CONTRIBUTION AGREEMENT
Among
PRIME MEDICAL SERVICES, INC.,
PRIME RVC, INC.,
PRIME REFRACTIVE - KANSAS CITY, L.L.C.,
VISION CORRECTION CENTERS OF KANSAS CITY, P.C.,
Kansas City Laser Vision Correction Centers, L.L.C.,
and
XXXXXXX XXXXX, M.D.
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Dated as of September 1, 2000
2
043838.0023 AUSTIN 193137 v8
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into to be
effective as of September 1, 2000 (the "Effective Time"), among Prime Medical
Services, Inc., a Delaware corporation ("PMSI"), Prime RVC, Inc., a Delaware
corporation ("Prime"), Vision Correction Centers of Kansas City, P.C., a
Missouri professional corporation ("VCC"), Kansas City Laser Vision Correction
Centers, L.L.C., a Missouri limited liability company ("KCL"), Xxxxxxx Xxxxx,
M.D., an individual residing in Kansas City, Missouri and the sole shareholder
of VCC ("Couch"), and Prime Refractive - Kansas City, L.L.C., a Delaware limited
liability company ("Newco").
The parties hereto agree as follows:
ARTICLE I
Agreement of Purchase and Sale
1.1 Agreement. Upon the basis of the representations and warranties,
for the consideration, and subject to the terms and conditions set forth in this
Agreement, (a) Prime agrees to purchase from Couch and/or VCC, as of the
Effective Time, by payment of $4,530,000 (the "Cash Purchase Price"), an
undivided sixty-five percent (65%) interest in (i) all of the Assets (as
hereinafter defined) and (ii) the business conducted with the Assets, which
business consists of providing space, equipment, non-professional personnel and
certain administrative services on a turn-key basis to professional providers of
Refractive Surgery (as hereinafter defined), including, without limitation,
initially providing such accommodations on an exclusive basis to the Refractive
Surgery practices of Couch and KCL in accordance with the terms set forth in
this Agreement and that certain agreement related to Couch's use of Newco's
offices and equipment (the "Facility Use Agreement") among Couch, KCL, VCC and
Newco in the form attached hereto as Exhibit A (collectively, the "Assets
Related Business"); (b) Prime agrees to contribute to Newco, as of the Effective
Time, the undivided sixty-five percent (65%) interest in the Assets and the
Assets Related Business purchased by Prime, and will receive a sixty-five
percent (65%) ownership interest in Newco; and (c) VCC agrees to contribute, as
of the Effective Time, the remaining undivided thirty-five percent (35%)
interest in the Assets and the Assets Related Business to Newco. The parties
agree that:
(y) immediately prior to the Closing (as hereinafter defined),
all of the outstanding membership interests of Newco shall be owned by VCC, and,
immediately after the Closing, Prime shall own sixty-five percent (65%) of all
of the outstanding membership interests of Newco and VCC shall own thirty-five
percent (35%) of all of the outstanding membership interests of Newco; and
(z) prior to or at the Closing, Prime and VCC shall have
executed the limited liability company agreement, in the form attached hereto as
Exhibit B, and any other organizational documents of Newco (collectively, the
"Organizational Documents").
1.2 Closing. The closing of the purchase and sale contemplated by
Section 1.1 (the "Closing") shall take place at the offices of Akin, Gump,
Strauss, Xxxxx & Xxxx, L.L.P., 1900 Frost Bank Plaza, 000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxx 00000, or at such other location as the parties may agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
1.3 Assets. As used in this Agreement, the term "Assets" shall mean and
include all of the items listed on Schedule 1.3(a) attached hereto, and, without
duplication, all Permits (as hereinafter defined) for which transfer thereof to
Newco is not prohibited under applicable law, all business records (excluding
medical records) of Refractive Surgery and the business conducted by VCC and
Couch prior to the Closing Date, any and all rights of VCC or Couch under leases
(including rights to receive returns of deposits under such leases) or contracts
listed on Schedule 1.3(a), the goodwill related to the business conducted by VCC
and Couch prior to the Closing Date (excluding the Medical Practice, as
hereinafter defined), the name "Vision Correction Centers of Kansas City" and
all likenesses thereof, and all of the related business benefiting VCC or Couch
prior to the Closing Date (excluding the Medical Practice). Each of VCC and
Couch hereby represents and warrants that the Assets include all property and
assets, real, personal and mixed, tangible and intangible, including, without
limitation, leases and contracts, equipment, instruments, computer software used
in connection with the equipment or instruments, Permits, personal property,
furniture, business records and other assets that are used primarily in or are
materially relied on for the Assets Related Business conducted by VCC and Couch
prior to the Closing. Notwithstanding the foregoing, the following shall not be
"Assets" and shall be retained by VCC and/or Couch:
(a) all of the business of VCC and Couch which, by applicable
law, may only be performed by a licensed medical professional, or an entity
owned exclusively by licensed medical professionals (the "Medical Practice");
(b) all activities that constitute the practice of medicine;
(c) the books of account and record books of VCC and the
Business (as hereinafter defined) (complete and accurate copies of which,
insofar as they relate to the Assets Related Business during the calendar years
1998, 1999 and 2000, up to and including the Closing Date, shall have been
provided to Prime on or before the Closing Date);
(d) VCC's and Couch's rights under this Agreement;
(e) any asset that (i) is neither used in, nor relied on for,
the business conducted by VCC and Couch prior to the Closing (excluding the
Medical Practice) and (ii) is set forth on Schedule 1.3(d) attached hereto;
(f) all cash, accounts receivable, prepaid expenses, deposits
(excluding deposits under leases assumed by Newco pursuant to Section 1.4),
inventory, and any notes receivables; but this exclusion shall not in any way
limit Couch's obligations under Section 4.8, or any obligation KCL or Couch may
have under the Facility Use Agreement;
(g) any medical or clinical records (although the parties acknowledge that
Newco may from time to time have physical possession of such records);
(h) any patents or copyrights that are owned individually by Couch and not
used in, nor relied on for, the Assets Related Business.
As used in this Agreement, the "Business" shall mean the Assets Related
Business and the Medical Practice, collectively. As used in this Agreement,
"Refractive Surgery" shall mean, collectively, any current and/or future
surgical procedures intended to correct refractive error, including, without
limitation, myopia, hyperopia, presbyopia or astigmatism of the eye.
Notwithstanding anything in this Agreement to the contrary, "Refractive Surgery"
shall not include any specific procedure that, at the time the procedure is to
be performed, requires in the exercise of a reasonable ophthalmologist's
independent professional judgment as to the individual patient the use of
general anesthesia and an operating room approved by the American Association of
Ambulatory Surgical Centers or Joint Commission on Accreditation of Healthcare
Organizations (or any similar or successor accreditation board or body) with the
capability of general anesthesia (provided, however, that if this sentence would
exclude from "Refractive Surgery" any surgical procedure included in "Refractive
Surgery" at the Effective Time, then the parties to this Agreement will work
together to restructure the operating mechanics of their relationship in a
manner that allows the operations of the Business to comply with such regulatory
change and also preserves the economic benefits of each of the parties,
including KCL, VCC and Couch, arising under this Agreement and the other
Transaction Documents, as such term is hereinafter defined, giving due
consideration to any recoupment of a party's investment hereunder or opportunity
therefor).
1.4 Assumed Liabilities. VCC and Couch each agree that, at the Closing,
Newco shall assume the following (collectively, the "Assumed Liabilities"): (a)
those lease or other contract obligations that are executory in nature and arise
after the Effective Time under leases or contracts that are (i) specifically
named or described on Schedule 1.3(a) and (ii) denoted on Schedule 1.3(a) as
having the related obligations assumed by Newco to the extent described in this
Section, (b) those trade payables on open account and accrued expenses
(including, without limitation, salary and benefits), owed to unrelated third
parties and less than ninety (90) days old, that were, in each case, incurred or
accrued in the ordinary course of business after the Effective Time, and (c)
those salaries and benefits arising between the Effective Time and the Closing
Date and attributable to employees of VCC or Couch that are hired or employed by
Newco after the Closing Date. From and after the Closing Date, Newco shall be
solely responsible for the Assumed Liabilites. The parties specifically agree
that Newco will have no responsibility, liability or obligation whatsoever for
(x) those obligations under such leases or contracts which accrued prior to the
Effective Time, (y) any breaches or defaults thereunder which occurred or were
alleged to have occurred prior to the Closing Date or (z) trade payables not
included in the definition of "Assumed Liabilities" above. Subject to the
foregoing, the parties will prorate costs and expenses incurred with respect to
both pre- and post-Effective Time periods, based on the extent to which the
related benefits were used prior to or after the Effective Time. The parties
agree to cooperate in good faith to account for such proration and remit amounts
that may become due another party based on such pro-ration.
VCC and Couch each agree that, except for the Assumed Liabilities, any
and all debts, liabilities, and obligations of VCC or Couch, whether known or
unknown, absolute, contingent or otherwise (including, but not limited to,
federal, state, and local taxes, any sales taxes, use taxes and property taxes,
any taxes arising from the transactions contemplated by this Agreement and any
liabilities arising from any litigation or civil, criminal or regulatory
proceeding involving or related to VCC, Couch or the Business) shall remain the
sole responsibility of VCC or Couch (whichever owed such debt, liability or
obligation), and each covenants to pay promptly and otherwise fulfill all such
debts, liabilities or obligations as and when the same become due (unless
contested in good faith). Without limiting the foregoing, each of VCC and Couch
specifically acknowledges and agrees that none of PMSI, Prime, any affiliate of
PMSI or Prime, and (except for Assumed Liabilities) Newco shall assume any
claims, debts, liabilities or obligations whatsoever of VCC or Couch, including,
without limitation, those related to or arising out of or under any claim or
other action disclosed on Schedule 3.13.
1.5 Payment and Allocation of Purchase Price. Prime agrees to pay the
Cash Purchase Price to VCC at the Closing by check, money order or wire transfer
of funds. Payment of the Contingent Consideration (as defined in Section 4.6)
shall be governed by the terms of Section 4.6. Collectively, the Cash Purchase
Price and the Contingent Consideration are referred to collectively in this
Agreement as the "Purchase Price." The Cash Purchase Price will be allocated
among the Assets, with $568,750 allocated to tangible assets, in accordance with
Schedule 1.5 attached hereto, and any Contingent Consideration paid pursuant to
Section 4.6 shall be allocated in a manner consistent with the allocation set
forth on Schedule 1.5. The parties agree, however, that the allocation set forth
on Schedule 1.5 may be changed by Prime after the Closing to give effect to the
valuation provided by Prime's external accountants.
