CONTRIBUTION AGREEMENT
Among
PRIME MEDICAL SERVICES, INC.,
PRIME REFRACTIVE, L.L.C.,
CASTER ONE, L.L.C.,
XXXXXX XXXXXX, M.D.,
and
CASTER EYE CENTER MEDICAL GROUP
--------------------
Dated as of March 1, 2000
3
043838.0000 AUSTIN 169304 v11
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into to be
effective as of March 1, 2000 (the "Effective Time"), among Prime Medical
Services, Inc., a Delaware corporation ("PMSI"), Prime Refractive, L.L.C., a
Delaware limited liability company ("Prime"), Caster Eye Center Medical Group, a
California corporation ("Seller"), Caster One, L.L.C., a Delaware limited
liability company ("Newco") and Xxxxxx Xxxxxx, M.D., an individual residing in
Beverly Hills, California and the sole shareholder of Seller ("Caster").
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 Seller, as of the Effective Time,
by payment of $366,489 (the "Asset Purchase Price"), an undivided sixty percent
(60%) interest in all of the Assets (as hereinafter defined); (b) Prime agrees
to purchase from Caster, as of the Effective Time, sixty percent (60%) of the
Goodwill (as hereinafter defined), by payment of $5,462,235 (the "Goodwill
Purchase Price") (c) Prime agrees to contribute to Newco, as of the Effective
Time, its entire interest in the Assets it purchased from Seller in return for a
sixty percent (60%) ownership interest in Newco which Newco hereby agrees to
issue to Prime; and (d) Seller agrees to contribute to Newco, as of the
Effective Time, the entire remaining interest in the Assets not purchased by
Prime in return for the other forty percent (40%) ownership interest in Newco.
The Goodwill Purchase Price and Asset Purchase Price are herein referred to in
the aggregate as the "Aggregate Purchase Price." 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 Caster,
and, immediately after the Closing, Prime shall own sixty percent (60%) of all
of the outstanding membership interests of Newco and Seller shall own forty
percent (40%) of all of the outstanding membership interests of Newco; and
(z) prior to the Closing Date, Prime and Seller shall have
executed the limited liability company agreement, in the form attached hereto as
Exhibit A, 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, all Permits
(as hereinafter defined), all business records (excluding medical records)
related to the Business (as hereinafter defined) conducted after the Effective
Time, copies of the business records (excluding medical records) related to the
Business conducted during the period beginning January 1, 1998 and ending on the
Effective Time, any and all rights of Seller under leases (including rights to
receive returns of deposits under such leases) or contracts listed on Schedule
1.3(a), the name "Caster Eye Center" and all likenesses thereof, and all
trademarks, service marks and applications for trademarks or service marks that
are related to the iris in motion portrayal utilized by Caster in connection
with the Business (the "Iris IP"). Notwithstanding the foregoing, the following
shall not be deemed "Assets", and shall not be acquired by Prime:
(a) all activities that constitute the practice of medicine;
(b) the books of account and record books of Seller up to and
including the Effective Time (provided, that Caster must give to Prime, prior to
the Closing Date, complete and accurate copies thereof, insofar as they relate
to the Business during the period beginning January 1, 1998 and ending on the
Effective Time);
(c) Seller's rights under this Agreement;
(d) all medical records of Seller and Caster;
(e) any limited partnership interest owned by Seller in Keratome Leasing
Associates, LLC, a California limited liability company;
(f) all cash, cash equivalents, and accounts receivable
arising from procedures done or work performed prior to the Effective Time, and
all bank accounts and other deposit accounts (but excluding cash on deposit in
such accounts that arose from procedures done or work performed after the
Effective Time);
(g) all assets that are neither used in, nor relied on for, the conduct of
the Business;
(h) except as expressly set forth in this Agreement, assets
that are owned individually by Caster, including, without limitation, (A) all
stock owned by Caster in Aris Vision Centers and Presby Corp., (B) any
copyright, held individually by Caster, for the medical book entitled "The Eye
Laser Miracle: The Complete Guide to Better Vision" and authored by Caster, (C)
that certain United States Patent No. 5,711,045, issued January 27, 1998,
pertaining to an infant sleep device, (D) all of Caster's medical records, (E)
the practice of medicine by Caster, and (F) Caster's rights under this
Agreement;
(i) any written or oral employment, payor or personal service
agreement with respect to any medically trained person required to be licensed
under the California Business and Professions Code, including physicians,
registered nurses and optometrists;
(j) any refund of any amount to which Seller claims entitlement and which
is specifically identified in the Schedules hereto as being retained by Seller
after the Closing; and
(k) any artwork depicting Caster's children.
