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EXHIBIT 4.10
PRUDENTIAL SECURITIES CREDIT CORPORATION
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
As of November 3, 1997
VISION TWENTY-ONE, INC.
0000 Xxxxx Xxxxx Xxxx
Xxxxx, Xxxxxxx 00000
NOTE AND WARRANT PURCHASE AGREEMENT
Gentlemen:
PRUDENTIAL SECURITIES INCORPORATED ("PRUDENTIAL") understands that
VISION TWENTY-ONE, INC., a Florida corporation (the "COMPANY"), has acquired
the business assets of certain optometry clinics, ophthalmology clinics,
optical dispensaries and ambulatory surgical centers (collectively, the
"PRACTICE ACQUISITIONS") for approximately $12,100,000 in aggregate
consideration, consisting of approximately $5,700,000 in cash, 575,328 shares
of the Company's common stock (the "COMMON STOCK"), and promissory notes in
$100,000 aggregate principal amount (excluding any contingent consideration).
It is also Prudential's understanding that the Company has entered into a Stock
Purchase Agreement, dated as of October 31, 1997 (the "ACQUISITION AGREEMENT"),
with BBG-COA, Inc. ("BLOCK") pursuant to which the Company has agreed to
purchase all of the stock of Block for approximately $35,000,000 (the "BLOCK
ACQUISITION"), consisting of approximately $26,400,000 in cash and
approximately 475,397 shares of Common Stock (subject to purchase adjustments
and excluding any contingent consideration). Further, it is Prudential's
understanding that the Practice Acquisitions have closed in escrow and that the
Company expects to consummate the Block Acquisition on or prior to November 30,
1997 (such date on which the Block Acquisition is actually consummated, the
"BLOCK CLOSING DATE").
Prudential further understands that the Company currently expects to
fund the cash portion of the Practice Acquisitions, and other similar
acquisitions, with borrowings under a credit facility provided by certain
financial institutions pursuant to which the Company will have aggregate
borrowing availability of up to $50,000,000 (the "CREDIT FACILITY"). Prudential
has been retained by the Company to act on its behalf in arranging for and
negotiating the terms of the Credit Facility. It is also Prudential's
understanding that the Company currently expects to fund the cash portion of
the Block Acquisition with the net proceeds from the public offering and sale
of approximately 2,800,000 shares of the Common Stock (the "EQUITY OFFERING"),
excluding the underwriter's over-allotment option. Prudential will act as the
lead manager of the Equity Offering.
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The Company and Prudential Securities Credit Corporation ("PRUCREDIT")
have entered into a commitment letter, dated October 10, 1997 the ("BRIDGE
COMMITMENT"), pursuant to which PruCredit has advised the Company that
PruCredit has approved a $37,000,000 senior secured credit facility (this
"BRIDGE CREDIT FACILITY"). The proceeds from this Bridge Credit Facility are to
be used to finance the cash portions of the Practice Acquisitions (as well as
other similar acquisitions) and the Block Acquisition, as set forth below. The
Bridge Commitment was executed and accepted by the Company on October 13, 1997.
1. AGREEMENT FOR PURCHASE AND SALE OF NOTES AND WARRANTS. PruCredit
agrees, on the terms and conditions set forth below, to purchase from the
Company, and the Company agrees to sell to PruCredit certain of the Company's
promissory notes and warrants.
(a) From time to time, during the period from the Closing
Date (as defined in Section 10 below) until the Note Termination Date
(as defined below) one or more senior secured notes of the Company, at
par, in an aggregate principal amount not to exceed at any time
outstanding $36,440,000 (such agreement to purchase such notes, as
modified from time to time pursuant to Section 5 below, being
hereinafter referred to as the "NOTE COMMITMENT") as follows:
(i) one or more senior secured notes in an aggregate
principal amount not to exceed $9,746,485, substantially in
the form of Exhibit A-1 hereto (each a "SERIES A NOTE" and
collectively, the "SERIES A NOTES") to fund the cash portion
of the Practice Acquisitions, as well as other similar
acquisitions; and
(ii) one or more notes in an aggregate principal amount
not to exceed $26,693,515, substantially in the form of
Exhibit A-2 hereto (each a "SERIES B NOTE" and collectively,
the "SERIES B NOTES", and together with the Series A Notes,
the "NOTES") to fund the cash portion of the Block Acquisition
solely in the event that the net proceeds from the Equity
Offering have not been received by the Company on or prior to
November 30, 1997 for any reason other than a breach or
default by the Company or failure by the Company to satisfy
any condition under any of the documents relating to the
Equity Offering, including, without limitation, the purchase
agreement relating to the Equity Offering.
The term "SERIES" shall mean either the Series A Notes or the Series B
Notes, as applicable. As used herein, "NOTE TERMINATION DATE" shall
mean the earliest to occur of (i) May 4, 1998, and (ii) the date of
termination of the Note Commitment pursuant to Section 5 or 15 below
or (iii) the date on which the then outstanding principal of the Notes
has been repaid in accordance with the terms hereof and thereof or
prepaid in accordance with Section 7. From and after the Note
Termination Date, PruCredit shall have no further obligation to
purchase Notes hereunder.
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(b) On the date of execution hereof, for an aggregate
purchase price of $140,000 a certificate evidencing warrants (each a
"COMMITMENT WARRANT") to purchase 50,000 shares of the Common Stock,
evidenced by a warrant certificate in substantially the form of
Exhibit B hereto.
(c) On the date of any purchase by PruCredit of a Note, for a
purchase price equal to $2.80 per warrant, a certificate evidencing
warrants (each, a "FUNDING WARRANT", and together with the Commitment
Warrants, the "WARRANTS") to purchase the number of shares of common
stock of the Company equal to the product of .004054054 and the sum of
the principal amount of such Note and the aggregate purchase price of
Warrants purchased on such date, provided, however, no fractional
shares shall be issued and the number of shares subject to each
Funding Warrant may be rounded up or down but in no event shall exceed
150,000 shares and shall be evidenced by a warrant certificate in
substantially the form of Exhibit B hereto.
2. PROCEDURES FOR PURCHASE OF NOTES. Each Note shall be purchased by
PruCredit on at least two (2) Business Days' (as defined in Section 9 below)
notice from the Company to PruCredit specifying (i) the date (which shall be
the date of purchase of such Note), (ii) the Series, and (iii) the principal
amount thereof (which shall be at least $500,000). Not later than 11:00 A.M.
(New York City time) on the date of such purchase and upon fulfillment of the
applicable conditions set forth in Sections 10 and 11 below, PruCredit will
make the purchase price of such Note available to the Company in same day funds
at such account as the Company shall designate in the notice from the Company
requesting such purchase. Each notice from the Company to PruCredit requesting
the purchase of a Note shall be irrevocable and binding on the Company.
3. COMMITMENT FEE. In consideration of PruCredit's agreements
hereunder, the Company agrees to pay to PruCredit on the date of the Company's
execution and delivery of this Agreement to PruCredit a commitment fee (the
"COMMITMENT FEE") of $370,000.
4. FUNDING FEE. In consideration of PruCredit's agreements hereunder,
the Company agrees to pay to PruCredit on the date of any purchase by PruCredit
of a Note a funding fee (each, a "FUNDING FEE") of 1.00% of the principal
amount of such Note.
5. REDUCTION OF THE NOTE COMMITMENT. The Company shall have the right,
upon at least two (2) Business Days' notice to PruCredit, to terminate in whole
or reduce in part the unused portion of the Note Commitment applicable to
either Series, provided, that each partial reduction shall be in the amount of
not less than $500,000.
6. INTEREST AND REPAYMENT. The Company shall repay, and shall pay
interest on, the aggregate unpaid principal amount of the Notes purchased by
PruCredit hereunder in accordance
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with the terms thereof. Amounts repaid or prepaid (as provided in Section 7)
may not be reborrowed.
7. PREPAYMENTS OF THE NOTES. The Notes must be prepaid by the Company
as specified in Section 7(a) and may, at the Company's option, be prepaid as
specified in Section 7(b).
(a) REQUIRED PREPAYMENTS. The Company shall make the
following prepayments of the Notes:
(i) subject to Section 7(a)(ii), the Company shall
prepay the Notes (or such lesser principal amount as shall
then be outstanding) in the amount of (A) any net proceeds
received by the Company in connection with any direct or
indirect public offering or private placement of the debt or
equity securities of the Company or any affiliate or direct
or indirect subsidiary of the Company (an "OFFERING") by a
financial institution other than Prudential or any of
Prudential's affiliates, or (B) any borrowings under any
credit facility made available to the Company or any
affiliate or indirect or direct subsidiary of the Company by
any financial institution if said credit facility has not
been arranged on behalf of the Company by Prudential or any
of its affiliates, on the date such net proceeds or
borrowings are received by the Company, on a pro rata basis
between the Series A Notes and the Series B Notes, in each
case, at 103.5% of the principal amount so prepaid, plus
accrued and unpaid interest thereon to the prepayment date
with respect to such principal amount; and such principal
amount of the Notes, together with interest thereon to the
prepayment date shall become due on such date;
(ii) notwithstanding anything to the contrary
contained in Section 7(a)(i), the Company shall prepay the
Notes (or such lesser principal amount as shall then be
outstanding) in the amount of (A) any net proceeds received
by the Company in connection with any Offering by Prudential
or any of Prudential's affiliates or (B) any borrowings under
any credit facility (other than this Agreement) arranged on
behalf of the Company or any affiliate or indirect or direct
subsidiary of the Company by Prudential or any of its
affiliates, on the date such net proceeds or borrowings are
received by the Company, on a pro rata basis between the
Series A Notes and the Series B Notes, in each case, at 100%
of the principal amount so prepaid, plus accrued and unpaid
interest thereon to the prepayment date with respect to such
principal amount; and such principal amount of the Notes,
together with interest thereon to the prepayment date shall
become due on such date; and
(iii) other than in the circumstances set forth in
Section 7(a)(i) or 7(a)(ii), in the event of a Change of
Control (as defined below), the Company shall prepay
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the entire outstanding principal of the Notes, at 101% of the
principal amount so prepaid, plus accrued and unpaid interest
thereon to the prepayment date with respect to such principal
amount on the date of such Change of Control; and such
principal amount of the Notes, together with interest thereon
to such prepayment date shall become due on such date.
(b) OPTIONAL PREPAYMENTS. The Company may, upon at least five
(5) Business Days' notice to PruCredit stating the proposed date and
principal amount of the prepayment, and if such notice is given, the
Company shall, prepay the principal of the Notes, in whole or in part,
on a pro rata basis between the Series A Notes and the Series B Notes,
in each case at 100% of the principal amount so prepaid, plus accrued
interest to the date of such prepayment on the amount prepaid,
provided, that each partial prepayment shall be in a principal amount
not less than $500,000.