ARTICLE II
Representations and Warranties of PMSI and Prime
PMSI and Prime hereby represent and warrant to VCC and Couch, jointly
and severally, that each of the following matters is true and correct in all
respects as of both the Effective Time and the Closing Date (with the
understanding that VCC and Couch are relying materially on such representations
and warranties in entering into and performing this Agreement and each of the
other contracts, documents, instruments or agreements to be entered into in
connection with or as contemplated by this Agreement, all of which, including
this Agreement, are collectively referred to as the "Transaction Documents") and
which shall survive the Closing:
2.1 Due Organization and Principal Executive Office. Prime is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. PMSI is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Each of
PMSI's and Prime's principal executive offices are located at 0000 Xxxxxxx xx
Xxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000.
2.2 Due Authorization. Each of PMSI and Prime has full corporate power
and authority to enter into and perform this Agreement and each Transaction
Document required to be executed by it in connection herewith. With respect to
each of PMSI and Prime, this Agreement and each Transaction Document required
herein to be executed by it has been duly and validly authorized, executed and
delivered by it, and the terms and provisions of this Agreement and each such
Transaction Document constitute the valid, binding and enforceable obligations
of it. With respect to each of PMSI and Prime, the execution, delivery, and
performance of this Agreement and each Transaction Document required herein to
be executed by it will not (a) violate any federal, state, county, or local law,
rule, or regulation applicable to it or its properties (provided, however, that
any representation or warranty by Prime or PMSI with respect to any laws
regulating or legislating the provision of healthcare or the practice of
medicine shall be limited to the actual knowledge possessed by Prime and PMSI on
the Closing Date), (b) violate or conflict with, or permit the cancellation of,
any agreement to which it is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, it or (d) violate or conflict with any
provision of its organizational documents. Except for the filing requirements of
PMSI arising under the Securities Exchange Act of 1934, no action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by either of PMSI or Prime in connection with the
execution, delivery or performance of this Agreement or any Transaction
Document.
2.3 Brokers and Finders. Neither PMSI nor Prime has engaged, or caused
to be incurred any liability to, any finder, broker, or sales agent (and neither
has paid, or will pay, any finder's fee or similar fee or commission to any
person) in connection with the execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
2.4 Claims and Proceedings. Neither PMSI nor Prime is a party to any
claim, action, suit, proceeding, or investigation, at law or in equity, before
or by any court, municipal or other governmental department, commission, board,
agency, or instrumentality, that it reasonably believes would result in a
liability or loss that could have a substantially adverse impact on the business
operations of PMSI. Neither PMSI nor Prime is a party to any claims, actions,
suits, proceedings, or investigations, at law or in equity, before or by any
court, municipal or other governmental department, commission, board, agency, or
instrumentality which seeks to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
transactions or any part thereof or seeking damages on account thereof; and, to
the knowledge of PMSI and Prime, no such claim, action, suit, proceeding or
investigation is threatened.
2.5 Investment Representations. Each of PMSI and Prime:
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(a) Is an "accredited investor," and has not retained or
consulted with any "purchaser representative" (as such terms are defined in Rule
501 of Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act")) in connection with its execution of this Agreement and
the consummation of the transactions contemplated hereby;
(b) Has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in Newco;
(c) Will acquire any Newco interests for its own account for
investment and not with the view toward resale or redistribution in a manner
which would require registration under the Securities Act or the Texas
Securities Act, as amended, and it does not presently have any reason to
anticipate any change in its circumstances or other particular occasion or event
which would cause it to sell its Newco interests, or any part thereof or
interest therein, and it has no present intention of dividing the Newco
interests with others or reselling or otherwise disposing of the Newco interests
or any part thereof or interest therein either currently or after the passage of
a fixed or determinable amount of time or upon the occurrence or nonoccurrence
of any predetermined event or circumstance;
(d) In connection with entering into this Agreement and each
Transaction Document to which it is a party, and in making the investment
decisions associated therewith, it has neither received nor relied on any
representations or warranties from Newco, Couch, VCC, the affiliates of VCC or
Couch, or the officers, directors, shareholders, employees, partners, members,
agents, consultants, personnel or similarly related parties of VCC or Couch,
other than those representations and warranties contained in this Agreement and
the other Transaction Documents;
(e) Is able to bear the economic risk of an investment in the
Newco interests and it has sufficient net worth to sustain a loss of its entire
investment without material economic hardship if such a loss should occur; and
(f) Acknowledges that the Newco interests have not been
registered under the Securities Act, or the securities laws of any of the states
of the United States, that an investment in the Newco interests involves a high
degree of risk, and that the Newco interests are an illiquid investment.
ARTICLE III
Representations and Warranties of VCC and Couch
VCC and Couch hereby represent and warrant to Prime, jointly and
severally, that each of the following matters is true and correct in all
respects as of both the Effective Time and the Closing Date (with the
understanding that Prime is relying materially on each such representation and
warranty in entering into and performing this Agreement), and which shall
survive the Closing. Notwithstanding any contrary provision of this Agreement,
any representation or warranty by Couch or VCC with respect to any laws
regulating or legislating the provision of healthcare or the practice of
medicine shall be limited to the actual knowledge possessed by Couch and VCC on
the Closing Date.
3.1 Due Organization. VCC is a professional corporation duly organized,
validly existing, and in good standing under the laws of the State of Missouri
and has full power and authority to carry on its business as now conducted and
as proposed to be conducted. KCL is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Missouri
and has full power and authority to carry on its business as now conducted and
as proposed to be conducted. Each of VCC and KCL is qualified to do business and
is in good standing in every jurisdiction where such qualification is required
for the conduct of the Business as conducted on the Closing Date. As of the
Closing Date, Couch is the sole holder of all equity ownership interests in each
of VCC and KCL, after assuming the conversion, exercise or exchange of any and
all rights or securities that are convertible into, or exercisable or
exchangeable for, equity ownership interests in VCC or KCL. KCL was formed in
connection with the transactions contemplated by this Agreement, and KCL has not
conducted any business or engaged in any transactions with any individual or
entity prior to the Closing (other than the organizational meeting or consent,
and the approval of resolutions authorizing the execution, delivery and
performance of this Agreement and any other Transaction Document to which KCL is
a party).
3.2 Subsidiaries. VCC does not directly or indirectly have (or possess
any options or other rights to acquire) any subsidiaries or any direct or
indirect ownership interests in any person, business, corporation, partnership,
limited liability company, association, joint venture, trust, or other entity.
3.3 Due Authorization. Each of KCL, VCC and Couch has full power and
authority to enter into and perform this Agreement and each Transaction Document
required to be executed by KCL, VCC or Couch in connection herewith. The
execution, delivery, and performance of this Agreement and each such Transaction
Document has been duly authorized by all necessary action of each of KCL (and
its managers, officers and members) and VCC (and its directors, officers, and
shareholders). This Agreement and each such Transaction Document has been duly
and validly executed and delivered by KCL, VCC and Couch and constitutes a valid
and binding obligation of KCL, VCC and Couch, enforceable against each of them
in accordance with its terms. The execution, delivery, and performance of this
Agreement, and each Transaction Document required herein to be executed by
Couch, KCL and/or VCC do not (a) violate any federal, state, county, or local
law, rule, or regulation applicable to KCL, VCC, Couch, the Business or the
Assets, (b) violate or conflict with, or permit the cancellation of, any
agreement to which VCC or Couch is a party, or by which VCC, Couch or their
properties are bound, or (except as expressly set forth herein or in the other
Transaction Documents) result in the creation of any lien, security interest,
charge, or encumbrance upon any of such properties, (c) permit the acceleration
of the maturity of any indebtedness of VCC or Couch, or any indebtedness secured
by the property of VCC or Couch, or (d) violate or conflict with any provision
of the organizational documents of KCL or VCC. No action, consent, waiver or
approval of, or filing with, any federal, state, county or local governmental
authority is required by KCL, VCC or Couch in connection with the execution,
delivery, or performance of this Agreement (or any Transaction Document).
3.4 Financial Statements. The unaudited balance sheet and income
statement for the Business as of and for each of the years ended December 31,
1998 and 1999, and the unaudited balance sheet and income statement for the
Business as of and for the period beginning on January 1, 2000, and ending on
August 31, 2000 (the "Balance Sheet Date") are attached hereto as Schedule 3.4
(collectively, the "Financial Statements"). The Financial Statements have been
prepared using the accrual basis in accordance with generally accepted
accounting principles ("GAAP") consistently applied (except as specifically
noted therein or in Schedule 3.4) and fairly present in all material respects
the financial position and results of operations of the Business as of the
indicated dates and for the indicated periods. Except for Assumed Liabilities
and liabilities set forth on Schedule 3.4 attached hereto, as of the Closing
Date, neither KCL, VCC nor Couch has any claims, debts, liabilities, or
obligations related to the Business or the Assets, whether known or unknown,
absolute, contingent or otherwise (including, but not limited to, federal,
state, and local taxes, any sales taxes, use taxes and property taxes, any taxes
arising from the transactions contemplated by this Agreement and any liabilities
arising from any litigation or civil, criminal or regulatory proceeding
involving or related to VCC, Couch, the Assets or the Business). Except as set
forth in Schedule 3.4 hereto, since the Effective Time there has been no
material adverse change in the Assets, the Business or the results of operations
of the Business.
