1. In the event of a
termination of this Agreement under the provisions of this Article 17, a party
not then in material breach of this Agreement shall stand fully released and
discharged of any and all obligations under this Agreement.
17. PHYSICIAN EMPLOYMENT AGREEMENT.
17.1. Physician Employment Agreement. The parties acknowledge that
in accordance with the terms of this Agreement, Physician, as employee, and New
P.C., as employer, have entered into the Physician Employment Agreement and that
the Subsidiary and Vision 21 are entitled to enforce such Physician Employment
Agreement as intended third party beneficiaries. Physician, Vision 21 and the
Subsidiary acknowledge that Vision 21 and the Subsidiary would suffer severe
harm in the event of Physician's resignation prior to the expiration of the five
(5) year term of such Physician Employment Agreement (without first obtaining
the written consent of Vision 21 and the Subsidiary) or a breach or default of
Physician's obligations under such Physician Employment Agreement, and
Physician, the Company, the Subisidary and Vision 21 agree that Vision 21 and
the Subsidiary shall be entitled
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to recover from Physician any and all damages incurred by Vision 21 and the
Subsidiary caused by such resignation, breach or default. Notwithstanding the
foregoing, neither Vision 21 nor the Subsidiary shall not be entitled to recover
its damages caused by such resignation, breach or default if such resignation,
breach or default was caused by: (i) the death or disability of Physician, (ii)
circumstances not caused by an act or omission of Physician and which
circumstances are beyond his control, or (iii) loss of Physician's license to
practice as an ophthalmologist, unless such loss of license is due to an act or
omission of Physician. Notwithstanding the foregoing, Physician shall have no
obligation to pay the damages contemplated in this Section 17.1 if (a) the
Business Management Agreement has been terminated pursuant to a material breach
by the Subsidiary, or (b) Physician cures any such breach or default of the
Physician Employment Agreement within a period of thirty (30) days after notice
from Vision 21 or the Subsidiary of such breach or default.
17.2. Survival. The parties acknowledge and agree that this Article
18 shall survive the Closing of the transactions contemplated herein.
18. NON-COMPETITION AND CONFIDENTIALITY COVENANTS.
18.1. Physician Non-Competition Covenant.
a. The Physician recognizes that the covenants of the
Physician contained in this Section 18.1 are an essential part of this Agreement
and that, but for the agreement of the Physician to comply with such covenants,
Vision 21 and the Subsidiary would not have entered into this Agreement. The
Physician acknowledges and agrees that the Physician's covenant not to compete
is necessary to ensure the continuation of the Management Business (as defined
below) and is necessary to protect the reputation of Vision 21 and the
Subsidiary, and that irreparable and irrevocable harm and damage will be done to
Vision 21 and the Subsidiary if the Physician competes with the Management
Business, Vision 21 or the Subsidiary. The Physician accordingly agrees that for
the periods set forth in the Business Management Agreement, the Physician shall
not:
i) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee, employer,
advisor, stockholder, partner or in any other individual or representative
capacity whatsoever, either for the Physician's own benefit or for the benefit
of any other person or entity knowingly (A) hire, attempt to hire, contact or
solicit with respect to hiring any employee of Vision 21 (or of the Subsidiary
or any of Vision 21's other direct or indirect subsidiaries) or (B) induce or
otherwise counsel, advise or encourage any employee of Vision 21 (or of the
Subsidiary or any of Vision 21's other direct or indirect subsidiaries) to leave
the employment of Vision 21 or the Subsidiary;
ii) act or serve, directly or indirectly, as a principal,
agent, independent contractor, consultant, director, officer, employee, employer
or advisor or in any other position or capacity with or for, or acquire a direct
or indirect ownership interest
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in or otherwise conduct (whether as stockholder, partner, investor, joint
venturer, or as owner of any other type of interest), any Competing Management
Business as such term is defined herein; provided, however, that this clause
(ii) shall not prohibit the Physician from being the owner of up to 1% of any
class of outstanding securities of any company or entity if such class of
securities is publicly traded; or
iii) directly or indirectly, either as principal, agent,
independent, contractor, consultant, director, officer, employee, employer,
advisor, stockholder, partner or in any other individual or representative
capacity whatsoever, either for the Physician's own benefit or for the benefit
of any other person or entity, call upon or solicit any customers or clients of
the Management Business; provided however, that the Physician may send out a
general notice to the customers or clients of the Management Business announcing
the termination of his arrangement with the Subsidiary and Vision 21 and may
advertise in a general manner without violating this covenant. The parties
hereto acknowledge and agree that for purposes of this Section, patients which
have in the past received medical or optometric care from the Company and/or
shall in the future receive medical or optometric care from the New P.C. are not
deemed to be customers or clients of the Management Business.