As used herein, "CHANGE OF CONTROL" means the occurrence of any entity, Person
(as defined below, but specifically excluding Xxxxxxxx X. Xxxxxxxx and any
trust of which Xxxxxxxx X. Xxxxxxxx is the grantor), or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT") which theretofore was beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of less than 20% of the Company's
then outstanding common stock either (x) acquiring shares of common stock of
the Company in a transaction or series of transactions that results in such
entity, Person or group directly or indirectly owning beneficially 20% or more
of the outstanding common stock of the Company, or (y) acquiring, by proxy or
otherwise the right to vote for the election of directors, for any merger,
combination or consolidation of the Company or any of its direct or indirect
subsidiaries, or for any other matter or question, more than 20% of the then
outstanding voting securities of the Company (except where such acquisition is
made by a person or persons appointed by at least a majority of the board of
directors of the Company to act as proxy for any purpose). As used herein,
"PERSON" has the meaning ascribed thereto in Section 14(d) of the Exchange Act.
8. PAYMENTS AND COMPUTATIONS. The Company shall make each payment
hereunder and under the Notes not later than 12:00 noon (New York City time) on
the day when due in U.S. dollars to PruCredit in same day funds in care of Bank
of New York, ABA 000000000, For the Account of Prudential Securities Credit
Corporation, Account Number: GLA 111 569 PPC, or such other address as
PruCredit may from time to time designate in writing to the Company. The
Company hereby authorize PruCredit, if and to the extent payment is not made
when due hereunder or under the Notes, to charge from time to time against any
or all of the Company's accounts with PruCredit any amount so due. All
computations of interest shall be made by PruCredit on the basis of a year of
360 days, for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable.
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9. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment hereunder or
under any Note shall be stated to be due on a day of the year other than on a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest. As used herein, the term "BUSINESS DAY" means any day of
the year on which dealings are carried on in the London interbank market and
banks are open for business in London and are not required or authorized to
close in New York City.
10. CONDITIONS PRECEDENT TO PURCHASES. PruCredit's obligation to
purchase any Note and any related Warrant is subject to the following
conditions:
(a) CONDITIONS PRECEDENT TO INITIAL PURCHASE OF SERIES A
NOTES AND RELATED WARRANTS. PruCredit's obligation to purchase the
initial Series A Note and the related Warrants is subject to the
conditions precedent that PruCredit shall have received on or before
the date of the initial purchase the following, each dated such date
(the "CLOSING DATE"), which must occur no later than November 14,
1997, in form and substance satisfactory to PruCredit:
(i) a Series A Note, in the principal amount purchased,
duly completed (in accordance with the notice delivered by the
Company under Section 2 above) and executed by the Company,
and in form and substance satisfactory to PruCredit;
(ii) the Commitment Warrant, duly executed by the
Company;
(iii) a Funding Warrant, duly executed by the Company;
(iv) payment of the cash component of the Commitment Fee
and the applicable Funding Fee;
(v) separate security agreements, substantially in the
form of Exhibit C hereto (including the security agreements
referred to in Section 10(b)(iv) and Section 10(c)(vi), the
"SECURITY AGREEMENTS", and together with this Agreement, the
Notes and the Warrants, the "LOAN DOCUMENTS"), duly executed
by each of the Company, Vision 21 of Southern Arizona, Inc.
("VISION 21 OF SOUTHERN ARIZONA"), Vision 21 of Sierra Vista,
Inc. ("VISION 21 OF SIERRA VISTA"), Vision Twenty-One Managed
Eye Care IPA, Inc ("MANAGED EYE CARE"), and together with
Vision 21 of Southern Arizona, Vision 21 of Sierra Vista and
the Company, the "LOAN PARTIES");
(vi) appropriately completed and duly executed financing
statements (Form UCC-1) for filing under the Uniform
Commercial Code of all jurisdictions
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as may be necessary in PruCredit's reasonable opinion to
perfect the security interests and liens created by the
Security Agreements;
(vii) certified copies of the resolutions of the
Board of Directors of each Loan Party approving each Loan
Document to which it is, or is to become, a party, and of all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to each Loan
Document to which it is, or is to become, a party;
(viii) a certificate of the Secretary or an
Assistant Secretary of each Loan Party certifying the names
and true signatures of the officers authorized to sign each
Loan Document to which it is, or is to become, a party and
the other documents to be delivered hereunder and thereunder;
(ix) true and complete copies, certified by the
Secretary or Assistant Secretary of each Loan Party, of the
articles of incorporation and by-laws of such Loan Party, as
in effect on the Closing Date;
(x) a favorable opinion or opinions of counsel to
the Loan Parties as to such matters as PruCredit may
reasonably request;
(xi) copies of the balance sheet of the Company and
its consolidated subsidiaries as at June 30, 1997 and the
related statement of income and retained earnings for the
nine-month period then ended, certified in a manner
acceptable to PruCredit;
(xii) a schedule of potential acquisitions of
ophthalmological and optometric practices to be made by the
Company during fiscal year 1997;
(xiii) copies of insurance policies or certificates
of insurance of the Loan Parties evidencing liability and
casualty insurance in full force and effect, in such amounts,
covering such risks and liabilities and with such deductibles
or self-insurance retentions as are in accordance with normal
industry practice and naming PruCredit as named insured and
loss payee thereon; and
(xiv) completion of favorable UCC, tax, judgment and
lien search reports with respect to each Loan Party and each
related ophthalmological or optometric practice in all
necessary or appropriate jurisdictions and under all legal
and appropriate trade names indicating that there are no
prior liens on the Collateral (as defined in each Security
Agreement) other than liens permitted by Section 14(c),
provided, however, that, in PruCredit's sole discretion, the
foregoing condition
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may be waived with respect to the purchase of up to
$3,419,134 aggregate principal amount of Series A Notes.
(b) CONDITIONS PRECEDENT TO SUBSEQUENT PURCHASES OF SERIES A
NOTES AND RELATED FUNDING WARRANTS. PruCredit's obligation to purchase
any Series A Note and the related Funding Warrants after the Closing
Date is subject to the conditions precedent that PruCredit shall have
received on or before the date of the purchase the following, each
dated such date, in form and substance satisfactory to PruCredit:
(i) a Series A Note, in the principal amount purchased,
duly completed (in accordance with the notice delivered by the
Company under Section 2 above) and executed by the Company,
and in form and substance satisfactory to PruCredit;
(ii) a Funding Warrant, duly executed by the
Company;
(iii) payment of the cash component of the
applicable Funding Fee;
(iv) in the event that the proceeds of such Series A
Note are used to purchase a controlling interest in the stock
or ownership interests in any Person or Persons (each, a
"SERIES A LOAN PARTY"):
(A) a Security Agreement, duly executed by
each such Series A Loan Party;
(B) appropriately completed and duly
executed financing statements (Form UCC-1) for
filing under the Uniform Commercial Code of all
jurisdictions as may be necessary in PruCredit's
reasonable opinion to perfect the security interests
and liens created by each such Security Agreement;
(C) completion of favorable UCC, tax,
judgment and lien search reports with respect to
each such Series A Loan Party and each related
ophthalmological or optometric practice in all
necessary or appropriate jurisdictions and under all
legal and appropriate trade names indicating that
there are no prior liens on the Collateral (as
defined in each such Security Agreement) other than
liens permitted by Section 14(c); and
(D) an opinion of counsel (which counsel
and the form and substance of such opinion shall be
reasonably satisfactory to PruCredit) addressed to
PruCredit relating to each such Series A Loan Party
and the enforceability of its obligations under each
such Security Agreement and
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such officer's certificates, financing statements,
lien searches, directors and shareholders
resolutions and other agreements, instruments and
documents as PruCredit may reasonably request. From
and after the date a Series A Loan Party executes a
Security Agreement, such Series A Loan Party shall
be deemed to be a Loan Party hereunder.
(c) CONDITIONS PRECEDENT TO INITIAL PURCHASE OF SERIES B
NOTES AND RELATED FUNDING WARRANTS. PruCredit's obligation to purchase
any Series B Note and the related Funding Warrants is subject to the
conditions set forth in subsection (a) above and the further
conditions precedent that, on or prior to November 30, 1997:
(i) PruCredit shall have received a Series B Note, in
the principal amount purchased, duly completed (in accordance
with the notice delivered by the Company under Section 2
above) and executed by the Company, and in form and substance
satisfactory to PruCredit;
(ii) PruCredit shall have received a Funding Warrant,
duly executed by the Company;
(iii) the Company shall have paid the applicable Funding
Fee;
(iv) the Block Acquisition shall have been consummated;
(v) the net proceeds of the Equity Offering shall not
have been received by the Company on or prior to November
30, 1997 for any reason other than a breach or default by
the Company or failure by the Company to satisfy any
condition under any of the documents relating to the Equity
Offering, including, without limitation, the purchase
agreement relating to the Equity Offering;
(vi) PruCredit shall have received a Security Agreement,
duly executed by Block (the "BLOCK SECURITY AGREEMENT");
(vii) PruCredit shall have received appropriately
completed and duly executed financing statements (Form UCC-1)
for filing under the Uniform Commercial Code of all
jurisdictions as may be necessary in PruCredit's reasonable
opinion to perfect the security interests and liens created by
the Block Security Agreement;
(viii)PruCredit shall have received favorable UCC, tax,
judgment and lien search reports with respect to Block and
each related ophthalmological or optometric practice in all
necessary or appropriate jurisdictions and under all legal
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and appropriate trade names indicating that there are no
prior liens on the Collateral (as defined in the Block
Security Agreement) other than liens permitted by Section
14(c); and
(ix) an opinion of counsel (which counsel and the
form and substance of such opinion shall be reasonably
satisfactory to PruCredit) addressed to PruCredit relating to
Block and the enforceability of its obligations under the
Block Security Agreement and such officer's certificates,
financing statements, lien searches, directors and
shareholders resolutions and other agreements, instruments
and documents as PruCredit may reasonably request. From and
after the date Block executes the Block Security Agreement,
Block shall be deemed to be a Loan Party hereunder.