3.5 Conduct of Business; Certain Actions. Except as set forth on
Schedule 3.5 attached hereto, since the Balance Sheet Date, VCC and Couch have
conducted the Business in the ordinary course and consistent with past practices
and have not (a) increased the compensation of any employees, agents,
contractors, vendors or other parties, except for wage and salary increases made
in the ordinary course of business and consistent with the past practices of VCC
or Couch, (b) sold any asset (or any group of related assets) in any transaction
(or series of related transactions) in which the purchase price or book value
for such asset (or group of related assets) exceeded $10,000, (c) suffered or
permitted any lien, security interest, claim, charge, or other encumbrance to
arise or be granted or created against or upon any of its assets, real or
personal, tangible or intangible, (d) amended its organizational documents, (e)
made or paid any severance or termination payment to any director, officer,
employee, agent, contractor, vendor or consultant, (f) made any change in its
method of accounting, (g) made any investment or commitment therefor in any
person, business, corporation, association, partnership, limited liability
company, joint venture, trust, or other entity, (h) amended, terminated or
experienced a termination of any material contract, agreement, lease, franchise,
or license to which it is a party, (i) entered into any other material
transactions except in the ordinary course of business, (j) changed the
standard, undiscounted per procedure fee generally charged to patients, which is
$1,500 at the time of Closing, (k) entered into any contract, commitment,
agreement, or understanding to do any acts described in the foregoing clauses
(a)-(j) of this Section, (l) suffered any material damage, destruction, or loss
(whether or not covered by insurance) to any assets, (m) experienced any strike,
slowdown, or demand for recognition by a labor organization by or with respect
to any of its employees, (n) experienced or effected any shutdown, slow-down, or
cessation of any operations conducted by, or constituting part of, the Business,
or (o) changed or suspended its procedures for collecting accounts receivable
and paying the accounts payable of the Business.
3.6 Assets; Licenses, Permits, etc. The Assets include all property and
assets, real, personal and mixed, tangible and intangible, including, without
limitation, leases and contracts, equipment, instruments, computer software used
in connection with the equipment or instruments, Permits, personal property,
furniture, business records and other assets that are used primarily in or are
materially relied on for the Assets Related Business conducted by VCC and Couch
prior to the Closing. Except as set forth on Schedule 3.6(a), VCC has good and
marketable title to all of the Assets, free and clear of all liens, security
interests, claims, rights of another, and encumbrances of any kind whatsoever.
The Assets are in good operating condition and repair, subject to ordinary wear
and tear, taking into account the respective ages of the properties involved and
are all that are necessary for the Assets Related Business conducted by VCC and
Couch prior to the Closing. Attached hereto as Schedule 3.6(b) is a list and
description of all federal, state, county, and local governmental licenses,
certificates, certificates of need, permits, waivers, filings and orders held or
applied for by VCC or Couch and used or relied on (or to be used or relied on)
in connection with the Assets or the Business ("Permits"). VCC and Couch have
complied in all material respects, and VCC and Couch are in compliance in all
material respects, with the terms and conditions of any such Permits. No
additional Permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
Business. No claim has been made by any governmental authority (and, to the
knowledge of VCC and Couch, no such claim has been threatened) to the effect
that a Permit not possessed by VCC or Couch is necessary in respect of the
Business. Except as specifically noted on Schedule 3.6(b), no Permit is or will
be adversely affected by the consummation of the transactions contemplated by
this Agreement.
3.7 Environmental Issues.
(a) For purposes of this Agreement, the term "environmental
laws" shall mean all laws and regulations relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, or release, of any pollutant, contaminant,
chemical, or industrial toxic or hazardous substance or waste, and any order
related thereto.
(b) VCC and Couch have complied in all material respects with
and obtained all authorizations and made all filings required by all applicable
environmental laws. The properties occupied or used by VCC or Couch have not
been contaminated with any hazardous wastes, hazardous substances, or other
hazardous or toxic materials in violation of any applicable environmental law,
the violation of which could have a material adverse impact on the Business.
(c) Neither VCC nor Couch has received any notice from the
United States Environmental Protection Agency that it is a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act ("Superfund Notice"), any citation from any federal, state or
local governmental authority for non-compliance with its requirements with
respect to air, water or environmental pollution, or the improper storage, use
or discharge of any hazardous waste, other waste or other substance or other
material pertaining to the Business ("Citations") or any written notice from any
private party alleging any such non-compliance; and there are no pending or
unresolved Superfund Notices, Citations or written notices from private parties
alleging any such non-compliance.
3.8 Intellectual Property Rights. There are no patents, trademarks,
trade names, or copyrights, and no applications therefor, owned by or registered
in the name of VCC or Couch or in which VCC or Couch has any right, license, or
interest other than those disclosed on Schedule 3.8. Neither VCC nor Couch is a
party to any license agreement, either as licensor or licensee, with respect to
any patents, trademarks, trade names, or copyrights other than those disclosed
on Schedule 3.8. Neither VCC nor Couch has received any notice that it is
infringing any patent, trademark, trade name, or copyright of others.
3.9 Compliance with Laws. To the knowledge of VCC and Couch, VCC and
Couch have complied in all material respects, and VCC and Couch are in
compliance in all material respects, with all federal, state, county, and local
laws, rules, regulations and ordinances currently in effect and relating to the
Business. No claim has been made or threatened by any governmental authority
against VCC or Couch to the effect that any aspect of the Business fails to
comply in any respect with any law, rule, regulation, or ordinance.
3.10 Insurance. Attached hereto as Schedule 3.10 is a list of all
policies of fire, liability, business interruption, and other forms of insurance
(including, without limitation, professional liability insurance) and all
fidelity bonds held by or applicable to VCC or the Business at any time within
the past three (3) years, which schedule sets forth in respect of each such
policy the policy name, policy number, carrier, term, type of coverage,
deductible amount or self-insured retention amount, limits of coverage, annual
premium and claims asserted thereunder (regardless of whether resolved or
whether benefits were paid). To the knowledge of VCC and Couch, no event
directly relating to VCC or the Business has occurred which will result in a
retroactive upward adjustment of premiums under any such policies or which is
likely to result in any prospective upward adjustment in such premiums. There
have been no material changes in the type of insurance coverage maintained by
VCC or Couch with respect to the Business during the past three (3) years,
including without limitation any change which has resulted in any period during
which VCC or the Business had no insurance coverage. Excluding insurance
policies which have expired and been replaced, no insurance policy relating to
the Business has been canceled within the last three (3) years and no threat has
been made to cancel any insurance policy relating to the Business within such
period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11,
neither VCC nor Couch maintains or contributes or is required to contribute to
any "employee welfare benefit plan" (as defined in section 3(1) of the Employee
Retirement Income Security Act of 1974 (and any sections of the Code amended by
it) and all regulations promulgated thereunder, as the same have from time to
time been amended ("ERISA")) or any "employee pension benefit plan" (as defined
in ERISA). Neither VCC nor Couch presently maintains or has ever maintained, or
had any obligation of any nature to contribute to, a "defined benefit plan"
within the meaning of the Code.
3.12 Contracts and Agreements. Attached hereto as Schedule 3.12 is a
list of all written or oral contracts, commitments, leases, and other agreements
(including, without limitation, all promissory notes, loan agreements, and other
evidences of indebtedness, mortgages, deeds of trust, security agreements,
pledge agreements, service agreements, and similar agreements and instruments
and all confidentiality agreements) relating to the Business and to which VCC or
Couch is a party or by which VCC or Couch or any of the Assets are bound,
pursuant to which the obligations thereunder of any party thereto are, or are
contemplated as being, in respect of any such individual contracts, commitments,
leases, or other agreements during any year during the term thereof, $25,000 or
greater, or which are otherwise material to the Business (collectively the
"Contracts" and individually, a "Contract"). Neither VCC nor Couch is, and, to
the best knowledge of VCC and Couch, no other party thereto is, in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default) under any Contract. Neither VCC nor Couch
has waived any material right under any Contract, and no consents or approvals
(other than those obtained in writing and delivered to Prime prior to Closing)
are required under any Contract in connection with the consummation of the
transactions contemplated hereby. Neither VCC nor Couch has guaranteed any
obligation of any other person or entity insofar as it relates to the Business.
3.13 Claims and Proceedings. Attached hereto as Schedule 3.13 is a list
and description of all claims, actions, suits, proceedings, and investigations
pending or, to the knowledge of VCC and Couch, threatened against VCC or Couch,
at law or in equity, or before or by any court, municipal or other governmental
department, commission, board, agency, or instrumentality. Except as set forth
on Schedule 3.13 attached hereto, none of such claims, actions, suits,
proceedings, or investigations will result in any liability or loss to VCC or
the Business which (individually or in the aggregate) is material, and VCC and
Couch have not been, and VCC and Couch are not now, subject to any order,
judgment, decree, stipulation, or consent of any court, governmental body, or
agency. No inquiry, action, or proceeding has been asserted, instituted, or
threatened against VCC or Couch to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
transactions or any part thereof or seeking damages on account thereof.
3.14 Taxes. All federal, foreign, state, county, and local income,
gross receipts, excise, property, franchise, license, sales, use, withholding,
and other tax (collectively, "Taxes") returns, reports, and declarations of
estimated tax (collectively, "Returns") which were required to be filed by VCC
(or Couch with respect to the Business) on or before the date hereof have been
filed within the time (including any applicable extensions) and in the manner
provided by law, and all such Returns are true and correct in all material
respects and accurately reflect the Tax liabilities of VCC (or Couch with
respect to the Business). VCC has provided Prime with true and complete copies
of all returns filed for and during the taxable years 1997, 1998 and 1999. All
Taxes, assessments, penalties, and interest which have become due pursuant to
such Returns have been paid or adequately accrued in the Financial Statements.
The provisions for Taxes reflected on the balance sheet contained in the
Financial Statements are adequate to cover all of VCC's (and Couch's with
respect to the Business) estimated Tax liabilities for the respective periods
then ended and all prior periods. As of the Closing Date, VCC (and Couch with
respect to the Business) will not owe any Taxes for any period prior to the
Closing which are not reflected on the Financial Statements, except for Taxes
attributable to the operations of the Business between the Balance Sheet Date
and the Closing Date. Neither VCC nor Couch has executed any presently effective
waiver or extension of any statute of limitations against assessments and
collection of Taxes. There are no pending or threatened claims, assessments,
notices, proposals to assess, deficiencies, or audits (collectively, "Tax
Actions") against VCC or Couch with respect to any Taxes owed or allegedly owed
in respect of the Business. There are no tax liens on any of the assets of VCC
or the Assets. Proper and accurate amounts have been withheld and remitted by
VCC and Couch from and in respect of all persons from whom either of them is
required by applicable law to withhold for all periods in compliance with the
tax withholding provisions of all applicable laws and regulations. Neither VCC
nor Couch is a party to any tax sharing agreement.