b. For the purposes of this Section 18.1, the following terms
shall have the meaning set forth below:
i) "Management Business" shall mean management and
administration of the non-medical aspects of medical, ophthalmology and
optometry practices.
ii) "Competing Management Business" shall mean an
individual, business, corporation, association, firm, undertaking, company,
partnership, joint venture, organization or other entity that either (A)
conducts a business substantially similar to the Management Business within the
State, or (B) provides or sells a service which is the same or substantially
similar to, or otherwise competitive with the services provided by the
Management Business within the State; provided, however, that "Competing
Management Business" shall not include Vision 21, the Subsidiary, or the
Physician's internal management and administration of the Physician's medical
practice or participation in the management and administration of a physician
group in which the Physician devotes a significant amount of time to the
practice of medicine.
c. Should any portion of this Section 18.1 be deemed
unenforceable because of the scope, duration or territory encompassed by the
undertakings of the Physician hereunder, and only in such event, then the
Physician, Vision 21 and the Subsidiary consent and agree to such limitation on
scope, duration or territory as may be finally adjudicated as enforceable by a
court of competent jurisdiction after the exhaustion of all appeals.
d. This covenant shall be construed as an agreement ancillary
to the other provisions of this Agreement, and the existence of any claim or
cause of action of
65
the Physician against the Subsidiary or Vision 21, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Subsidiary and Vision 21 of this covenant; provided, however, that the Physician
shall not be bound by this covenant and shall not be obligated to pay the
liquidated damages contemplated in this Section 18.1 if at the time of a breach
of this covenant the Business Management Agreement has already been terminated
pursuant to Section 6.2(a) thereof. Without limiting other possible remedies to
the Subsidiary and Vision 21 for breach of this covenant, the Physician agrees
that injunctive or other equitable relief will be available to enforce the
covenants of this provision, such relief to be without the necessity of posting
a bond, cash or otherwise. The Physician, the Subsidiary and Vision 21 further
expressly acknowledge that the damages that would result from a violation of
this non-competition covenant would be impossible to predict with any degree of
certainty, and agree that liquidated damages in the amount of the aggregate
consideration received by the Physician pursuant to this Agreement is reasonable
in light of the severe harm to the Management Business, the Subsidiary and
Vision 21 which would result in the event that a violation of this
non-competition covenant were to occur. For purposes of calculation of the
liquidated damages contemplated in this Section and for purposes of calculation
of the liquidated damages contemplated in the Business Management Agreement and
the Physician Employment Agreement between the Physician and New P.C., the
aggregate consideration received by Physician pursuant to this Agreement shall
be in those amounts and in such form as set forth in Schedule 18.1. If the
Physician violates this non-competition covenant, Vision 21 shall, in addition
to all other rights and remedies available at law or equity, be entitled to (a)
cancel the number of shares of Common Stock held by the Physician or, with
respect to shares of Common Stock entitled to be received by the Physician,
terminate its obligation to deliver such number of shares of Common Stock,
valued as set forth in Section 6.6(a) of the Business Management Agreement, and
(b) repayment by Physician to Vision 21 of any and all sums received in
connection with any shares of Vision 21 Common Stock sold by Physician; but in
no event shall Vision 21 be entitled to offset amounts in excess of the
liquidated damages sum pursuant to this Section 18.1. The Physician agrees to
deliver to Vision 21 the certificates representing any such shares canceled by
Vision 21. Payment and satisfaction by Physician shall be made within sixty (60)
days of notification to Physician by Vision 21 that Physician has violated this
non-competition covenant.
e. Notwithstanding anything contained herein, this Section
18.1 shall not be construed to (i) limit the freedom of any patient of the
Physician to choose the facility or physician from whom such patient shall
receive health-care services or (ii) limit or interfere with the Physician's
ability to exercise his professional medical judgment in treating his patients
or his ability to provide medical services to his patients.