11. CONDITIONS PRECEDENT TO ALL PURCHASES. PruCredit's obligation to
make each purchase (including the initial purchase) of Notes and Warrants
hereunder shall be subject to the further conditions precedent that on the date
of such purchase:
(a) the following statements shall be true and PruCredit shall have
received a certificate signed by the Company's duly authorized officer,
dated the date of such purchase, stating that:
(i) the representations and warranties contained in
Section 12 hereof and Section 4 of each Security Agreement
are correct on and as of the date of such purchase, before
and after giving effect to such purchase and to the
application of the proceeds therefrom, as though made on and
as of such date, and
(ii) no event has occurred and is continuing, or
would result from such purchase or from the application of
the proceeds therefrom, that constitutes an Event of Default
(as defined in Section 15) or would constitute an Event of
Default but for the requirement that notice be given or time
elapse or both; and
(b) PruCredit shall have received such other approvals, opinions or
documents as PruCredit may reasonably request.
12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. (a) The Company
represents and warrants to PruCredit as follows:
(i) The Company is the 100% owner of the
subsidiaries listed on Schedule 12(a)(i) hereto, and each of
the Company and each of its subsidiaries is duly organized
and validly existing and in good standing under the laws of
the jurisdiction of its incorporation, and each has the
requisite corporate power and
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authority to own and operate its properties and carry on its
business as now conducted.
(ii) The execution, delivery and performance by the
Company of each Loan Document to which the Company is, or is
to become, a party are within its corporate powers, have been
duly authorized by all necessary corporate action, and do not
contravene (A) the articles of incorporation or by-laws of
the Company or (B) law or any contractual restriction binding
on or affecting the Company.
(iii) No authorization or approval or other action
by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due
execution, delivery and performance by the Company of any
Loan Document to which the Company is, or is to become, a
party.
(iv) This Agreement is, and each other Loan Document
to which the Company is to become a party, when delivered
hereunder will be, the legal, valid and binding obligation of
the Company enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(v) The audited balance sheets of the Company and
its consolidated subsidiaries as at December 31, 1997, and
the related statements of income and retained earnings for
the fiscal year then ended and the unaudited balance sheets
of the Company and its consolidated subsidiaries as at June
30, 1997, and the related unaudited statements of income and
retained earnings for the nine-month period then ended,
fairly present (subject, in the case of such unaudited
financial statements to year-end adjustments), the financial
condition of the Company and its consolidated subsidiaries as
at such date and the results of operations of the Company and
its consolidated subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting
principles consistently applied. Except as disclosed in such
balance sheet or statements, neither the Company nor any its
consolidated subsidiaries have on the Closing Date material
liabilities, contingent or otherwise, or material unrealized
or anticipated losses. Since December 31, 1996, there has
been no material adverse change in the financial condition or
operations of the Company or on its ability to perform its
obligations under any Loan Document to which the Company is,
or is to become, a party.
(vi) There is no pending or threatened action or
proceeding affecting the Company before any court,
governmental agency or arbitrator that may materially
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adversely affect the financial condition or operations of the
Company or which could reasonably be expected to affect the
legality, validity or enforceability of any Loan Document to
which the Company is, or is to become, a party.
(vii) No part of the proceeds of the sale of the
Notes will be used, directly or indirectly, for the purpose
of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve
System (12 CFR 207), or for the purpose of buying or carrying
or trading in any securities under such circumstances as to
involve any broker or dealer in a violation of Regulation T
of said Board (12 CFR 220). Margin stock does not constitute
more than 25% of the value of the assets of the Company and
its consolidated subsidiaries.
(viii) The authorized capital stock of the Company
consists of 50,000,000 shares of common stock (the "COMMON
STOCK") and 10,000,000 shares of preferred stock. On the
Closing Date, upon the issuance of the Commitment Warrant and
the Funding Warrant issued on such date pursuant to this
Agreement, and excluding those contingent shares more fully
described on Schedule 12(viii), there will be (A) in the
aggregate 9,187,389 shares of Common Stock outstanding, the
stockholders beneficially owning in excess of 5% of which
being identified on Schedule 12(viii) hereto and no shares of
preferred stock outstanding, and (B) 1,817,292 shares of
Common Stock issuable upon the exercise of options or
warrants, including the Commitment Warrant and the Funding
Warrant issued on the Closing Date, by the parties identified
in Schedule 12(a)(viii) hereto (assuming the maximum number
of shares are issuable under all such warrants). The 200,000
shares of Common Stock issuable upon the exercise of the
Commitment Warrant and the Funding Warrants issued on the
Closing Date have been duly reserved. All outstanding Common
Stock is, and the Common Stock that may be issued upon
exercise of the Commitment Warrants and the Funding Warrants
issued on the Closing Date will be, when so issued, duly
authorized and legally and validly issued, fully-paid and
non-assessable and free and clear of all pledges, liens,
encumbrances, security interests, equities, options, claims,
charges and restrictions, except as provided in such
Warrants, the articles of incorporation and the by-laws of
the Company and except for restrictions imposed by laws
relating to the sale of securities.
(ix) Except (A) those certain warrants issued in
connection with the Amended and Restated Note and Warrant
Purchase Agreement, dated as of June 13, 1997, between the
Company and Prudential, as amended August 15, 1997, (B) those
certain warrants issued in connection with the Company's 10%
Senior Subordinated Notes due December 19, 1999 issued under
the Note Xxxxxxxx
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Agreement, dated December 20, 1996, (C) those certain
warrants issued in connection with the Company's 10% Senior
Subordinated Series 1997 Notes due December 19, 1999 issued
under the Note Purchase Agreement, dated February 27, 1997,
(D) the Commitment Warrants, (E) the Funding Warrants issued
on the Closing Date, (F) the Articles of Incorporation and
the By-Laws, (G) as contemplated by the registration
statement number 333-39031 filed with the Securities and
Exchange Commission in connection with the sale of 2,800,000
shares of Common Stock (excluding the underwriters'
over-allotment option), (H) the issuance of 458,365 shares of
Common Stock and the issuance of 219,633 share of Common
Stock on a contingent basis to the stockholders of Block in
connection with the Block Acquisition, or (I) otherwise set
forth in Schedule 12(a)(viii), there are no outstanding
rights, registration rights, subscriptions, convertible
securities, warrants, calls, puts, unsatisfied preemptive
rights, options, or other agreements of any kind to purchase
or otherwise receive from the Company any securities of the
Company.
(x) All sales of securities by the Company have been
made in compliance with all applicable laws relating to the
sale of securities, and the Company is in compliance with all
such laws except to the extent that any noncompliance could
not reasonably be expected to have a material adverse effect
on the financial condition or operations of the Company or on
its ability to perform its obligations under this Agreement,
the Notes or the Warrants.
(xi) Neither the Company nor anyone acting on its
behalf has offered the Notes or the Warrants for sale to, or
solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any Person
other than PruCredit. Neither the Company nor anyone acting
on its behalf has taken, or will take, any action that would
subject the issuance or sale of the Notes or the Warrants to
the registration requirements of Section 5 of the Securities
Act of 1933, as amended from time to time (the "SECURITIES
ACT"), other than pursuant to the terms of the Warrants.
(xii) The offer and sale of the Notes and Warrants
to PruCredit is, and the issuance of the Common Stock to
PruCredit upon the exercise of the Warrants will be, exempt
from the registration requirements of the Securities Act, and
in compliance with all applicable state securities laws.
(xiii) Neither any certificate nor any other
statement furnished to PruCredit in writing by or on behalf
of the Company in connection with the transactions
contemplated hereby contains any untrue statement of material
fact or omits to state a material fact necessary in order to
make the statements contained
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therein not misleading. There is no fact known to the Company
that materially and adversely affects or in the future may
(so far as the Company can now reasonably foresee) materially
and adversely affect the business, prospects, condition,
affairs or operations of the Company and its subsidiaries,
considered as a whole.
(xiv) Neither the Company nor any of its
subsidiaries is an "investment company" or a company
"controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(xv) As of and from and after the Closing Date, and
after giving effect to the initial purchase of a Note
hereunder, each Loan Party: (A) owns and will own assets the
fair saleable value of which are (x) greater than the total
amount of its liabilities (including contingent liabilities)
and (y) greater than the amount that will be required to pay
its then existing debts as they become absolute and matured
considering all financing alternatives and potential asset
sales reasonably available to it; (B) has capital that is not
unreasonably small in relation to its business as presently
conducted or undertaken transaction; and (C) does not intend
to incur and does not believe that it will incur debts beyond
its ability to pay such debts as they become due.
(xvi) No event has occurred, which has not been
remedied, cured or waived: (A) which constitutes an Event of
Default or with the passage of time, giving of notice, a
determination of materiality, the satisfaction of any
condition, or any combination of the foregoing, would
constitute, an Event of Default; or (B) which constitutes, or
which with the passage of time, the giving of notice, a
determination of materiality, the satisfaction of any
condition, or any combination of the foregoing, would
constitute, a default or event of default by the Company of
any material agreement (other than this Agreement) or
judgment, decree or order to which the Company or by which
the Company or any of its properties may be bound.
(xvii)All federal, state and other tax returns of
the Company required by applicable laws to be filed have been
duly filed (except where valid extension of time for filing
has been obtained), and all federal, state and other taxes,
assessments and other governmental charges or levies upon the
Company and its properties, income, profits and assets which
are due and payable have been paid, other than those
contested in good faith and for which adequate reserves have
been established in accordance with generally accepted
accounting principles consistently applied.
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(b) SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement shall be
deemed to be made at and as of the Closing Date and at and as of the
date of purchasing any Note, except to the extent that such
representations and warranties expressly relate solely to an earlier
date (in which case such representations and warranties shall have
been true and correct in all material respects on and as of such
earlier date) and except for changes in factual circumstances
specifically permitted hereunder.
13. AFFIRMATIVE COVENANTS. So long as any Note shall remain unpaid or
PruCredit shall have any Note Commitment hereunder, the Company will, unless
PruCredit shall otherwise consent in writing:
(a) PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. Subject to
Section 14(e) hereof, preserve and maintain, and cause each other Loan
Party to preserve and maintain, its respective existence, rights,
franchises, licenses and privileges in the jurisdiction of its
formation and qualify and remain qualified and authorized to do
business in each jurisdiction in which the character of its properties
or the nature of its business requires such qualification or
authorization.
(b) COMPLIANCE WITH LAWS. Comply, and cause each of the
Company's subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent
all taxes, assessments and governmental charges imposed upon the
Company or any such subsidiary or upon the Company's or any such
subsidiary's property except to the extent contested in good faith by
appropriate proceedings and except to the extent that any
noncompliance could not reasonably be expected to have a material
adverse effect on the financial condition or operations of the Company
or any such subsidiary or on the Company's or any such subsidiary's
ability to perform its obligations under any Loan Document to which it
is, or is to become, a party.