3.15 Personnel. Attached hereto as Schedule 3.15 is a list of names and
current annual rates of compensation of the officers, employees or agents of VCC
or the Business who are necessary for the operation of the Business or who
utilize (or are necessary for the utilization of) the Assets (collectively, the
"Employees"). Except as set forth on Schedule 3.15, there are no bonus, profit
sharing, percentage compensation, company automobile, club membership, and other
like benefits, if any, paid or payable by VCC or the Business to any Employees
that are not fully and specifically reflected in the Financial Statements.
Schedule 3.15 attached hereto also contains a brief description of all material
terms of employment agreements and confidentiality agreements to which VCC (or
Couch with respect to the Business) is a party and all severance benefits which
any director, officer, Employee or sales representative of VCC (or Couch with
respect to the Business) is or may be entitled to receive. VCC has delivered to
Prime accurate and complete copies of all such employment agreements,
confidentiality agreements, and all other agreements, plans, and other
instruments. There is no pending or threatened (i) labor dispute or union
organization campaign relating to the Business, (ii) claims against VCC or Couch
by any employees of VCC (or Couch with respect to the Business), or (iii)
terminations, resignations or retirements of any employees of VCC (or Couch with
respect to the Business). None of the employees of VCC (or Couch with respect to
the Business) are represented by any labor union or organization. There is no
unfair labor practice claim against VCC (or Couch with respect to the Business)
before the National Labor Relations Board or any strike, labor dispute, work
slowdown, or work stoppage pending or threatened against or involving VCC (or
Couch with respect to the Business).
3.16 Business Relations. Neither VCC nor Couch has any reason to
believe and has not been notified that any supplier or customer of the Business
will cease or refuse to do business with the Business in the same manner as
previously conducted with the Business as a result of or within one (1) year
after the consummation of the transactions contemplated hereby, to the extent
such cessation or refusal might affect the Assets or the Business. Neither VCC
nor Couch has received any notice of any disruption (including delayed
deliveries or allocations by suppliers) in the availability of the materials or
products used in the Business.
3.17 Agents. VCC (and Couch with respect to the Business) has not
designated or appointed any person (other than VCC's employees, officers and
directors) or other entity to act for it or on its behalf pursuant to any power
of attorney or any agency which is presently in effect.
3.18 Indebtedness To and From Directors, Officers, Shareholders and
Employees. No director, officer, shareholder, employee or affiliate of VCC or
Couch has any indebtedness owed to it from VCC or Couch, excluding indebtedness
for travel advances or similar advances for expenses incurred on behalf of and
in the ordinary course of the Business and consistent with past practices
associated with the Business. As of the Effective Time and the Closing Date all
amounts due VCC or Couch from any of their (as applicable) directors, officers,
employees or affiliates (or any of their family members) shall have been repaid
in full.
3.19 Commission Sales Contracts. Except as disclosed in Schedule 3.19
attached hereto, neither VCC nor Couch has an employment relationship with any
individual, corporation, partnership, or other entity related to the Business
whose compensation from VCC or Couch is in whole or in part determined on a
commission basis.
3.20 Certain Consents. Except as set forth on Schedule 3.20 attached
hereto, there are no consents, waivers, or approvals required to be executed
and/or obtained by VCC or Couch from third parties (including, without
limitation, the spouse, if any, of Couch) in connection with the execution,
delivery, and performance of this Agreement or any other Transaction
Documents").
3.21 Brokers. Neither VCC nor Couch has engaged, or caused any
liability to be incurred to, any finder, broker, or sales agent (and neither has
paid, nor will pay, any finders fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
3.22 Interest in Competitors, Suppliers, and Customers. Except as set
forth on Schedule 3.22 attached hereto, neither VCC nor any affiliate of VCC
(including, without limitation, Couch), and to the knowledge of VCC and Couch,
no director, officer, employee or affiliate of VCC or any affiliate of any
director, officer, employee or affiliate of VCC, has any ownership interest in
any competitor, customer or supplier of the Business (other than the ownership
of securities of a publicly held entity of which it owns less than five percent
(5%) of any class of outstanding securities) or any property used in the
operation of the Business.
3.23 Warranties. Except as set forth on Schedule 3.23, there have not
been made any warranties or guarantees to third parties with respect to any
products sold or services rendered in connection with the Business. Except as
set forth on Schedule 3.23 attached hereto, no claims for breach of product or
service warranties have ever been made with respect to products sold or services
rendered in connection with the Business.
3.25 Investment Representations. Each of VCC and Couch:
--------------------------
(a) Is an "accredited investor," and has not retained or
consulted with any "purchaser representative" (as such terms are defined in Rule
501 of Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act")) in connection with its execution of this Agreement and
the consummation of the transactions contemplated hereby;
(b) Has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in Newco;
(c) Will acquire any Newco interests for its own account for
investment and not with the view toward resale or redistribution in a manner
which would require registration under the Securities Act, the securities laws
of Missouri and Kansas, as amended, or the securities laws of any other state,
and it does not presently have any reason to anticipate any change in its
circumstances or other particular occasion or event which would cause it to sell
its Newco interests, or any part thereof or interest therein, and it has no
present intention of dividing the Newco interests with others or reselling or
otherwise disposing of the Newco interests or any part thereof or interest
therein either currently or after the passage of a fixed or determinable amount
of time or upon the occurrence or nonoccurrence of any predetermined event or
circumstance;
(d) In connection with entering into this Agreement and each
of the other Transaction Documents to which it is a party, and in making the
investment decisions associated therewith, it has neither received nor relied on
any representations or warranties from Newco, PMSI, Prime, the affiliates of
PMSI or Prime, or the officers, directors, shareholders, employees, partners,
members, agents, consultants, personnel or similarly related parties of PMSI or
Prime, other than those representations and warranties contained in this
Agreement and the other Transaction Documents;
(e) Is able to bear the economic risk of an investment in the
Newco interests and it has sufficient net worth to sustain a loss of its entire
investment without material economic hardship if such a loss should occur; and
(f) Acknowledges that the Newco interests have not been
registered under the Securities Act, or the securities laws of any of the states
of the United States, that an investment in the Newco interests involves a high
degree of risk, and that the Newco interests are an illiquid investment.
ARTICLE IV
Covenants
4.1 Use of Name. Except to the extent allowed under the limited license
contained in the Facility Use Agreement, each of KCL, VCC and Couch agrees that,
following the Closing Date, it will cease using the name "Vision Correction
Centers of Kansas City, P.C.," "Kansas City Laser Vision Correction Centers,
L.L.C." or any words or phrases which are deceptively similar to such names.
4.2 Cooperation Relating to Financial Statements. Each of KCL, VCC and
Couch agrees to cooperate with Prime, at Prime's expense, in the preparation of
any financial statements of KCL or VCC which Prime or its affiliates may be
required by any applicable law to prepare.
4.3 Action by Owners; Restrictions on Transfer.
(a) Action by Owner. Couch agrees to vote any interest he owns
in KCL or VCC, and to take such other actions as may be necessary in his
capacity as the sole director and sole shareholder of VCC and the sole manager
and sole member of KCL, to authorize and direct KCL and VCC to perform all of
their respective obligations under this Agreement and under the Organizational
Documents and other Transaction Documents to which either of them is a party.
(b) VCC Restrictions on Transfer. Except as provided in
subsection (d) of this Section, VCC and Couch each agree that, until such time
as neither of them owns any direct or indirect ownership interest in Newco,
neither of them will, without obtaining the prior written consent of Prime,
which consent may be withheld in Prime's sole and absolute discretion, (i)
authorize the issuance of any additional capital stock or other ownership
interest in VCC or (ii) transfer, assign, pledge, hypothecate, or in any way
alienate any capital stock of VCC, or any interest therein, whether voluntarily
or by operation of law, or by gift or otherwise, without the prior written
consent of Prime. Any purported transfer in violation of this Section shall be
void ab initio without any action by any party, and shall not operate to
transfer any interest or title to the purported transferee.
(c) KCL Restrictions on Transfer. Except as provided in
subsection (d) of this Section, KCL and Couch each agree that, until such time
as Couch and all entities controlled by Couch do not own any direct or indirect
ownership interest in Newco, neither of KCL or Couch will, without obtaining the
prior written consent of Prime, which consent may be withheld in Prime's sole
and absolute discretion, take any of the following actions if such action could
result in a non-licensed physician owning any interest in KCL, or Couch owning
less than 51% of all of the voting stock or other ownership interests in KCL:
(i) authorize the issuance of any additional membership or other ownership
interest in KCL or (ii) transfer, assign, pledge, hypothecate, or in any way
alienate any membership interest of KCL, or any interest therein, whether
voluntarily or by operation of law, or by gift or otherwise. KCL and Couch
further agree that only licensed physicians will be permitted to acquire an
interest in KCL (unless prohibited by the foregoing sentence or otherwise
allowed pursuant to subsection (d) of this Section). Any purported transfer in
violation of this Section shall be void ab initio without any action by any
party, and shall not operate to transfer any interest or title to the purported
transferee.
Furthermore, KCL and Couch agree that prior to selling or
transferring any interest in KCL to any licensed physician in a transaction
allowed under this Section, KCL and Couch will require as a condition to such
sale or transfer that the licensed physician sign an agreement naming Newco as a
beneficiary and containing restrictive covenants substantially similar to those
contained in Article VIII of this Agreement (excluding the provisions of Section
8.2(b), Section 8.2(c) and the last paragraph of Section 8.3); provided,
however, that the exclusivity and non-compete terms of such agreement shall
terminate one year after such licensed physician no longer owns an interest in
KCL and no longer uses Newco's premises and equipment. Despite Couch's limited
ability to transfer ownership interests in KCL to other licensed physicians,
Couch hereby represents and warrants to Prime as of the Effective Time and the
Closing Date that Couch is not currently committed to, and does not currently
have, any intention to transfer any ownership interests in KCL. Couch further
represents and warrants to Prime as of the Effective Time and the Closing Date
that he currently intends to devote all his business time and attention toward
personally performing for the foreseeable future not less than the volume of
procedures that he was performing immediately prior to the Closing. Prime
acknowledges that KCL is entitled to hire physicians, subject to the conditions
above relating to transfers of ownership interests in KCL. Furthermore, licensed
physicians employed by KCL will also, subject to Couch's approval, be allowed to
perform procedures using Newco's premises and facilities pursuant to the
Facility Use Agreement. Couch and KCL acknowledge and agree that Newco shall not
be responsible for paying any salaries, benefits, professional fees or other
remuneration to any physician employee of KCL or VCC.