18.2. Physician Confidentiality Covenant. From the date hereof, the
Physician shall not, directly or indirectly, use for any purpose, other than in
connection with the performance of the Physician's duties under the Physician
Employment Agreement with New P.C., or disclose to any third party, any
information of the Subsidiary, Vision 21 or the Company, as appropriate (whether
written or oral), including any business management or economic studies, patient
lists, proprietary forms, proprietary business or management methods,
66
marketing data, fee schedules, or trade secrets of the Subsidiary, Vision 21 or
of the Company, as applicable, and including the terms and provisions of this
Agreement and any transaction or document executed by the parties pursuant to
this Agreement. Notwithstanding the foregoing, the Physician may disclose
information that the Physician can establish (a) is or becomes generally
available to and known by the public or medical community (other than as a
result of an unpermitted disclosure directly or indirectly by the Physician or
his Affiliates, advisors, or representatives); (b) is or becomes available to
the Physician on a nonconfidential basis from a source other than the Subsidiary
or Vision 21, the Company or their respective Affiliates, advisors or
representatives, provided that such source is not and was not bound by a
confidentiality agreement with or other obligation of secrecy to the Subsidiary
or Vision 21, the Company or their respective Affiliates, advisors or
representatives of which the Physician has knowledge; or (c) has already been or
is hereafter independently acquired or developed by the Physician without
violating any confidentiality agreement with or other obligation of secrecy to
the Subsidiary, Vision 21, the Company or their respective Affiliates, advisors
or representatives. Without limiting the other possible remedies to the
Subsidiary and Vision 21 for the breach of this covenant, the Physician agrees
that injunctive or other equitable relief shall be available to enforce this
covenant, such relief to be without the necessity of posting a bond, cash or
otherwise. The Physician further agrees that if any restriction contained in
this Section 18.2 is held by any court to be unenforceable or unreasonable, a
lesser restriction shall be enforced in its place and the remaining restrictions
contained herein shall be enforced independently of each other.
18.3. Survival. The parties acknowledge and agree that this Article
19 shall survive the Closing of the transactions contemplated herein.
19. DISPUTES.
19.1. Mediation and Arbitration. Any dispute, controversy or claim
(excluding claims arising out of an alleged breach of Article 19 of this
Agreement) arising out of this Agreement, or the breach thereof, that cannot be
settled through negotiation shall be settled (a) first, by the parties trying in
good faith to settle the dispute by mediation under the Commercial Mediation
Rules of the AAA (such mediation session to be held in Tampa, Florida, if the
amount in dispute is equal to or in excess of $200,000 or if the dispute is
solely of a non-monetary nature, and in Sierra Vista, Arizona if the amount in
dispute is lower than $200,000, and in either case to commence within 15 days of
the appointment of the mediator by the AAA), and (b) if the controversy, claim
or dispute cannot be settled by mediation, then by arbitration administered by
the AAA under its Commercial Arbitration Rules (such arbitration to be held in
Tampa, Florida, if the amount in dispute is equal to or in excess of $200,000 or
if the dispute is solely of a non-monetary nature, and in Sierra Vista, Arizona
if the amount in dispute is lower than $200,000, and in either case before a
single arbitrator and to commence within 15 days of the appointment of the
arbitrator by the AAA), and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof.
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20. MISCELLANEOUS
20.1. Taxes. Physician shall pay all transfer taxes, sales and
other taxes and charges imposed by the State, if any, which may become payable
in connection with the transactions and documents contemplated hereunder
(excluding any of such taxes which may be attributable to services to be
provided by Vision 21 under the Business Management Agreement). Vision 21 shall
pay all transfer taxes, sales and other taxes and charges imposed by the State
of Florida, if any, which may become payable in connection with the transactions
and documents contemplated hereunder (excluding any of such taxes which may be
attributable to services to be provided by Vision 21 under the Business
Management Agreement).
20.2. Remedies Not Exclusive. No remedy conferred by any of the
specific provisions of this Agreement or any document contemplated by this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
20.3. Parties Bound. Except to the extent otherwise expressly
provided herein, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
20.4. Notices. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Agreement shall be sufficient in all respects if given in writing and
delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to Vision 21 and the Subsidiary addressed to:
Vision 21, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Chief Financial Officer
With copies to:
Xxxxxxxx, Loop & Xxxxxxxx
Post Office Box 172609
000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000-0000
Facsimile No. (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, Esquire
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If to the Company and the Physician addressed to:
Cochise Eye & Laser, P.C.
0000 X. Xxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, M.D.
With copies to:
Sacks Tierney, P.A.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxxx, Esquire
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 20.4. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery or
refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
20.5. Choice of Law. This Agreement shall be construed,
interpreted, and the rights of the parties determined in accordance with, the
laws of the State of Florida except with respect to matters of law concerning
the internal affairs of any corporate or partnership entity which is a party to
or the subject of this Agreement, and as to those matters the law of the state
of incorporation or organization of the respective entity shall govern.
20.6. Entire Agreement; Amendments and Waivers. This Agreement,
together with the documents contemplated by this Agreement and all Exhibits and
Schedules hereto and thereto, constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof. No supplement, modification or waiver of any of the
provisions of this Agreement shall be binding unless it shall be specifically
designated to be a supplement, modification or waiver of this Agreement and
shall be executed in writing by the party to be bound thereby. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
20.7. Confidentiality Agreements. The provisions of any prior
confidentiality agreements and letters of intent between or among Vision 21, the
Company and the Physician, as amended, shall terminate and cease to be of any
force or effect at and upon the Closing.