(c) GOVERNMENTAL APPROVALS. Obtain and maintain, and cause
each of the Company's subsidiaries to obtain and maintain, in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary for the ownership of the Company's and their
respective properties and for the conduct of the Company's and their
respective businesses, in each case to the extent necessary to ensure
that any noncompliance could not reasonably be expected to have a
material adverse effect on the financial condition or operations of
the Company or on its ability to perform its obligations under any
Loan Document to which it is, or is to become, a party.
(d) INSURANCE. Maintain, and cause each of the Company's
subsidiaries to maintain, with financially sound and reputable
insurers, insurance, naming PruCredit as
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named insured and loss payee, with respect to the Company's and their
respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in the same or a
similar business and similarly situated.
(e) PAYMENT OF OBLIGATIONS. The Company, and each of its
subsidiaries shall, pay and discharge or otherwise satisfy at or
before maturity all their material obligations and liabilities,
including, without limitation, trade payables or tax liabilities,
except where the same may be contested in good faith by appropriate
proceedings and appropriate reserves for the accrual of the same shall
have been provided in accordance with GAAP and where nonfulfillment
could not reasonably be expected to have a material adverse effect and
would not subject any of their property to any Lien not permitted by
Section 14(c).
(f) USE OF PROCEEDS. Use the proceeds of each Series A Note
solely (i) to fund the cash portion of the Practice Acquisitions or
similar acquisitions of ophthalmological and optometric practices and
(ii) for the payment of professional fees (including advisory, legal,
accounting and appraisal fees) relating to such acquisitions,
provided, that solely in connection with a Series A Note purchased on
the date of any purchase of a Series B Note in accordance with the
terms hereof, the Company may use the proceeds of such Series A Note
to repay up to $6,000,000 existing indebtedness of Block and/or any of
its subsidiaries to NationsBank, N.A. Use the proceeds of each Series
B Note solely (x) to fund the cash portion of the Block Acquisition if
the net proceeds from the Equity Offering have not been received by
the Company on or prior to November 30, 1997 for any reason other than
a breach or default by the Company or failure by the Company to
satisfy any condition under any of the documents relating to the
Equity Offering, including, without limitation the purchase agreement
relating to the Equity Offering and (y) for the payment of
professional fees (including advisory, legal, accounting and appraisal
fees) relating to the Block Acquisition.
(g) PERMANENT FINANCING. (i) The Company will take all
actions which, in the reasonable judgment of Prudential, in
consultation with the Company, are necessary or desirable to obtain
permanent financing in an amount sufficient to redeem all the Notes as
soon as is reasonably practicable through the issuance of (A) debt
securities ("ISSUED DEBT") at such interest rates and terms as are, in
the opinion of Prudential, in consultation with the Company,
prevailing for new issues of securities of comparable size and credit
rating in the United States capital markets at the time such permanent
financing is consummated and obtained in comparable transactions made
on an arm's-length basis between unaffiliated parties, and/or (B)
through the issuance of Common Stock at such
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prices and terms as are, in the opinion of Prudential, in consultation
with the Company, prevailing for issues of equity by companies in
similar lines of business, of comparable size and at the time of such
issue. The terms of such Issued Debt shall provide for the issuance of
equity securities (which may include warrants to purchase such equity
securities), whether as part of a unit or separately, as is needed to
facilitate the issuance of Issued Debt. The Company shall issue and
make available to Prudential such equity securities for the foregoing
purpose in such amounts as Prudential shall reasonably determine in
consultation with the Company. The respective amounts to be financed
through Issued Debt, Common Stock or through the issuance of other
securities shall be as determined by the Company, but shall be in an
amount at least sufficient to repay or redeem the Notes in full in
accordance with their terms. The Company hereby covenants and agrees
that the net proceeds from any such permanent financing shall be used
to the extent required to repay in full the Notes in accordance with
their terms.
(ii) The Company shall enter into such agreements
as, in the reasonable judgment of Prudential, in consultation
with the Company, are customary in connection with any such
permanent financing, make such filings under the Act, the
Exchange Act, the Trust Indenture Act of 1939, as amended,
the state securities laws as, in the reasonable judgment of
Prudential, in consultation with the Company, shall be
required to permit consummation of such permanent financing
and take such steps as, in the reasonable judgment of
Prudential, in consultation with the Company, are necessary
to cause such filings to become effective or, in the
reasonable judgment of Prudential, in consultation with the
Company, are otherwise required to consummate such permanent
financing.
(h) CONDUCT OF BUSINESS. At all times carry on, and cause
each other Loan Party to carry on, its business in the same or
complimentary line of business as engaged in on the date hereof. The
Company will not, and will not permit any other Loan Party to, engage
to any substantial extent in any business other than the businesses in
which the Company and such Loan Party are engaged on the date of this
Agreement and businesses reasonably related or complimentary thereto
or in furtherance thereof.
(i) MAINTENANCE OF MATERIAL CONTRACTS. Shall comply, and
shall cause the Company's subsidiaries to comply, with its obligations
under each material contract to which the Company, or any subsidiary
of the Company is a party. The Company will not, and will not permit
its subsidiaries to, amend, supplement or modify any such material
contract in a manner which is adverse to the Company or such
subsidiary, as the case may be. The Company will not, and will not
permit its subsidiaries to, terminate or allow to lapse without
further action (including the failure to timely submit a competitive
bid relating to a managed care contract the renewal of which is by its
terms then subject to a
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competitive bid procedure) any material contract, the termination or
lapse of which would be adverse to the Company or such subsidiary, as
the case may be.
(j) REPORTING REQUIREMENTS. Furnish to PruCredit: (i) as soon
as possible and in any event within three days after the occurrence of
an Event of Default or within five Business Days after the occurrence
of an event, which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, the statement of the
Company's chief financial officer setting forth the details of such
Event of Default or such other event and the action which the Company
proposes to take with respect thereto; (ii) as soon as available and
in any event within 45 days after the end of each fiscal quarter
(other than the fiscal quarter ending December 31, 1997), the
Company's balance sheet as of the end of such quarter and a statement
of the Company's income and retained earnings for the period
commencing at the end of the previous fiscal year and ending with the
end of such quarter, certified by the Company's chief financial
officer; (iii) as soon as available and in any event within 90 days
after the end of the fiscal year ending December 31, 1997, a copy of
the Company's annual report for such year, containing financial
statements for such year certified in a manner reasonably acceptable
to PruCredit by independent public accountants reasonably acceptable
to PruCredit; (iv) as soon as available and in any event within 30
days after the end of each calendar month, a certificate of the
Company's chief financial officer as to (A) the Company's compliance
with the covenant set forth in Section 14(a) hereof, including a
reasonably detailed calculation of such compliance and (B) a
reasonably detailed calculation of EBITDA for the month most recently
ended; (v) as soon as available and in any event within 45 days after
the end of each fiscal quarter of each of the Company's fiscal years,
a certificate of the Company's chief financial officer as to the
Company's compliance with the covenant set forth in Section 14(b)
hereof, including a reasonably detailed calculation of such
compliance; and (vi) such other information respecting the Company's
condition or operations, financial or otherwise, as PruCredit may from
time to time reasonably request.
(k) INSPECTION OF PROPERTY, BOOKS AND RECORDS. Each of the
Company and each of its subsidiaries shall keep proper books of record
and account in which full, true and correct entries shall be made of
all material dealings and transactions in relation to its business and
activities, and shall permit representatives of PruCredit, at the
expense (which expenses shall have been reasonably incurred) of the
Company and upon reasonable notice to the Company to visit and inspect
any of their properties, to examine and make abstracts from any of
their books and records and to discuss their affairs, finances and
accounts with their executive officers and independent public
accountants, all at such reasonable times and as often as may
reasonably be desired.
(l) ADDITIONAL COLLATERAL. Within ten (10) days of the date
of the acquisition of any Person, other with the cash proceeds of any
Note, of a controlling interest in the
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stock or ownership interests in any Person (such Person, an
"ADDITIONAL LOAN PARTY"), cause such Additional Loan Party to (i)
execute and deliver in favor of PruCredit a Security Agreement, in
substantially the form attached hereto as Exhibit C, (ii) deliver in
connection with such Security Agreement an opinion of counsel (which
counsel and the form and substance of such opinion shall be reasonably
satisfactory to PruCredit) addressed to PruCredit relating to such
Additional Loan Party and the enforceability of its obligations under
such Security Agreement, and (iii) deliver to PruCredit such officer's
certificates, financing statements, lien searches, directors and
shareholders resolutions and other agreements, instruments and
documents as PruCredit may reasonably request. From and after the date
an Additional Loan Party executes a Security Agreement, such
Additional Loan Party shall be deemed to be a Loan Party hereunder.
14. NEGATIVE COVENANTS. So long as any Note shall remain unpaid or
PruCredit shall have any Note Commitment hereunder, the Company will not,
without PruCredit's written consent:
(a) SENIOR DEBT TO CAPITAL FUNDS RATIO. Permit as at the end
of each calendar month a ratio of Senior Debt to Capital Funds to
exceed 2.00 to 1.00. As used herein, "DEBT" shall be determined in
accordance with generally accepted accounting principles, consistent
with those applied in the preparation of the financial statements
described in Section 12(a)(v) hereof ("GAAP"). The term "SENIOR DEBT"
shall mean Debt of the Company and its subsidiaries which is not
expressly subordinated by written agreement to the Notes. The term
"SUBORDINATED DEBT" shall mean all Debt of the Company and its
subsidiaries that has been expressly subordinated by written agreement
to the Notes, in form and substance acceptable to PruCredit. The term
"CAPITAL FUNDS" shall mean Net Worth plus Subordinated Debt. The term
"NET WORTH" shall mean the Company's consolidated stockholders' equity
as determined in accordance with GAAP, less the receivables from and
loans to employees of the Company.
(b) EBITDA TO INTEREST CHARGES RATIO. Permit as at the end of
each fiscal quarter a ratio of EBITDA to Interest Charges to be less
than the number set forth below next to the applicable fiscal quarter
ending date:
December 31, 1997 1.50 to 1.00
March 31, 1998 2.00 to 1.00
As used herein, the term "EBITDA" shall mean, for any period, net
income of the Company and its subsidiaries (determined in accordance
with GAAP) for such period plus all amounts deducted in the
computation thereof on account of Interest Charges, taxes,
depreciation and amortization allowances and other non-cash expenses
for such period. The term "INTEREST CHARGES" shall mean, for any
period, the sum (without duplication)
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of the following (in each case, eliminating all offsetting debits and
credit between the Company and its subsidiaries and all other items
required to be eliminated in the course of the preparation of the
consolidated financial statements of the Company and its subsidiaries
in accordance with GAAP): (i) all interest in respect of Debt of the
Company and its subsidiaries deducted in determining net income of the
Company for such period and (ii) all debt discount and expense
amortized or required to be amortized in the determination of net
income of the Company and its subsidiaries for such period.