(d) Notwithstanding the foregoing or any contrary provision of
this Agreement, after the expiration of ten years following the Closing Date,
Couch is entitled to transfer his interest in VCC or in KCL to any person or
entity upon obtaining Prime's consent, which consent cannot be unreasonably
withheld.
(e) Each of KCL, VCC and Couch covenant that all evidences of
ownership in KCL or VCC, including, without limitation, all stock certificates,
shall bear the following legend:
"THE INTERESTS REPRESENTED HEREBY AND THE SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF ARE SUBJECT TO
CERTAIN RESTRICTIONS CONTAINED IN A CONTRIBUTION AGREEMENT AMONG
THE COMPANY AND THE WITHIN NAMED PARTIES, AND ANY AMENDMENT
THERETO. A COPY OF THE CONTRIBUTION AGREEMENT AND ALL APPLICABLE
AMENDMENTS THERETO WILL BE FURNISHED BY THE COMPANY TO THE HOLDER
HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE."
4.4 Public Statements and Press Releases. The parties hereto covenant
and agree that, except as provided for hereinbelow, each will not from and after
the date hereof make, issue or release any public announcement, press release,
statement or acknowledgment of the existence of, or reveal publicly the terms,
conditions and status of, the transactions provided for herein, without the
prior written consent of the other parties hereto as to the content and time of
release of and the media in which such statements or announcement is to be made,
provided, however, that the following shall not be a breach of this Section: (a)
filings and disclosures required by the Securities and Exchange Commission, and
(b) announcements, statements, acknowledgments or revelations which either party
is required by law to make, issue or release as long as such party shall have
given, to the extent reasonably possible, not less than two (2) calendar days
prior notice to the other parties hereto, and shall have attempted, to the
extent reasonably possible, to clear such announcement, statement,
acknowledgment or revelation with the other parties hereto. Each party hereto
agrees that it will not unreasonably withhold any such consent or clearance. The
provisions of this Section shall not limit or restrict any party's
communications with its personal consultants or advisors, including, without
limitation, its attorneys, accountants and financial advisors.
4.5 Guaranty of PMSI. PMSI hereby unconditionally and irrevocably
guarantees each of the payment and performance obligations of Prime hereunder
and under each of the Transaction Documents. Without limiting the foregoing,
PMSI agrees that if Prime shall default in any obligation to pay to KCL, VCC or
Couch any amount then due and payable by Prime to KCL, VCC or Couch under
Article I, Article VI or Article VII hereunder, PMSI shall immediately pay such
amount to KCL, VCC or Couch. PMSI hereby agrees not to require KCL, VCC or Couch
to proceed against Prime or any other person or to pursue any other remedy
before proceeding against PMSI under this guaranty.
4.6 Contingent Consideration. In further consideration of the purchase
of sixty-five percent (65%) of the Assets and the Assets Related Business, Prime
agrees to the following provisions related to the payment to VCC of certain
additional consideration if the requirements of this Section are satisfied, and
only in accordance with the provisions below. Any amounts payable pursuant to
this Section are hereinafter referred to as "Contingent Consideration" and are
provided in addition to payment of the Cash Purchase Price pursuant to Section
1.1. No payment of any portion of the Cash Purchase Price shall reduce amounts
payable under this Section.
(a) Within sixty days of each of the first three annual
anniversaries of the Closing Date (each, a "Calculation Date"), Newco shall
calculate the Actual Net Income (as hereinafter defined) for Newco for the
twelve consecutive calendar months ending on the respective Calculation Date
(each such twelve month period is hereinafter referred to as a "Calculation
Period). As used herein, "Actual Net Income" for any Calculation Period shall
mean the net income for Newco during that Calculation Period, calculated using
the same methodology and principles reflected in the calculation of "Base Net
Income" shown on Schedule 4.6 attached hereto. The parties acknowledge and agree
that the manner of calculation set forth on Schedule 4.6 attached hereto
reflects the agreed upon means of calculating the Base Net Income reflected
therein, as well as the Actual Net Income for any Calculation Period (subject,
however, to exclusions/additions described below in subsection (d)). Within each
such sixty day period, Prime shall deliver to Couch, via certified or registered
U.S. Mail, a statement (the "Calculation Statement") showing calculation of the
Actual Net Income for the respective Calculation Period and the basis on which
it was calculated in reasonable detail. If Couch shall fail to receive a
Calculation Statement within such sixty-day period, then Couch shall promptly
notify Prime in writing that the Calculation Statement has not been received,
and Prime shall have an additional five days following its receipt of such
notice from Couch, within which Prime may deliver the respective Calculation
Statement without having been in default under this subsection (a). If Prime
fails to deliver the respective Calculation Statement within such additional
five-day period, and payment of the Contingent Consideration would have been
otherwise required for the respective Calculation Period, Prime agrees to pay
interest at PMSI's overnight funds investment rate on the amount of the
Contingent Consideration, charged from the first day following such addition
five-day period until the day on which the respective Calculation Statement is
delivered.
Couch shall have thirty days following his receipt of a
Calculation Statement during which Newco and Prime agree to provide to Couch
reasonable access to Newco's books and records. If Couch shall fail to deliver
an Objection Notice (as hereinafter defined) within such thirty-day period, then
such failure shall constitute Couch's acceptance of the respective Calculation
Statement, which shall thereupon become conclusive and binding on all parties
hereto, and shall not be subject to further review, challenge, or adjustment.
During such thirty-day period, Couch may deliver to Prime, via certified or
registered U.S. Mail, a written notice of objection to the respective
Calculation Statement (an "Objection Notice"), which Objection Notice shall set
forth in reasonable detail Couch's calculation of the Contingent Consideration
calculated therein, and Couch's basis for objection, in which case the parties
shall meet and in good faith attempt to resolve any disagreement within thirty
(30) days after Prime's receipt of the Objection Notice. If the parties are
unable to resolve such disagreement within such time period, the disagreement
shall be referred to a "Big Five" accounting firm selected by mutual agreement
of Couch and Prime, or if the parties cannot agree on such selection, then a
"Big Five" accounting firm selected by lot, excluding those that have provided
services to Couch or Prime within the preceding twenty-four months (the
"Settlement Accountants"). The Settlement Accountants shall be directed to use
their best efforts to reach a determination of the correct Actual Net Income for
the respective Calculation Period within forty-five days after such referral,
and their determination shall be final and binding on the parties hereto, and
shall not be subject to further review, challenge or adjustment. The costs and
expenses of the services of the Settlement Accountants (the "Audit Costs") shall
be allocated to and borne by Prime if the Contingent Consideration is payable
based on the Actual Net Income calculation of the Settlement Accountants, or
Couch if the Contingent Consideration is not payable based on the Actual Net
Income calculation of the Settlement Accountants.
(b) If the Actual Net Income for any Calculation Period
finally determined pursuant to subsection (a) is equal to or greater than the
corresponding "Target Amount" set forth below, Prime shall in each instance,
within five business days of the final determination of that Actual Net Income,
pay in cash to VCC the amount of $200,000:
Calculation Period Target Amount
9/1/00 to 8/31/01 115% of Base Net Income
9/1/01 to 8/31/02 132% of Base Net Income
9/1/02 to 8/31/03 152% of Base Net Income
If Prime fails to timely pay any amount required to be paid by
Prime pursuant to this subsection (b), then Prime agrees to pay interest at the
rate of 10% per annum on the amount required to have been paid, charged from the
last date on which such payment could have been timely made until the date on
which such payment is actually paid.
(c) The parties agree that each calculation of Actual Net
Income and related payment of Contingent Consideration (if required) shall be
made independent of other calculations of Actual Net Income. For example, and
solely for purposes of illustration, if the finally determined Actual Net Income
for the Calculation Period beginning on September 1, 2001 and ending on August
31, 2002 amounted to 120% of Base Net Income, and the finally determined Actual
Net Income for the Calculation Period beginning on September 1, 2002 and ending
on August 31, 2003 amounted to 160% of Base Net Income, Prime would not be
obligated to pay any amount in respect of the Calculation Period ended August
31, 2002, but would be obligated to pay $200,000 to VCC in respect of the
Calculation Period ended August 31, 2003. The parties agree that Prime shall
never be obligated to pay more than $600,000 pursuant to this Section (excluding
interest, if any, pursuant to subsection (a) related to the untimely delivery of
a Calculation Statement).
(d) The parties agree that, notwithstanding any provision of
this Agreement to the contrary, the revenues, income, costs, and expenses
(including, without limitation, startup and transaction costs, legal and
accounting costs and fees, and applicable financing costs) resulting from or
attributable to the acquisition, development and/or operation of any new
locations by Newco or Newco's subsidiaries shall be included in the calculation
of the Actual Net Income for each Calculation Period pursuant to subsection (a).
The provisions of this subsection (d) shall not be construed to require any
party, including Newco, to develop or acquire any new location.
4.7 Key-Man Life Insurance. The parties agree that Newco shall maintain
a key-man life insurance policy and a disability policy (the "Policies") on
Couch, each naming Newco as the exclusive beneficiary thereunder and each in a
policy amount equal to or exceeding $7,700,000. Such Policies shall be
maintained by Newco until Couch no longer materially participates in the Assets
Related Business as reasonably determined by the Managers.
4.8 Working Capital Line. Couch hereby agrees to loan amounts to Newco,
from time to time, during the first four (4) months immediately following the
Closing Date, not to exceed $200,000 in the aggregate, upon request by Prime, to
cover any actual deficit in working capital that Newco may experience. The
parties agree that amounts borrowed will not accrue interest but must be repaid
by Newco prior to Newco's distribution of any of its earnings to Prime.