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20.8. Reformation Clause. It is the intention of the parties
hereto to conform strictly to applicable laws regarding the practice and
regulation of medicine, whether such laws are now or hereafter in effect,
including the laws of the United States of America, the State or any other
applicable jurisdiction, and including any subsequent revisions to, or judicial
interpretations of, those laws, in each case to the extent they are applicable
to this Agreement (the "Applicable Laws"). Accordingly, if the ownership of any
Nonmedical Asset by the Subsidiary violates any Applicable Law, then the parties
hereto agree as follows: (a) the provisions of this section 20.8 shall govern
and control; (b) if none of the parties hereto are materially economically
disadvantaged, then any Nonmedical Asset, the ownership of which violates any
Applicable Law, shall be deemed to have never been owned by the Subsidiary; (c)
if one or more of the parties hereto is materially economically disadvantaged,
then the parties hereto agree to negotiate in good faith such changes to the
structure and terms of the transactions provided for in this Agreement as may be
necessary to make these transactions, as restructured, lawful under applicable
laws and regulations, without materially disadvantaging either party; (d) this
Agreement shall be deemed reformed; and (e) the parties to this Agreement shall
execute and deliver all documents or instruments necessary to effect or evidence
the provisions of this Section 20.8.
20.9. Assignment. The Agreement may not be assigned by operation
of law or otherwise except that Vision 21 and the Subsidiary shall have the
right to assign this Agreement, at any time, to any Affiliate or direct or
indirect wholly-owned subsidiary. In the event of such assignment, Vision 21 and
the Subsidiary shall remain liable hereunder.
20.10. Attorneys' Fees. Except as otherwise specifically provided
herein, if any action or proceeding is brought by any party with respect to this
Agreement or the other documents contemplated with respect to the
interpretation, enforcement or breach hereof, the prevailing party in such
action shall be entitled to an award of all reasonable costs of litigation or
arbitration, including, without limitation, attorneys' fees, to be paid by the
losing party, in such amounts as may be determined by the court having
jurisdiction of such action or proceeding or by the arbitrators deciding such
action or proceeding.
20.11. Further Assurances. From time to time hereafter and without
further consideration, each of the parties hereto shall execute and deliver such
additional or further instruments of conveyance, assignment and transfer and
take such other actions as any of the other parties hereto may reasonably
request in order to more effectively consummate the transactions contemplated
hereunder or as shall be reasonably necessary or appropriate in connection with
the carrying out of the parties' respective obligations hereunder for the
purposes of this Agreement.
20.12. Announcements and Press Releases. Any press releases or any
other public announcements concerning this Agreement or the transactions
contemplated hereunder shall be approved in advance by Vision 21, New P.C. and
the Company; provided, however, that such approval shall not be unreasonably
withheld and if any party reasonably believes that
70
it has a legal obligation to make a press release and the consent of the other
party cannot be obtained, then the release may be made without such approval.
20.13. No Tax Representations. Each party acknowledges that it is
relying solely on its advisors to determine the tax consequences of the
transactions contemplated hereunder and that no representation or warranty has
been made by any party as to the tax consequences of such transactions except as
otherwise specifically set forth in this Agreement.
20.14. No Rights as Stockholder. The Physician shall have no rights
as a stockholder with respect to any shares of Common Stock until the issuance
of a stock certificate evidencing such shares. Except as otherwise provided in
the Agreement, no adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to such date any stock
certificate is issued.
20.15. Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20.16. Headings. The headings of the several articles and sections
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
20.17. Severability. Each article, section and subsection of this
Agreement constitutes a separate and distinct undertaking, covenant or provision
of this Agreement. If any such provision shall finally be determined to be
unlawful, such provision shall be deemed severed from this Agreement, but every
other provision of this Agreement shall remain in full force and effect.
20.18. Form of Transaction. If after the execution hereof, Vision
21 determines that the ownership of the Nonmedical Assets of the Company can be
better achieved through a different form of transaction without economic injury
to the Company or the Physician, or delay of the consummation of the
transaction, the Company and the Physician shall cooperate in revising the
structure of the transaction and shall negotiate in good faith to so amend this
Agreement; provided, that Vision 21 shall reimburse the Company and the
Physician at Closing for all reasonable additional expenses incurred by the
Company and the Physician as a result of such change in form.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
"COMPANY"
COCHISE EYE & LASER, P.C.
By:
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Witness Xxxxxx X. Xxxxxx, M.D., President
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Witness
"PHYSICIAN"
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Witness Xxxxxx X. Xxxxxx, M.D.
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Witness
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Witness Xxxxxxx X. Xxxxxx, M.D.
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Witness
"VISION 21"
VISION TWENTY-ONE, INC.
By:
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Xxxxxxxx X. Xxxxxxxx, President
"SUBSIDIARY'
VISION 21 OF SIERRA VISTA, INC.
By:
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Witness Xxxxxxxx X. Xxxxxxxx, President
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Witness