(c) LIENS. Create or suffer to exist, or cause or permit any
of the Company's subsidiaries to create or suffer to exist, any lien,
security interest or other charge or encumbrance, or any other type of
preferential arrangement, upon or with respect to any of the Company's
or such subsidiary's properties or assets, whether now owned or
hereafter acquired, or assign any right to receive revenues or income,
in each case to secure any Debt of any Person or entity, other than
(i) purchase money liens or purchase money security interests upon or
in any property acquired or held by the Company or such subsidiary in
the ordinary course of business to secure the purchase price of such
property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property, (ii) liens or security
interests existing on such property at the time of its acquisition
(other than any such lien or security interest created in
contemplation of such acquisition), or (iii) liens securing the
indebtedness hereunder.
(d) SENIOR DEBT. Create or suffer to exist (i) any Debt that
ranks senior to the Debt evidenced by the Notes or, (ii) any Debt that
ranks pari passu (on a secured or unsecured basis) with the Debt
evidenced by the Notes, other than (x) Debt the proceeds of which are
subject to the provisions of Section 7(a) hereof and (y) from and
after the purchase of any Series B Note, standby letter of credit
reimbursement obligations of Block and/of any of its subsidiaries in
an aggregate amount not to exceed $3,000,000.
(e) CONSOLIDATIONS AND MERGERS. Merge or consolidate, or
cause or permit any of the Company's subsidiaries to merge or
consolidate, with or into, or convey, transfer, lease or otherwise
dispose of, or cause or permit any of the Company's subsidiaries to
convey, transfer, lease or otherwise dispose of, (whether in one
transaction or in a series of transactions) all or substantially all
of the Company's or such subsidiary's assets (whether now owned or
hereafter acquired) to any Person or entity, except that the Company
and/or any wholly-owned subsidiary of the Company may merge with any
wholly-owned subsidiary of the Company, provided that, immediately
after giving effect to such proposed transaction, no Event of Default
or event which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default would exist and, in the case of
any merger involving the Company, the Company is the surviving
corporation.
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(f) CERTAIN AMENDMENTS. Amend or modify the articles of
incorporation or the by-laws of the Company so as to materially impair
any of the Company's rights under any Loan Document.
(g) INVESTMENTS. Make or purchase any Investment or, after
such date, permit any Investment to be outstanding other than (i)
Investments described on Schedule 14(g); (ii) Investments permitted
for the use of proceeds pursuant to Section 13(e); (iii) Investments
in existence as of the date hereof; or (iv) Investments made in the
ordinary course of business as conducted by the Company on the Closing
Date and not in excess of $250,000, individually or $500,000 in the
aggregate for any calendar year. As used herein, "INVESTMENT" means
the acquisition of any interest in any Person or property, a loan or
advance to any Person or other arrangement for the purpose of
providing funds or credit to any Person, a capital contribution in or
to any Person, or any other investment in any Person or property.
(h) DIVIDEND LIMITATION. (i) Pay or declare any cash dividend
on any class of its stock or make any other distribution on account of
any class of its stock; or (ii) redeem, purchase or otherwise acquire,
directly or indirectly, any shares of its stock; except for:
(A) dividends payable in common stock;
(B) any subsidiary of the Company may pay dividends
or any other such distribution to the Company;
(C) the Company may repurchase shares of common
stock and/or options to purchase such common stock held by
directors, executive officers, members of management or
employees of the Company or any of its subsidiaries upon the
death, disability, retirement or termination of employment of
such directors, executive officers, members of management or
employees so long as (x) no Event of Default, or event that
with the passing of time, giving of notice then exists or
would result in an Event of Default, would result therefrom
and (y) the aggregate amount of cash expended by the Borrower
pursuant to this clause (C) does not exceed $500,000 in any
fiscal year of the Borrower; and
(D) the Company may repurchase shares of its common
stock and/or options to purchase such common shares held by
any Person so long as (x) no Event of Default then exists, or
event exists which, with the giving of notice or lapse of
time, or both, would result in an Event of Default, or no
Event of Default or event exists which, with the giving of
notice or lapse of time, or both, would result in an Event of
Default, would result therefrom and (y) the aggregate amount
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of cash expended by the Borrower pursuant to this clause (D)
does not exceed $500,000 in any fiscal year of the Borrower.
The term "STOCK" as used in this Section 14(h) shall include
warrants or options to purchase stock and any preferred stock.
(i) TRANSACTIONS WITH AFFILIATES. Except as specified on
Schedule 14(i) hereto, enter into any transaction or series of related
transactions, whether or not in the ordinary course of business, with
any Affiliate (as defined below) of the Borrower, other than on terms
and conditions substantially as favorable to the Borrower as would be
obtainable by the Borrower at the time in a comparable arm's length
transaction with a Person not an Affiliate ("UNAFFILIATED
TRANSACTION") other than any transaction or series of transactions
with respect to assets or services of the Borrower or its Subsidiaries
having a value in an Unaffiliated Transaction equal to or less than
$250,000 individually or $500,000 in the aggregate. As used herein,
"AFFILIATE" means, with respect to any Person, any entity which
directly or indirectly controls, is controlled by, or is under common
control with, such Person or any subsidiary of such Person or any
Person who is a director, officer or partner of such Person or any
subsidiary of such Person and, with respect to each Loan Party, shall
include all other Loan Parties. For purposes hereof, "CONTROL" shall
mean the possession, directly or indirectly, of the power to (a) vote
ten percent (10%) or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or
cause the direction of management and policies of a business, whether
through the ownership of voting securities, by contract or otherwise
and either alone or in conjunction with others or any group.
(j) SALE LEASEBACKS. The Company will not, nor will it permit
any of its subsidiaries to, directly or indirectly, become or remain
liable as lessee or as guarantor or other surety with respect to any
lease of any property (whether real or personal or mixed), whether now
owned or hereafter acquired, (i) which such Person has sold or
transferred or is to sell or transfer to any other Person other than a
Loan Party or (ii) which such Person intends to use for substantially
the same purpose as any other property which has been sold or is to be
sold or transferred by such Person to any other Person in connection
with such lease.
15. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur and be continuing:
(a) The Company shall fail to pay any principal of any Note
when due, or the Company shall fail to pay any interest on any Note or
any other amount payable hereunder within three days of the date when
the same becomes due and payable; or
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(b) Any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) Any Loan Party shall fail to perform or observe (i) any
term, covenant or agreement contained in Sections 13(a), (g), (j) and
(l) and Section 14 or (ii) any other term, covenant or agreement
contained in any Loan Document, in each case, on its part to be
performed or observed if such failure shall remain unremedied for 10
days after written notice thereof shall have been given to the Company
by PruCredit; or
(d) Any Loan Party shall fail to pay any principal of or
premium or interest on any Debt that is outstanding in an aggregate
principal amount of at least $250,000 (but excluding Debt evidenced by
the Notes) when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any agreement
or instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate,
or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof; or
(e) Any Loan Party or any corporate Affiliate of any Loan
Party shall generally not pay its debts as such debts become due, or
shall admit in writing its inability to pay debts generally, or shall
make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against any Loan Party or any
Affiliate of any Loan Party seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of
an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or shall take any
corporate action to authorize any of the actions set forth above in
this subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $250,000 shall be rendered against any Loan Party and either (i)
enforcement proceedings shall have
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been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 10 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(g) Any provision of any Loan Document after delivery thereof
shall for any reason cease to be valid and binding on any Loan Party
that is a party thereto, or any Loan Party shall so state in writing;
or
(h) Any material adverse change shall occur in the financial
condition or operations of the Company and its consolidated
subsidiaries or on the ability of the Company to perform its
obligations under any Loan Document to which it is, or is to become, a
party; or
(i) Any Security Agreement shall for any reason, except to
the extent permitted by the terms hereof and thereof, cease to create
a valid and perfected first priority security interest (to the extent
purported to be granted by such Security Agreement) in all or any
portion of the Collateral (as defined in the Security Agreements); or
(j) (i) Any Termination Event with respect to a Plan shall
occur; (ii) any Plan shall incur an "accumulated funding deficiency"
(as defined in Section 412 of the Internal Revenue Code of 1986, as
amended (the "CODE") or Section 302 of ERISA) for which a waiver has
not been obtained in accordance with the applicable provisions of the
Code and ERISA; or (iii) the Company is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a
"Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA)
resulting from the Company's complete or partial withdrawal (as
described in Section 4203 or 4205 of ERISA) from such Multiemployer
Plan. As used herein: "ERISA" means the Employee Retirement Income
Security Act of 1974, as in effect from time to time; "PLAN" means an
employee benefit plan maintained for employees of the Company or any
of its subsidiaries that is covered by Title IV of ERISA, including
such plans as may be established after the Closing Date; "REPORTABLE
EVENT" has the meaning set forth in Section 4043(b) of ERISA, but
shall not include a Reportable Event as to which the provision for 30
days' notice to the Pension Benefit Guaranty Corporation (or any
successor agency, the "PBGC") is waived under applicable regulations;
"TERMINATION EVENT" means (a) a Reportable Event; (b) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA or (c) the
institution of proceedings to terminate a Plan by the PBGC under
Section 4042 of ERISA, or the appointment of a trustee to administer
any Plan;
then, and in any such event, PruCredit may, by notice to the Company, (i)
declare PruCredit's obligation to purchase the Notes to be terminated,
whereupon the same shall forthwith terminate; (ii) declare the Notes, all
interest thereon and all other amounts payable under this Agreement to
25
25
be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by the Company; and (iii) exercise in respect of the
Collateral, in addition to the other rights and remedies provided for herein
and in the Security Agreements, all the rights and remedies of a secured party
on default under the Uniform Commercial Code in effect from time to time in the
State of New York and in effect in any other jurisdiction in which the
Collateral is located at that time; provided, however, that in the event of an
actual or deemed entry of an order for relief with respect to the Company under
the Federal Bankruptcy Code, (A) PruCredit's obligation to purchase the Notes
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company.