4.9 Reimbursement of Development Costs. Prime agrees to reimburse Couch
for up to $30,900 for amounts paid by Couch to the following vendors in
connection with the planning and initial development of a second location: (a)
Eye Designs, (b) WRS Architects, Inc., and (c) Universal Construction Company,
Inc./Xxxxxxxx Mechanical Company. Prime agrees that such reimbursements must be
paid in cash on or before five days following the Closing. Prime, Couch and VCC
agree to cooperate to seek the return of equipment deposits paid to Topcon and
Visx in the aggregate amount of $34,780, but if return of the deposits is not
possible, then Prime agrees to reimburse VCC or Couch for the $34,780 within
five days of the date on which it becomes clear that the deposits will not be
returned. Couch and VCC agree to promptly pay to Prime any refunds received with
respect to amounts reimbursed pursuant to this Section. Couch and VCC further
agree that, upon receiving reimbursements from Prime, Prime shall be exclusively
entitled to seek the return of and/or direct the application or use of any
credits, deposits or refunds related to amounts reimbursed pursuant to this
Section, and Couch and VCC agree to execute any assignment or take any other
action reasonably necessary to accomplish or enable the foregoing.
4.10 Tag Along Rights. In the event Prime elects to transfer after the
Closing Date all or any portion of its membership interest in Newco to any
transferee not affiliated with Prime, Prime will provide VCC with 30 days prior
written notice setting forth the terms and conditions of the proposed transfer.
VCC shall have 10 days following its receipt of such notice within which VCC may
elect in writing to include, as a condition to Prime's transfer, all or any
portion of its interest in the proposed transfer on the same terms and
conditions; provided that if Prime is transferring only a portion of its
interest, VCC shall only be entitled to include in the transfer the same
proportion of its interest. VCC shall not be entitled to delay the closing of
any proposed transfer by Prime, and VCC shall forfeit all rights with respect to
a proposed transfer in the event of such a delay. VCC's rights under this
Section are specific to transfers by Prime or any transferee of Prime that is
affiliated with Prime, but shall not apply to transfers by any transferee not
affiliated with Prime, even if such transferee assumes Prime's rights and
obligations under this Agreement.
4.11 Covenant to Obtain Consents. Each of KCL, VCC and Couch covenants
and agrees to exercise good faith, diligent efforts to obtain each of the
consents listed on Schedule 3.20 within thirty days following the Closing Date.
ARTICLE V
Conditions to Closing
5.1 Prime's Conditions to Closing. Prime's obligation to consummate the
transactions contemplated in this Agreement is subject to the satisfaction,
prior to or at the Closing, of each of the following conditions, any one or more
of which may be waived by Prime in writing. Upon failure of any of the following
conditions, Prime may terminate this Agreement:
(a) each of KCL, VCC and Couch shall have executed and
delivered each of the Transaction Documents to which it is a party (including,
without limitation, the Limited Liability Company Agreement of Newco attached
hereto as Exhibit B), and shall have performed or complied in all respects with
its agreements and covenants required by this Agreement or any other Transaction
Document to have been performed or complied with by it prior to or at the
Closing;
(b) since the Effective Time, except as set forth on Schedule
3.4 hereto, there shall not have been any material adverse change in the
condition (financial or otherwise) of VCC, the Assets or the Business
(including, without limitation, any material change in the amount of working
capital reasonably necessary to operate the Assets Related Business during any
one-month period);
(c) each of the representations and warranties made by VCC or
Couch in this Agreement or any other Transaction Document shall be true, correct
and not misleading in any material respect; and
(d) each of KCL, VCC and Couch shall have delivered such good
standing certificates, officer certificates, and similar documents and
certificates as counsel for Prime may have reasonably requested.
5.2 Couch's and VCC's Conditions to Closing. Each of Couch's, KCL's and
VCC's obligation to consummate the transactions contemplated in this Agreement
is subject to the satisfaction, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived by KCL, VCC and
Couch in writing. Upon failure of any of the following conditions, KCL, VCC and
Couch may terminate this Agreement:
(a) Prime shall have executed and delivered each of the
Transaction Documents to which it is a party (including, without limitation, the
Limited Liability Company Agreement of Newco attached hereto as Exhibit B), and
shall have performed or complied in all respects with its agreements and
covenants required by this Agreement or any other Transaction Document to have
been performed or complied with by it prior to or at the Closing;
(b) each of the representations and warranties made by Prime in this
Agreement or any other Transaction Document shall be true, correct and not
misleading in any material respect; and
(c) Prime shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for VCC and Couch may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime. Each of KCL, VCC and Couch agrees to
indemnify and hold harmless Prime, each parent company, subsidiary and/or
affiliate of Prime (including, without limitation, Newco) and each parent
company, subsidiary, affiliate, shareholder, member, partner (or other owner),
officer, director, manager, agent, employee and representative of any of the
foregoing (collectively, the "Prime Indemnified Parties") from and against any
and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs, and expenses (including court costs and attorneys' fees and
expenses incurred in investigating and preparing for any litigation or
proceeding) (collectively, "Indemnified Costs"), including, without limitation,
Indemnified Costs arising in connection with the commencement or assertion of
any action, proceeding, demand, or claim by a third party (collectively, a
"Third-Party Action"), which any of the Prime Indemnified Parties may sustain,
arising out of or related to (a) any breach or default by KCL, VCC or Couch of
any of the representations, warranties, covenants or agreements contained in
this Agreement or any Transaction Document, (b) any claim, debt, obligation or
liability of KCL, VCC or Couch (excluding the Assumed Liabilities), (c) any
actual or alleged actions or omissions by VCC, Couch, or any of VCC's directors,
officers, shareholders, agents, employees, representatives, subsidiaries and/or
affiliates occurring prior to the Closing Date (regardless of whether such
Indemnified Costs are asserted at any time before or after the Closing Date),
and (d) any actual or alleged actions or omissions by KCL, VCC or Couch
occurring after the Closing that either were not made by VCC or Couch in its
capacity as a director, officer or shareholder of Newco (as applicable), or, if
made by VCC or Couch in such a capacity, constituted a breach of any fiduciary
or other duty owed by VCC or Couch under applicable law or any Transaction
Document.
For purposes of this Section, any decrease in the value of a
Prime Indemnified Party's ownership interest (if any) in Newco, as a result of
the acts, omissions or circumstances described in clauses (a) through (d) of
this Section, shall be deemed an Indemnified Cost, and such Prime Indemnified
Party shall be entitled to indemnification hereunder in an amount equal to such
decrease in value; provided further that, notwithstanding any provision of this
Agreement or any other Transaction Document to the contrary, none of KCL, VCC or
Couch may, and each hereby agrees not to, seek contribution, indemnification or
reimbursement from Newco for any amount KCL, VCC or Couch is required to pay
pursuant to this Article, regardless of whether KCL, VCC or Couch is entitled to
contribution, indemnification or reimbursement under any Transaction Document,
the organizational documents of Newco or applicable law.
The parties agree that indemnification may not be sought under
this ARTICLE or ARTICLE VII on the basis that the structure of the transactions
contemplated by this Agreement violate any federal, state, county, or local
laws, rules, regulations or ordinances regulating or legislating the provision
of healthcare or the practice of medicine. The parties also agree that recourse
under this ARTICLE or ARTICLE VII shall not be the sole recourse of the parties
against one another for a breach of the provisions of this Agreement or any
other Transaction Document.
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Couch, of the commencement or assertion of any Third
Party Action in respect of which such Prime Indemnified Party shall seek
indemnification hereunder. Any failure to so notify Couch shall not relieve KCL,
VCC or Couch from any liability that they may have to such Prime Indemnified
Party under this Article except to the extent that the failure to give such
notice materially and adversely prejudices Couch. Couch shall have the right to
assume control of the defense of, settle, or otherwise dispose of such
Third-Party Action on such terms as it deems appropriate; provided, however,
that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such Third-Party Action;
(b) Couch shall obtain the prior written approval of the Prime
Indemnified Party, which approval shall not be unreasonably withheld, before
entering into or making any settlement, compromise, admission, or acknowledgment
of the validity of such Third-Party Action or any liability in respect thereof
if, pursuant to or as a result of such settlement, compromise, admission, or
acknowledgment, injunctive or other equitable relief would be imposed against
the Prime Indemnified Party;
(c) Couch shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
Third-Party Action by each claimant or plaintiff to, and in favor of, each Prime
Indemnified Party;
(d) Couch shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Prime
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any Third-Party Action
as to which Couch fails to assume the defense within thirty (30) days; provided,
however, that the Prime Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability on the part of
Couch, without the prior written consent of Couch;
(e) Couch shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this Article to or for the account
of the Prime Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Prime Indemnified Party has agreed in writing to reimburse Couch for the
full amount of such payments if the Prime Indemnified Party is ultimately
determined not to be entitled to such indemnification; and
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any Third-Party Action pursuant to this Article
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VII
Indemnification of KCL, VCC and Couch
7.1 Indemnification of KCL, VCC and Couch. Prime agrees to indemnify
and hold harmless KCL, VCC, Couch, each parent company, subsidiary and/or
affiliate of KCL, VCC (including, without limitation, Newco) and each parent
company, subsidiary, affiliate, shareholder, member, partner (or other owner),
officer, director, manager, agent, employee and representative of any of the
foregoing (collectively, the "Couch Indemnified Parties"), from and against any
and all Indemnified Costs, including, without limitation, Indemnified Costs
arising in connection with the commencement or assertion of any Third Party
Action, which any of the Couch Indemnified Parties may sustain, arising out of
any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
The parties agree that indemnification may not be sought under
this ARTICLE or ARTICLE VI on the basis that the structure of the transactions
contemplated by this Agreement violate any federal, state, county, or local
laws, rules, regulations or ordinances regulating or legislating the provision
of healthcare or the practice of medicine. The parties also agree that recourse
under this ARTICLE and ARTICLE VI shall not be the sole recourse of the parties
against one another for a breach of the provisions of this Agreement or any
other Transaction Document.
7.2 Defense of Third-Party Claims. A Couch Indemnified Party shall give
prompt written notice to Prime of the commencement or assertion of any
Third-Party Action in respect of which such Couch Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Couch Indemnified Party under
this Article except to the extent that the failure to give such notice
materially and adversely prejudices Prime. Prime shall have the right to assume
control of the defense of, settle, or otherwise dispose of such Third-Party
Action on such terms as it deems appropriate; provided, however, that:
(a) The Couch Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such Third-Party Action;
(b) Prime shall obtain the prior written approval of the Couch
Indemnified Party, which approval shall not be unreasonably withheld, before
entering into or making any settlement, compromise, admission, or acknowledgment
of the validity of such Third-Party Action or any liability in respect thereof
if, pursuant to or as a result of such settlement, compromise, admission, or
acknowledgment, injunctive or other equitable relief would be imposed against
the Couch Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
Third-Party Action by each claimant or plaintiff to, and in favor of, each Couch
Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Couch
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any Third-Party Action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Couch Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this Article to or for the account
of the Couch Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Couch Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Couch Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any Third-Party Action pursuant to this Article
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Each of KCL, VCC and Couch agrees that
it has been and may continue to be, through its relationship with Prime and
Newco, exposed to confidential information and trade secrets pertaining to, or
arising from, the business of Prime and/or each of Prime's present or future
affiliates (which includes, without limitation, Prime, PMSI and each present or
future affiliate or subsidiary of PMSI) (individually and collectively,
"Discloser"), that such information and trade secrets are unique and valuable
and that Discloser would suffer irreparable injury if this information or trade
secrets were divulged to those in competition with Discloser. Therefore, each of
KCL, VCC and Couch agrees to keep in strict secrecy and confidence, both during
and after the period during which Prime owns any interest in Newco, any and all
information concerning Discloser which it acquires, or to which it has access
through its relationship with Discloser, that has not been publicly disclosed by
Discloser or that is not a matter of common knowledge among Discloser's
competitors (collectively, "Proprietary Information"). The Proprietary
Information covered by this Agreement shall include, but shall not be limited
to, information relating to any inventions, processes, software, formulae,
plans, devices, compilations of information, technical data, mailing lists,
management strategies, business distribution methods, names of suppliers (of
both goods and services) and customers, names of employees and terms of
employment, arrangements entered into with suppliers and customers, including,
but not limited to, proposed expansion plans of Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser. Notwithstanding
the foregoing, "Proprietary Information" shall exclude confidential information
and trade secrets pertaining solely to or arising solely from the conduct of the
Business prior to the Closing Date.
Except with prior written approval of Discloser, each of KCL, VCC and
Couch agrees that it will not: (i) directly or indirectly, disclose any
Proprietary Information to any person except authorized personnel of Discloser
or (ii) use Proprietary Information in any way, except as expressly contemplated
otherwise in the Transaction Documents. Within forty-eight (48) hours of the
time at which Couch and all entities controlled by Couch no longer directly or
indirectly own any voting equity interests in Newco, whether the result of
voluntary or involuntary disposition, each of KCL, VCC and Couch will deliver to
Prime (without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which it has
prepared, that contain Proprietary Information or relate to Discloser's
business, all other tangible Proprietary Information in its possession or
control, and all of Discloser's credit cards, keys, equipment, vehicles,
supplies and other materials that are in possession or under its control.
The provisions of this Section shall not limit or restrict any party's
communications with its personal consultants or advisors, including, without
limitation, its attorneys, accountants and financial advisors.
8.2 Exclusive Use.
(a) Couch hereby agrees that, during the period of time (the
"Restricted Period") beginning on the Closing Date and ending on the later of
(i) the ten-year anniversary of the Closing Date or (ii) the expiration of two
years following the first time at which Couch and all entities controlled by
Couch no longer own any direct or indirect interest in Newco; Couch will
perform, and will direct all other full-time, medically trained or licensed
medical professionals under his or KCL's direction or control to perform, all
services related to Refractive Surgery only at the premises of, and using the
equipment of, Newco.
(b) Couch also agrees that, except as expressly otherwise
provided below in this subsection (b), for a period of ten (10) years
immediately following the Effective Time, Couch shall devote Couch's full
business time and attention (in amounts generally consistent with the practices
of Couch prior to the Closing Date) to rendering professional ophthalmic and
medical services within the following area (collectively, the "Restricted
Area"): within the Missouri counties of Clay, Jackson, Cass and Platte, the
Kansas counties of Wyandotte, Leavenworth and Xxxxxxx, or within a forty mile
radius of any other location developed or established by Newco on or before the
end of the Restricted Period (as hereinafter defined); provided, however, that
Couch may decrease the amount of business time and attention devoted to
rendering professional ophthalmic and medical services within the Restricted
Area to the extent such decrease does not materially decrease the average
monthly volume of Refractive Surgery procedures done using Newco's premises and
equipment below the average monthly volume that existed during the six months
immediately preceding the Closing Date.
(c) Notwithstanding the provisions of this Section, the death
or Disability of Couch shall not be the basis of any breach or default of the
provisions of this Section, but in the case of Disability, performance shall be
excused only for so long as the Disability exists. As used in this Agreement,
Disability shall mean Couch's having a mental or physical incapacity that
reasonably prevents Couch's resumption of the normal performance of his medical
practice.
8.3 Noncompetition. Each of KCL, VCC, Couch, PMSI and Prime, as a
material inducement to the others to enter into this Agreement, hereby agrees
that, at all times during the Restricted Period, such party will not directly or
indirectly, either through any kind of ownership (other than ownership of
securities of a publicly held corporation of which it owns less than five
percent (5%) of any class of outstanding securities), or as a principal,
shareholder, agent, employer, advisor, consultant, co-partner or in any
individual or representative capacity whatever, either for its own benefit or
for the benefit of any other person, corporation or other entity, without the
prior written consent of each other party hereto, commit any of the following
acts, which acts shall be considered violations of this covenant not to compete:
(a) Except through Newco or its subsidiaries, directly or
indirectly engage in, or provide, anywhere within the Restricted Area, any
services (other than services included in the practice of medicine) related to
(i) the operating of premises used to provide Refractive Surgery, (ii) the
manufacture, maintenance, refurbishing, repair, sale, or leasing of any
equipment related to or necessary for the operating of premises used to provide
Refractive Surgery, or (iii) providing any management services, training or
consulting services related to any of the activities described in (i) or (ii);
(b) Except through Newco or its subsidiaries, directly or
indirectly provide, anywhere within the Restricted Area, (i) premises, equipment
and non-physician personnel for the performance of Refractive Surgery by
physicians, (ii) the marketing, scheduling and management of Refractive Surgery
(but excluding, with respect to Couch, KCL or VCC, marketing, scheduling and
management of patients for treatment by Couch, KCL or VCC), (iii) the
credentialing and scheduling of physicians to perform Refractive Surgery and
(iv) the billing, collecting or accounting for the use of any such premises,
equipment or non-physician personnel.
(c) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with Newco
or any of its subsidiaries, Prime, or any affiliate or related entity of any of
them, to withdraw, curtail, or cancel its business with such person or entity;
or
(d) Directly or indirectly hire any employee of Newco or any
of its subsidiaries, Prime, or any affiliate or related entity of any of them,
or induce or attempt to influence any employee of Newco or any of its
subsidiaries, Prime or any such affiliate or related entity to terminate his or
her employment with such person or entity.
8.4 Practice of Medicine. Notwithstanding any provision of this
Agreement or any other Transaction Document to the contrary, the provisions of
this Article shall not be construed to require Couch to perform Refractive
Surgery at the premises of, or use the equipment of, Newco, if in the
professional medical judgment of a reasonable ophthalmologist practicing
Refractive Surgery, such use would be detrimental to Couch's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery or
related services that are to be paid for, or reimbursed by, Medicare, Medicaid,
Champus, or any other state or federal health care program, or in any instance
where the operation of this Agreement would constitute a violation of applicable
law.
8.5 Restrictions Reasonable. Each party hereto has reviewed and
carefully considered the provisions of this Article and, having done so, agrees
that the restrictions applicable to it as set forth herein (a) are fair and
reasonable with respect to time, geographic area and scope, (b) are not unduly
burdensome to it, and (c) are reasonably required for the protection of the
interests of the other parties hereto for whose benefit such restrictions were
agreed upon.
8.6 Remedies.
(a) General. Each party agrees that a violation on its part of
any applicable covenant contained in this Article will cause the other parties
hereto for whose benefit such restrictions were agreed upon irreparable damage
for which remedies at law may be insufficient, and for that reason, it agrees
that the other parties shall be entitled as a matter of right to equitable
remedies, including specific performance and injunctive relief, therefor. The
right to specific performance and injunctive relief shall be cumulative and in
addition to whatever other remedies, at law or in equity, that the other parties
may have, including, specifically, recovery of liquidated damages as provided
below and any other additional damages.
(b) Liquidated Damages. Because of the difficulty of measuring
economic losses to the other parties as a result of a material breach of any
provision of this Article or Article VIII, KCL, VCC and Couch agree that, in the
event of such a breach by any of them, they shall, jointly and severally, be
obligated to pay to Prime as liquidated damages (which damages are in addition
to all other remedies provided for in this Agreement, or available to Prime or
another party pursuant to arbitration hereunder) an amount determined by
multiplying the Purchase Price by a fraction, the numerator of which is the
difference between one hundred twenty (120) and the number of entire consecutive
months passed after the Effective Time and prior to such breach, and the
denominator of which is the number one hundred twenty (120).
(c) Before any remedy may be sought by any party under this
Agreement with respect to a breach of the provisions of this Article or Article
VIII, the breaching party shall be given thirty days following delivery of
notice by the party asserting the breach (identifying such material breach)
within which the breaching party may cure such material breach.
ARTICLE X
Post Closing Agreements
9.1 Transition of Business. Each of KCL, VCC and Couch agrees to
cooperate fully with Prime and Newco in transitioning the Assets Related
Business existing prior to the Closing, including the relationships maintained
by VCC and Couch with respect to the Assets Related Business, to Newco after the
Closing; and, each of KCL, VCC and Couch agrees not to take any action or make
any disclosure, including disclosures related to the transactions contemplated
by this Agreement, which might alter or impair any relationship with any
customer, or other service recipient, person or entity which did business with
VCC prior to the Closing. Each of KCL, VCC, Couch and Newco agrees to cooperate
after the Closing to account for procedures done between the Effective Time and
the Closing and to allocate amounts received in respect thereof pursuant to the
terms of the Facility Use Agreement.