16. REPRESENTATIONS AND WARRANTIES OF PRUDENTIAL SECURITIES CREDIT
CORPORATION. PruCredit represents and warrants that:
(a) PruCredit is acquiring the Notes and receiving as
consideration of PruCredit's agreements hereunder the Warrants and the
shares of the Common Stock issuable upon exchange of the Warrants
(collectively, the "SECURITIES") for the purpose of investment for
PruCredit's own account and not with a view to or for sale in
connection with any distribution thereof, provided, that the
disposition of PruCredit's property shall at all times be and remain
within PruCredit's control. PruCredit understands that the Securities
have not been registered under the Act, and may be resold only if
registered pursuant to the provisions of the Securities Act and any
applicable state "blue sky" laws or if an exemption from such
registration is available, and PruCredit will not distribute any of
the Securities in violation of the Act and such state "blue sky laws."
(b) The address set forth in Section 18 hereof is PruCredit's
principal business address.
(c) PruCredit (i) acknowledges that the Securities to be
issued to PruCredit at the Closing must be held indefinitely by
PruCredit unless such Securities are subsequently registered under the
Act or an exemption from registration is available, and (ii) is aware
that any routine sales of Securities made pursuant to Rule 144 under
the 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 or
exemption will be required.
(d) PruCredit has knowledge and experience in financial and
business matters such that PruCredit is capable of evaluating the
merits and risks of the Securities to be
26
26
acquired by PruCredit upon consummation of the transactions described
in this Agreement and can afford a complete loss of PruCredit's
investment in the Securities.
(e) PruCredit has had the opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions
of PruCredit's investment in the Securities, and PruCredit has
received, to PruCredit's satisfaction, information about the Company's
operations and the terms and conditions of PruCredit's investment in
the Securities as PruCredit has requested.
(f) PruCredit acknowledges and agrees that each of the
Securities issued by the Company or issued as a result of any
subsequent transfer thereof, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"The securities represented hereby have not been registered
under the Securities Act of 1933 or applicable state "blue
sky" laws. Such securities may not be sold or transferred in
the absence of such registration or an opinion of counsel
that an exemption therefrom under said Act and applicable
state "blue sky" laws is available. Any transfer of such
securities in violation of the foregoing shall be invalid."
PruCredit further acknowledges and agrees that appropriate
"stop-transfer" instructions will be given to the Company's transfer
agent, if any, in the event of any attempted transfer in violation of
such restriction.
(g) PruCredit is an "accredited investor" within the meaning
of Securities and Exchange Commission Rule 501 of Regulation D, as
presently in effect.
17. AMENDMENTS. No amendment or waiver of any provision of this
Agreement or the Notes, nor consent to any departure by the Company therefrom,
shall in any event be effective unless the same shall be in writing and signed
by PruCredit, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
18. NOTICES. All notices and other communications provided for
hereunder shall be in writing (including telecopier communication) and mailed,
telecopied or delivered, if to the Company, at the Company's address at 0000
Xxxxx Xxxxx Xxxx, Xxxxx, Xxxxxxx 00000, Attention: Xxxxxxx X. Xxxxx (fax
000-000-0000); and if to PruCredit, Xxx Xxx Xxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxx (fax 000-000-0000) with copies to
Prudential Securities Incorporated, Xxx Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxx X. Xxxxxx, III and Xxxxx X. Xxxxxxx-Xxxxxxxx (fax
000-000-0000); or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party.
27
27
All such notices and communications shall, when mailed or telecopied, be
effective when deposited in the mails or telecopied, respectively.
19. NO WAIVER; REMEDIES; BENEFITS. No failure by either party to
exercise, and no delay in exercising, any right hereunder or under any Note or
the Warrants shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder or under any Note preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law. All
Notes at any time outstanding shall be equally and ratably entitled to the
benefits of this Agreement, without priority, preference or distinction on
account of the date or dates of issue thereof.
20. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in Section 12(a)(v).
21. COSTS AND EXPENSES. The Company agrees to pay on demand all
reasonable costs and expenses in connection with the preparation, execution,
delivery, filing, recording, administration, modification and amendment of this
Agreement, the other Loan Documents and the other documents to be delivered
hereunder and thereunder, including, without limitation, the reasonable fees
and out-of-pocket expenses of PruCredit's counsel with respect thereto and with
respect to advising PruCredit as to PruCredit's rights and responsibilities
under this Agreement. The Company further agrees to pay on demand all costs and
expenses, if any (including counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the other Loan Documents and the other documents to be
delivered hereunder and thereunder, including, without limitation, counsel fees
and expenses in connection with the enforcement of rights under this Section
21. In addition, the Company shall pay any and all stamp and other taxes
payable or determined to be payable in connection with the execution and
delivery of this Agreement, the other Loan Documents and the other documents to
be delivered hereunder and thereunder, and agree to save PruCredit harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
22. BINDING EFFECT; ENTIRE AGREEMENT. This Agreement shall be binding
upon and inure to the benefit of the Company and PruCredit and the Company's
and PruCredit's respective successors and assigns, except that the Company
shall not have the right to assign the Company's rights hereunder or any
interest herein without PruCredit's prior written consent. This Agreement may
be executed in separate counterparts, each of which shall be an original, with
the same effect as if the signatures were upon the same instrument. This
Agreement and the other Loan Documents constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersede any prior agreements, written or oral, with respect thereto.
28
28
23. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN SUCH STATE.
24. WAIVER OF TRIAL BY JURY. THE PARTIES HERETO ACKNOWLEDGE THAT ANY
DISPUTE ARISING OUT OF THIS AGREEMENT OR THE NOTES WILL BE BASED ON DIFFICULT
AND COMPLEX FACTS. ACCORDINGLY, EACH OF THE PARTIES HERETO HEREBY WAIVES ITS
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, CONTROVERSY, SUIT, HEARING OR OTHER
PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE NOTES OR THE OBLIGATIONS,
DUTIES AND RIGHTS OF THE COMPANY OR OF THE HOLDER OF ANY NOTE AS SET FORTH
HEREIN OR IN THE NOTES.
29
29
If the terms of this Agreement are satisfactory to the Company, please
indicate the Company's agreement and acceptance thereof by executing a
counterpart of this Agreement and returning it to PruCredit.
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By /s/
----------------------------------------
Name:
Title:
Agreed and Accepted:
VISION TWENTY-ONE, INC.
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Financial Officer
30
EXHIBIT A-1
FORM OF
SERIES A PROMISSORY NOTE
The securities represented hereby have not been registered under the
Securities Act of 1933 or applicable state "blue sky" laws. Such
securities may not be sold or transferred in the absence of such
registration or an opinion of counsel that an exemption therefrom
under said Act and applicable state "blue sky" laws is available. Any
transfer of such securities in violation of the foregoing shall be
invalid.
$_______________ Dated: _________, 19__
FOR VALUE RECEIVED, the undersigned, VISION TWENTY-ONE, INC., a
Florida corporation (the "COMPANY"), HEREBY PROMISES TO PAY to the order of
PRUDENTIAL SECURITIES CREDIT CORPORATION (the "PURCHASER") the principal sum of
[AMOUNT IN WORDS] (U.S.$______________) or, if less, the aggregate principal
amount of this Note outstanding on the Note Termination Date (as defined in the
Purchase Agreement referred to below) together with interest on the unpaid
principal amount hereof and all other sums then due and payable to the
Purchaser under this Note, subject to the terms and conditions of this Note.
This Note is one of the Series A Notes issued pursuant to and entitled
to the benefits of the Note Purchase Agreement, dated as of November 3, 1997
(as from time to time amended, the "PURCHASE AGREEMENT"; capitalized terms used
but not defined herein having the meanings therein assigned), between the
Purchaser and the Company. The Company will make required prepayments of
principal on the dates and in the amounts specified in the Purchase Agreement.
This Note is also subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Purchase Agreement, but
not otherwise. If an Event of Default occurs and is continuing, the principal
of this Note may be declared or otherwise become due and payable in the manner,
at the price and with the effect provided in the Purchase Agreement.
The Company promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full,
payable in arrears on the last day of each Interest Period (as hereinafter
defined) during the term hereof (each, a "PAYMENT DATE"), at an interest rate
per annum (the "INTEREST RATE") equal at all times during each Interest Period
to the
31
2
sum of (i) the LIBOR Rate (as hereinafter defined) plus (ii) four percent (4%),
provided, however, that from and after the date ninety (90) days following the
Closing Date, the Interest Rate shall be equal at all times to the sum of (i)
the LIBOR Rate plus (iii) four and one-half percent (4.50%).
The "LIBOR RATE" for each Interest Period shall mean the London
interbank offered rate for United States of America Dollar deposits for a
period equal in length to such Interest Period that appears as of 11:00 A.M.
(London time) on the second Business Day (as hereinafter defined) next
preceding the first day of such Interest Period on the display page designated
as Page 3750 on the Telerate Monitor (or such other page or service as shall
replace the Telerate Monitor for the purposes of displaying the London
interbank offered rate for United States of America Dollar deposits). If (i) on
the date on which the Purchaser shall seek to determine the LIBOR Rate for an
Interest Period, no quotation is given on Telerate Monitor page 3750, or (ii)
the Company shall have failed to give the Purchaser at least two Business Days'
prior written notice to request the advance of funds hereunder, the LIBOR Rate
shall be equal to the Purchaser's cost of funds for United States Dollar
deposits for a period comparable to such Interest Period on the date of
determination for amounts approximately equal to the then-outstanding principal
balance of the Note.
The period between the date hereof and the date of payment in full of
the principal amount hereof shall be divided into successive periods of three
calendar months (each, an "INTEREST PERIOD"), with each such Interest Period
ending on the last day of a calendar month, except that the initial Interest
Period shall begin on the date hereof and end on [LAST CALENDAR DAY OF MONTH IN
WHICH NOTE IS DATED]. Each subsequent Interest Period shall begin on the last
day of the preceding Interest Period; provided, that, (i) any Interest Period
that would otherwise end on a day that is not a Business Day shall, subject to
clauses (ii) and (iii) below, be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day; (ii) any Interest
Period that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to clause (iii), end on the
last Business Day of a calendar month; and (iii) any Interest Period that would
otherwise end after the Note Termination Date shall end on the Note Termination
Date.
Payments and computations shall be made as follows:
(a) The Company shall make each payment of principal and
interest hereunder in same day funds not later than 12:00 noon (New
York City time) on the date when due in U.S. Dollars to the Purchaser
in care of Bank of New York, ABA 000000000, For the Account of
Prudential Securities Credit Corporation, Account Number: GLA 111 569
PPC (or such other address as the Purchaser may from time to time
designate to the Company in writing), in same day funds. All payments
of principal hereunder shall be recorded by
32
3
the Purchaser and, prior to the transfer hereof, endorsed on the grid
attached hereto which is part of this Note.