9.2 Right of Set Off. Each of VCC and Couch agrees that Newco shall
have rights of offset against distributions to it in respect of any direct or
indirect ownership interest any of them may have in Newco at any time following
the Closing, for any and all debts, obligations or liabilities that KCL, VCC or
Couch may have to Prime, PMSI or any affiliate or subsidiary of PMSI, including,
without limitation, any liability arising out of or relating to any obligations
arising under Section 6.1 of this Agreement, or other obligations owed under
this Agreement or any other Transaction Document. Each of VCC and Couch hereby
authorizes and directs Newco to, and hereby agrees that Newco is entitled to,
withhold and pay such offset amounts to Prime and to take all other actions
necessary to make such payment. Newco hereby agrees to promptly remit any and
all such offset amounts to Prime upon request.
Without limiting or adversely affecting the rights of Prime
under this Section, and in order to secure full and prompt payment of the
obligations of KCL, VCC and Couch under this Agreement and each other
Transaction Document, each of VCC and Couch hereby grants to Prime a continuing
security interest in and to distributions either of them may be entitled to
receive at any time after the Closing in respect of any direct or indirect
ownership interest held by either of them in Newco. In connection with the grant
of a security interest contained in this Section, each of VCC and Couch agrees
(i) to execute all documents, agreements, instruments and certificates, and to
take such other actions, as are reasonably necessary in order to fully evidence
and perfect such security interest, and (ii) that it will not, without obtaining
the express prior written consent of Prime in each instance, grant or assign to
any person or entity rights of any nature in the distributions covered by the
security interest granted in this Section, irrespective of whether such rights
are to be senior or subordinate to the rights granted under this Section;
provided, however, that clause (ii) shall not prohibit Permitted Transfers (as
such term is defined in the Organizational Documents) of its ownership interest
in Newco, as long as the transferee (A) executes a certificate acknowledging
that such distributions with respect to the ownership interest transferred
remain subject to the offset rights and security interest granted under this
Section as though such transferee and it were one and the same person and (B)
executes and consents to the filing of all documents, agreements, instruments
and certificates, and takes such other actions, as are necessary in order to
fully evidence and perfect such security interest.
Each of VCC and Couch acknowledges and agrees that the rights
and obligations contained in this Section shall remain attached to membership
interests of Newco conveyed by it, regardless of whether the conveyance was
permitted pursuant to the Organizational Documents and/or consented to by Prime.
In addition, Prime may require any such transferee to execute an acknowledgment
recognizing the applicability of the rights and obligations contained in this
Section to the membership interest transferred.
9.3 Ratification by Newco. Each of Prime, VCC and Couch agrees that by
executing this Agreement it is deemed to be voting any ownership interests or
management vote it may have in Newco (whether now or at any time after the
Closing) to authorize Newco to enter into and perform this Agreement and each of
the Transaction Documents to which Newco is a party, including, without
limitation, the Facility Use Agreement. Each of Prime, VCC and Couch agrees to
execute such resolutions and written consents, and take such other actions, in
their capacities as owners of Newco, as any party shall reasonably require after
the Closing to have Newco ratify and adopt this Agreement, notwithstanding the
time of creation of Newco or the time of execution of the Organizational
Documents.
9.4 Post-Closing Capital Contributions. Without in any way limiting or
qualifying the representation and warranty with respect to cash required to be
included in the Assets pursuant to Section 1.3, all parties to this Agreement
acknowledge and agree that no member of Newco, nor any other party, has any
obligation after the Closing to make a capital contribution to Newco.
9.5 Legend. On and after the Closing, each certificate or document
representing ownership of any of Newco's ownership interests, and each
certificate or document that may be issued and delivered by Newco upon transfer
of any such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND THEY MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM, OR OTHERWISE IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SUCH INTERESTS MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH
CERTAIN CONDITIONS SPECIFIED IN (I) A CERTAIN CONTRIBUTION AGREEMENT DATED
EFFECTIVE AS OF SEPTEMBER 1, 2000, AND (II) THE COMPANY'S LIMITED LIABILITY
COMPANY AGREEMENT, COMPLETE AND CORRECT COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED TO
THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
ARTICLE X
Miscellaneous
10.1 Collateral Agreements, Amendments, and Waivers. This Agreement
(together with the documents delivered pursuant hereto) supersedes all prior
documents, understandings, and agreements, oral or written, relating to this
transaction and constitutes the entire understanding among the parties with
respect to the subject matter hereof. Any modification or amendment to, or
waiver of, any provision of this Agreement (or any document delivered pursuant
to this Agreement unless otherwise expressly provided therein) may be made only
by an instrument in writing executed by each party thereto.
10.2 Successors and Assigns. No party's rights or obligations under
this Agreement may be assigned without the prior written consent of all parties
hereto, except that Prime may assign its rights and obligations hereunder to any
entity, more than fifty percent (50%) of the voting equity ownership interests
of which is at the time owned, directly or indirectly, by PMSI. Any assignment
in violation of the foregoing shall be null and void. Subject to the preceding
sentences of this Section, the provisions of this Agreement (and, unless
otherwise expressly provided therein, of any document delivered pursuant to this
Agreement) shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors, and assigns.
Notwithstanding any contrary provision of this Agreement or any other
Transaction Document, all of the parties agree that PMSI shall be free to effect
a transfer, assignment or encumbrance of the ownership interests or assets of
any of its direct or indirect subsidiaries other than Newco and Newco's direct
or indirect subsidiaries (an "Upstream Transfer"), and that no Upstream Transfer
shall give rise to or be subject to any rights or approval requirements that are
applicable to a direct transfer of the membership interests or assets of Newco
under this Agreement or any other Transaction Document.
10.3 Expenses. Except as set forth in the following sentence,
regardless of whether the transactions contemplated hereby are consummated, each
party hereto shall pay all of its costs and expenses incurred by it in
connection with this Agreement, including the fees and disbursements of its
legal counsel and accountants. Notwithstanding the foregoing, up to $3,000 of
the costs and expenses incurred by Prime that are associated specifically with
the formation and documentation of Newco, including legal fees and expenses for
drafting the Organizational Documents, shall be paid or reimbursed to Prime by
Newco.
10.4 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement.
10.5 Waiver. No failure or delay on the part of any party in exercising
any right, power, or privilege hereunder or under any of the documents delivered
in connection with this Agreement shall operate as a waiver of such right,
power, or privilege; nor shall any single or partial exercise of any such right,
power, or privilege preclude any other or future exercise thereof or the
exercise of any other right, power or privilege.
10.6 Notices. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered pursuant to this Agreement) shall be given in writing and shall be
deemed received (a) when delivered personally or by courier service to the
relevant party at its address as set forth below or (b) if sent by mail, on the
third (3rd) day following the date when deposited in the United States mail,
certified or registered mail, postage prepaid, to the relevant party at its
address indicated below:
PMSI & Prime: 0000 Xxxxxxx xx Xxxxx Xxxxxxx
Xxxxx X-000
Xxxxxx, Xxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to: Xx. Xxxxxxx X. XxXxxx
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
VCC or KCL: Vision Correction Centers of Kansas City, P.C. or
Kansas City Laser Vision Correction Centers,
L.L.C.
0000 X.X. Xxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxx, M.D.
Facsimile: (000) 000-0000
Couch: Xxxxxxx Xxxxx, M.D.
0000 X.X. Xxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx Xxxxxxx
Xxxxxxx Law Firm
0000 Xxxxxxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
Each party may change its address for purposes of this Section by proper
notice to the other parties.
10.7 Survival of Representations, Warranties, and Covenants. Regardless
of any investigation at any time made by or on behalf of any party hereto or of
any information any party may have in respect thereof, all covenants,
agreements, representations, and warranties made hereunder or pursuant hereto or
in connection with the transactions contemplated hereby shall survive the
Closing.
10.8 Further Assurances. At, and from time to time after, the Closing,
each party shall, at the request of another party, but without further
consideration, execute and deliver such other instruments of conveyance,
assignment, assumption, transfer and delivery and take such other action as such
party may reasonably request in order more effectively to consummate the
transactions contemplated hereby.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Xxx Xxxxxxx, Xxxx
Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxxx and (ii) VCC, it shall mean such items as
are within the actual knowledge of Couch and any employee of VCC who becomes an
employee of Newco after the Closing. For purposes of this Agreement, when the
term "affiliate" is used with respect to PMSI or Prime, it shall not include
KCL, VCC or Couch, and when "affiliate" is used with respect to KCL, VCC or
Couch, it shall not include PMSI or Prime.
10.10 Other Agreements. Each party hereto agrees that any material
breach by it of any of the terms and provisions of another Transaction Document
to which it is a party shall also be deemed to have been for all purposes a
material breach by it of this Agreement, and that any material breach by it of
the terms and provisions of this Agreement shall also be deemed for all purposes
to have been a material breach by it of all other Transaction Documents to which
it is a party.
10.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri.
10.12 Arbitration. Any controversy between the parties regarding this
Agreement or any other Transaction Document, any claims arising out of any
breach or alleged breach of this Agreement or any other Transaction Document and
any claims arising out of the relationship between the parties created hereunder
shall be submitted to binding arbitration by all parties involved. The
arbitration proceedings shall be conducted by a single arbitrator pursuant to
the Commercial Arbitration Rules of the American Arbitration Association
(subject to the express provisions of this Section). The arbitration shall be
conducted in Austin, Texas. The arbitrator shall not have the right to award
punitive or exemplary damages against either party.
10.13 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
S-1
SIGNATURE PAGE TO
CONTRIBUTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PMSI: Prime Medical Services, Inc.
------------------------------------
Xxxxxx Xxxxxxxx, Senior Vice
President
Prime: Prime RVC, Inc.
------------------------------------
Xxxxxx Xxxxxxxx, Senior Vice
President
Couch: ____________________________________
Xxxxxxx Xxxxx, M.D.
VCC: Vision Correction Centers of
Kansas City, P.C.
------------------------------------
Xxxxxxx Xxxxx, M.D., President
KCL: Kansas City Laser Vision Correction
Centers, L.L.C.
------------------------------------
Xxxxxxx Xxxxx, M.D., President
Newco: Prime Refractive - Kansas City,
L.L.C.
------------------------------------
Xxxxxxx Xxxxx, M.D., as manager of
Newco and individually as a
member of Newco
------------------------------------
Xxxxxx Xxxxxxxx, as manager of Newco
and on behalf of Prime as a
member of Newco