(b) The Company hereby authorizes the Purchaser, if and to
the extent payment is not made when due hereunder, to charge from time
to time against any or all of the Company's accounts with the
Purchaser any amount so due.
(c) All computations of interest shall be made by the
Purchaser on the basis of the actual number of days elapsed over a
year of 360 days (including the first day but excluding the last day)
occurring in the applicable Interest Period for which such interest is
payable.
The Company hereby agrees that the Purchaser shall be entitled to
receive and the Company shall pay interest on any overdue principal or any
other amounts under this Note due at a rate (the "DEFAULT RATE") equal to the
lesser of (i) the maximum rate permitted by applicable law, and (ii) two
percent (2%) above the otherwise applicable Interest Rate.
If, due to either (i) the introduction of or any change (including,
without limitation, any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation or (ii) the
compliance by the Purchaser with any guideline or request from any central bank
or other governmental authority (whether or not having the force of law), there
shall be any increase in the cost to the Purchaser of funding or maintaining
this Note, then the Company shall from time to time, upon demand by the
Purchaser, pay to the Purchaser additional amounts sufficient to indemnify the
Purchaser against such increased cost. A certificate as to the amount of such
increased cost, submitted to the Company by the Purchaser, shall be conclusive
and binding for all purposes, absent manifest error.
The Company shall pay to the Purchaser, if and for so long as the
Purchaser shall be required under regulations of the Board of Governors of the
Federal Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (as such term is
defined in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time), additional interest on the unpaid
principal amount hereof, from the date hereof until such principal amount is
paid in full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the LIBOR Rate for an Interest Period from (ii) the
rate obtained by dividing such LIBOR Rate by a percentage equal to 100% minus
the reserve percentage applicable during such Interest Period (or if more than
one such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for the
Purchaser with respect to liabilities or assets consisting of or including
Eurocurrency
33
4
Liabilities having a term equal to such Interest Period, payable on each date
on which interest is payable hereunder. Such additional interest shall be
determined by the Purchaser and notified to the Company.
If, for any reason, the Purchaser receives payments of principal of
this Note other than on the last day of an Interest Period, the Company shall,
upon demand, pay to the Purchaser any amounts required to compensate the
Purchaser for additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Purchaser to maintain this Note.
Upon the failure by the Company to pay the Purchaser any amounts under
this Note when due, the Purchaser is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the Purchaser to or
for the credit or the account of the Company against any and all of the
obligations of the Company now or hereafter existing under this Note, whether
or not the Purchaser shall have made any demand under this Note and although
such obligations may be unmatured. The Purchaser agrees promptly to notify the
Company after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Purchaser under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which the
Purchaser may have.
If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under this Note, or
if any prepayment results in the Company having paid any interest in excess of
that permitted by applicable law, then, without further action by the Purchaser
or the Company and so as to comply with the applicable law and to permit the
recovery of the fullest amount otherwise called for hereunder, (i) all excess
amounts theretofore collected by the Purchaser shall be credited on the
principal balance of this Note and (ii) the provisions of this Note shall be
immediately deemed reformed and the amounts thereafter collectible hereunder
reduced.
34
5
This Note shall be construed with and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
VISION TWENTY-ONE, INC.
By
-------------------------------------
Name:
Title:
35
ADVANCES AND PAYMENTS OF PRINCIPAL
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Amount of Principal Unpaid Principal Notation
Date Paid or Prepaid Balance Made By
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36
EXHIBIT A-2
FORM OF
SERIES B PROMISSORY NOTE
The securities represented hereby have not been registered under the
Securities Act of 1933 or applicable state "blue sky" laws. Such
securities may not be sold or transferred in the absence of such
registration or an opinion of counsel that an exemption therefrom
under said Act and applicable state "blue sky" laws is available. Any
transfer of such securities in violation of the foregoing shall be
invalid.
$_______________ Dated: _________, 19__
FOR VALUE RECEIVED, the undersigned, VISION TWENTY-ONE, INC., a
Florida corporation (the "COMPANY"), HEREBY PROMISES TO PAY to the order of
PRUDENTIAL SECURITIES CREDIT CORPORATION (the "PURCHASER") the principal sum of
[AMOUNT IN WORDS] (U.S.$______________) or, if less, the aggregate principal
amount of this Note outstanding on the Note Termination Date (as defined in the
Purchase Agreement referred to below) together with interest on the unpaid
principal amount hereof and all other sums then due and payable to the
Purchaser under this Note, subject to the terms and conditions of this Note.
This Note is one of the Series B Notes issued pursuant to and entitled
to the benefits of the Note Purchase Agreement, dated as of November 3, 1997
(as from time to time amended, the "PURCHASE AGREEMENT"; capitalized terms used
but not defined herein having the meanings therein assigned), between the
Purchaser and the Company. The Company will make required prepayments of
principal on the dates and in the amounts specified in the Purchase Agreement.
This Note is also subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Purchase Agreement, but
not otherwise. If an Event of Default occurs and is continuing, the principal
of this Note may be declared or otherwise become due and payable in the manner,
at the price and with the effect provided in the Purchase Agreement.
The Company promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full,
payable in arrears on the last day of each Interest Period (as hereinafter
defined) during the term hereof (each, a "PAYMENT DATE"), at an interest rate
per annum (the "INTEREST RATE") equal at all times during each Interest Period
37
2
to the sum of (i) the LIBOR Rate (as hereinafter defined) plus (ii) four
percent (4%), provided, however, that from and after the date ninety (90) days
following the Closing Date, the Interest Rate shall be equal at all times to
the sum of (i) the LIBOR Rate plus (iii) four and one-half percent (4.50%).
The "LIBOR RATE" for each Interest Period shall mean the London
interbank offered rate for United States of America Dollar deposits for a
period equal in length to such Interest Period that appears as of 11:00 A.M.
(London time) on the second Business Day (as hereinafter defined) next
preceding the first day of such Interest Period on the display page designated
as Page 3750 on the Telerate Monitor (or such other page or service as shall
replace the Telerate Monitor for the purposes of displaying the London
interbank offered rate for United States of America Dollar deposits). If (i) on
the date on which the Purchaser shall seek to determine the LIBOR Rate for an
Interest Period, no quotation is given on Telerate Monitor page 3750, or (ii)
the Company shall have failed to give the Purchaser at least two Business Days'
prior written notice to request the advance of funds hereunder, the LIBOR Rate
shall be equal to the Purchaser's cost of funds for United States Dollar
deposits for a period comparable to such Interest Period on the date of
determination for amounts approximately equal to the then-outstanding principal
balance of the Note.
The period between the date hereof and the date of payment in full of
the principal amount hereof shall be divided into successive periods of three
calendar months (each, an "INTEREST PERIOD"), with each such Interest Period
ending on the last day of a calendar month, except that the initial Interest
Period shall begin on the date hereof and end on [LAST CALENDAR DAY OF MONTH IN
WHICH NOTE IS DATED]. Each subsequent Interest Period shall begin on the last
day of the preceding Interest Period; provided, that, (i) any Interest Period
that would otherwise end on a day that is not a Business Day shall, subject to
clauses (ii) and (iii) below, be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day; (ii) any Interest
Period that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to clause (iii), end on the
last Business Day of a calendar month; and (iii) any Interest Period that would
otherwise end after the Note Termination Date shall end on the Note Termination
Date.
Payments and computations shall be made as follows:
(a) The Company shall make each payment of principal and
interest hereunder in same day funds not later than 12:00 noon (New
York City time) on the date when due in U.S. Dollars to the Purchaser
in care of Bank of New York, ABA 000000000, For the Account of
Prudential Securities Credit Corporation, Account Number: GLA 111 569
PPC (or such other address as the Purchaser may from time to
38
3
time designate to the Company in writing), in same day funds. All
payments of principal hereunder shall be recorded by the Purchaser
and, prior to the transfer hereof, endorsed on the grid attached
hereto which is part of this Note.
(b) The Company hereby authorizes the Purchaser, if and to
the extent payment is not made when due hereunder, to charge from time
to time against any or all of the Company's accounts with the
Purchaser any amount so due.
(c) All computations of interest shall be made by the
Purchaser on the basis of the actual number of days elapsed over a
year of 360 days (including the first day but excluding the last day)
occurring in the applicable Interest Period for which such interest is
payable.
The Company hereby agrees that the Purchaser shall be entitled to
receive and the Company shall pay interest on any overdue principal or any
other amounts under this Note due at a rate (the "DEFAULT RATE") equal to the
lesser of (i) the maximum rate permitted by applicable law, and (ii) two
percent (2%) above the otherwise applicable Interest Rate.
If, due to either (i) the introduction of or any change (including,
without limitation, any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation or (ii) the
compliance by the Purchaser with any guideline or request from any central bank
or other governmental authority (whether or not having the force of law), there
shall be any increase in the cost to the Purchaser of funding or maintaining
this Note, then the Company shall from time to time, upon demand by the
Purchaser, pay to the Purchaser additional amounts sufficient to indemnify the
Purchaser against such increased cost. A certificate as to the amount of such
increased cost, submitted to the Company by the Purchaser, shall be conclusive
and binding for all purposes, absent manifest error.
The Company shall pay to the Purchaser, if, and for so long as, the
Purchaser shall be required under regulations of the Board of Governors of the
Federal Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (as such term is
defined in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time), additional interest on the unpaid
principal amount hereof, from the date hereof until such principal amount is
paid in full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the LIBOR Rate for an Interest Period from (ii) the
rate obtained by dividing such LIBOR Rate by a percentage equal to 100% minus
the reserve percentage applicable during such Interest Period (or if more than
one such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental
39
4
or other marginal reserve requirement) for the Purchaser with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period, payable on each date on which
interest is payable hereunder. Such additional interest shall be determined by
the Purchaser and notified to the Company.
If, for any reason, the Purchaser receives payments of principal of
this Note other than on the last day of an Interest Period, the Company shall,
upon demand, pay to the Purchaser any amounts required to compensate the
Purchaser for additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Purchaser to maintain this Note.
Upon the failure by the Company to pay the Purchaser any amounts under
this Note when due, the Purchaser is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by the Purchaser to or
for the credit or the account of the Company against any and all of the
obligations of the Company now or hereafter existing under this Note, whether
or not the Purchaser shall have made any demand under this Note and although
such obligations may be unmatured. The Purchaser agrees promptly to notify the
Company after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Purchaser under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which the
Purchaser may have.
If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under this Note, or
if any prepayment results in the Company having paid any interest in excess of
that permitted by applicable law, then, without further action by the Purchaser
or the Company and so as to comply with the applicable law and to permit the
recovery of the fullest amount otherwise called for hereunder, (i) all excess
amounts theretofore collected by the Purchaser shall be credited on the
principal balance of this Note and (ii) the provisions of this Note shall be
immediately deemed reformed and the amounts thereafter collectible hereunder
reduced.
40
5
This Note shall be construed with and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
VISION TWENTY-ONE, INC.
By
--------------------------------------
Name:
Title:
41
ADVANCES AND PAYMENTS OF PRINCIPAL
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Amount of Principal Unpaid Principal Notation
Date Paid or Prepaid Balance Made By
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42
EXHIBIT B
[FORM OF WARRANT CERTIFICATE]
43
EXHIBIT C
[FORM OF SECURITY AGREEMENTS]
44
Schedule 12(a)(i)
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
% of Outstanding
Stock Owned by
State of Company Directly
Corporation Incorporation or
Through a
Subsidiary
------------------------------ ------------------- --------------------------
The Company Florida NA
Vision 21 Physician Practice Florida 100%
Management Company (practice
management company)
Vision 21 Managed Eye Care of Florida 100%
Tampa Bay, Inc. (managed care
organization)
Vision 21 Management Services, Florida 100%
Inc.
Vision 21 Sierra Vista, Inc Florida 100%
Vision 21 of Southern Arizona, Florida 100%
Inc.
Vision Twenty-One Managed New York 100%
Eye Care IPA, Inc.
45
SCHEDULE 12(A)(VIII)
STOCK, OPTION AND WARRANT OWNERSHIP SUMMARIES
---------------------------------------------
STOCK
5% BENEFICIAL OWNER SHARES
------------------- ------
Xxxxxxxx X. Xxxxxxxx 1,898,558
Xxxxxxx Xxxxxxx 593,329
Other Stockholders 6,695,502
---------
TOTAL COMMON STOCK OUTSTANDING(*) 9,187,389
=========
---------------
(*) The Company has 9,187,389 shares of common stock issued and outstanding,
excluding (a) an aggregate of 383,041 shares held in escrow as contingent
consideration, the amount of which is contingent upon (i) certain revenue
projections being met by Xx. Xxxxxx'x practice, (ii) certain revenue projections
being met as a result of the Xxxxxx Wootton practice hiring a new
ophthalmologist, and (iii) Managed Health Services, Inc.'s medical loss ratio
relating to certain capitated vision care contracts for the period ending August
31, 1998, and (iv) certain post-closing performance targets being met by Block
Vision and (b) excludes contingent shares reserved for issuance to Drs. Joffee,
Carroll, and Xxxxxxxxx in the cash amount of $223,025; (the number of shares to
be issued shall be determined by the per share value of the stock on the
termination date of escrow) and 37,092 shares reserved for the First Eye Care,
P.C. acquisition scheduled to be completed in November 1997.
LIST OF OUTSTANDING OPTIONS
NAME OPTION SHARES
---- -------------
Xxxxxxxx X. Xxxxxxxx 0
Xxxxxxx Xxxxxxx 0
Xxxxxxx X. Xxxxx 150,000
Other Company Employees (excludes Florida Eye & Retina) 563,302
Outside Non-Management Directors 6,665
Non-Shareholder Affiliated Professionals
and Non-Employee Consultants 120,659
-------
TOTAL OPTION SHARES (**) 840,626
=======
------------------
(**) Subject to adjustment pursuant to the terms of the Option Agreements and
grants of stock options for acquisitions closed in escrow in September and
October.
46
LIST OF WARRANTS
In connection with the Note Purchase Agreement dated December 30, 1996, as
amended April 18, 1997, there are outstanding Warrants which are exchangeable
for up to a maximum of 208,333 shares of Common Stock of the Company, subject
to adjustment pursuant to the terms of the Warrants.
In connection with the Note Purchase Agreement dated February 28, 1997,
there are outstanding Warrants which are exchangeable for up to a maximum of
333,333 shares of Common Stock of the Company, subject to adjustment pursuant
to the terms of the Warrant.
In connection with the Amended and Restated Note and Warrant Purchase
Agreement dated June 13, 1997, there are outstanding Warrants which are
exchangeable for up to a maximum of 210,000 shares of Common Stock of the
Company, subject to adjustment pursuant to the terms of the Warrant.
Warrants issuable to Prudential Securities Credit Corporation in connection
with this Agreement include (i) 50,000 warrants, the Commitment Warrant, and
(ii) 150,000 warrants for a pro rata funding fee the Funding Warrant. In
addition, warrants issuable to Prudential Securities of (i) 25,000 Warrants for
M&A advisory services, (ii) 10,000 warrants for a bank credit facility finders
fee, and (iii) 40,000 warrants issuable upon closing of a bank credit facility.
47
VISION TWENTY-ONE REGISTRATION RIGHTS*
================================================================================
MAXIMUM % MAXIMUM
DATE OF SHARES NUMBER OF
SHARES NUMBER OF WITH SHARES
SHAREHOLDER WERE SHARES REGISTRATION ELIGIBLE FOR
ISSUED ISSUED RIGHTS REGISTRATION
================================================================================
Xxxxx X. Xxxxxx 05/10/96 135,166 20% 27,033
10/20/96 26,189 5,237
-------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxxx, 09/09/96 123,554 20% 24,710
M.D.
-------------------------------------------------------------------------------
Xxxx X. Xxxx, O.D. 12/31/96 54,754 50% 27,377
-------------------------------------------------------------------------------
Xxxx X. Xxxx, O.D. 12/31/96 22,800 50% 11,400
and Xxxx Xx Xxxx-
jtbte
-------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx, M.D. 12/31/96 144,869 60% 86,921
-------------------------------------------------------------------------------
Xxxxxxx X. Xxxx, M.D. 12/31/96 198,306 50% 99,153
-------------------------------------------------------------------------------
Xxxxx Xxxxxx, M.D. 12/31/96 198,306 50% 99,153
-------------------------------------------------------------------------------
Xxxx Xxxxx, O.D. 12/31/96 32,808 60% 19,684
-------------------------------------------------------------------------------
Xxxx Xxxxx, O.D. 01/15/97 68,758 60% 41,254
-------------------------------------------------------------------------------
Xxxx Xxxxx, O.D. 01/15/97 68,758 60% 41,254
-------------------------------------------------------------------------------
Xxxxxxxx, Xxxxxx & 01/15/97 9,077 60% 5,446
Associates, P.A.
-------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx, M.D. 01/15/97 129,398 60% 77,638
-------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx, M.D. 01/15/97 17,240 60% 10,344
to be held To be held
in escrow in escrow
-------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx, 01/15/97 171,723 60% 103,033
M.D.
-------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx, 01/15/97 155,993 60% 93,595
M.D.
-------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx, M.D. 01/15/97 71,670 60% 43,002
-------------------------------------------------------------------------------
48
================================================================================
MAXIMUM % MAXIMUM
DATE OF SHARES NUMBER OF
SHARES NUMBER OF WITH SHARES
SHAREHOLDER WERE SHARES REGISTRATION ELIGIBLE FOR
ISSUED ISSUED RIGHTS REGISTRATION
================================================================================
Xxxxxx X. Xxxxxx and 01/15/97 63,983 60% 38,389
Xxxxxx Xxxxxx, jtwros
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx, O.D., 01/15/97 69,242 60% 41,545
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx, O.D. 01/15/97 6,209 60% 3,725
to be held To be held in
in escrow escrow
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx, O.D. 01/15/97 7,653 60% 4,591
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxxx, 01/15/97 123,554 60% 91,039
M.D.
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxx, 01/15/97 41,185 60% 30,346
M.D.
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx, 01/15/97 82,369 60% 60,692
M.D.
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx, 01/15/97 31,572 60% 18,943
O.D.
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxx, 01/15/97 31,572 60% 18,943
O.D.
--------------------------------------------------------------------------------
Xxxx Xxxxx, O.D. 01/20/97 12,346 60% 7,407
02/20/97 23,960 14,376
--------------------------------------------------------------------------------
Xxxx Xxxxxx, O.D. 01/20/97 12,728 60% 7,636
02/20/97 23,584 14,150
--------------------------------------------------------------------------------
BSM Investments, Ltd. 01/27/97 108,976
--------------------------------------------------------------------------------
Xxxx Xxxxx, O.D. 02/20/97 23,971 60% 14,382
--------------------------------------------------------------------------------
Xxx Xxxxxxxxx, O.D. 02/20/97 21,054 60% 12,632
--------------------------------------------------------------------------------
Xx Xxxxxxx, O.D. 02/20/97 21,049 60% 12,629
--------------------------------------------------------------------------------
49
MAXIMUM % MAXIMUM
DATE OF SHARES NUMBER OF
SHARES NUMBER OF WITH SHARES
SHAREHOLDER WERE SHARES REGISTRATION ELIGIBLE FOR
ISSUED ISSUED RIGHTS REGISTRATION
==================================================================================
Xxxx Xxxxx, O.D. 02/20/97 15,252 60% 9,151
----------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx, O.D. 02/20/97 11,980 60% 7,188
----------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxx, O.D. 02/20/97 11,980 60% 7,188
----------------------------------------------------------------------------------
Xxxxxxx X. Short, D.O. 03/31/97 128,541 60% 77,124
----------------------------------------------------------------------------------
Xxxxxx Xxxxxx, M.D. 05/01/97 118,744 50% 59,372
----------------------------------------------------------------------------------
Xxxxxxx Xxxxxx, M.D. 05/01/97 50,406 50% 25,203
----------------------------------------------------------------------------------
Xxxx Xxxxx 05/01/97 11,411 30% 3,423
----------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 06/01/97 123,778 30% 37,133
----------------------------------------------------------------------------------
Xxxxx Xxxxxxx 06/01/97 123,778 30% 37,133
----------------------------------------------------------------------------------
Xxxxx Xxxxxxx 06/01/97 72,444 30% 21,733
----------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 06/01/97 38,960 30% 11,688
to be held 30% to be held in
in escrow escrow
----------------------------------------------------------------------------------
Xxxxx Xxxxxxx 06/01/97 38,959 30% 11,687
to be held to be held in
in escrow escrow
----------------------------------------------------------------------------------
Xxxxx Xxxxxxx 06/01/97 19,480 30% 5,844
to be held to be held in
in escrow escrow
----------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 06/01/97 49,901 30% 14,970
----------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx 06/01/97 59,183 30% 17,754
============ ============
TOTAL 3,085,619 1,554,250
* All shareholders of BBG-COA, Inc. have received registration rights.