As used in this Agreement, "Business" shall mean the business related
to the conduct of Refractive Surgery and related activities that are incidental
thereto, excluding in all cases the practice of medicine. As used in this
Agreement, "Technical Assistance" shall mean, collectively, the rendering of
personnel and technical assistance in relation to the operation of the Business,
other than the practice of medicine, including, without limitation, personnel,
equipment, space and services, in connection with Refractive Surgery acquired by
Caster personally as a bi-product of his practice of medicine and "Goodwill"
shall mean the goodwill arising solely from the Technical Assistance. As used in
this Agreement, "Refractive Surgery" shall mean 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, is required in the exercise of a physician's independent
professional judgment as to the individual patient to be performed in 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, in each instance within either an ambulatory surgical center or
acute care hospital that, in either case, meets all licensing requirements
applicable in the State of Texas (provided, however, that this sentence shall
not exclude from "Refractive Surgery" any surgical procedure included in
"Refractive Surgery" at the Effective Time, and if any applicable regulatory
change occurs that would result in such a reclassification, 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 the
parties arising under this Agreement and the other Transaction Documents).
1.4 Assumed Liabilities. Seller and Caster each agree that, at the
Closing, Newco shall assume only the following (collectively, the "Assumed
Liabilities") (a) those executory lease or other contract obligations accruing
after the Effective Time under leases or contracts specifically identified as
Assumed Liabilities on Schedule 1.3(a), and (b) those trade payables on open
account with unrelated third parties incurred with respect to goods and services
received or used by Seller on or after the Effective Time (the "Trade
Payables"). With respect to inventory items included in the Assets, there will
be a pro-ration of the cost of such inventory items based on the extent to which
the inventory items were used prior to or after the Effective Time. The parties
agree to cooperate in good faith to account for such pro-ration and remit
amounts that may become due another party based on such pro-ration. 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 under
such leases or contracts, which occurred or were alleged to have occurred prior
to the Closing Date and (z) trade payables not included in the definition of
"Assumed Liabilities" above.
Except for the Assumed Liabilities, Seller and Caster each agree that
any and all debts, liabilities, and obligations of Seller or Caster, 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 Seller or its business) shall remain the sole
responsibility of Seller or Caster (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). Except for the assumption by Newco of the Assumed
Liabilities, and without otherwise limiting the foregoing provisions of this
Section, each of Seller and Caster specifically acknowledges and agrees that
none of PMSI, Prime, any affiliate of PMSI or Prime, or Newco shall assume any
claims, debts, liabilities or obligations whatsoever of Seller or Caster,
including, without limitation, those related to or arising out of or under any
claim or other action disclosed on Schedule 3.13.
Notwithstanding the foregoing, PMSI may, if and only to the extent
required pursuant to the express provisions of Section 10.11, be required to pay
amounts under certain guarantees of contracts listed on Schedule 1.4 attached
hereto.
1.5 Payment and Allocation of Purchase Price. Prime agrees to pay the
Asset Purchase Price to Seller at the Closing by cashier's check, wire transfer
or delivery of other immediately available funds. Prime agrees to pay the
Goodwill Purchase Price to Caster at the Closing by cashier's check, wire
transfer or delivery of other immediately available funds. The Asset Purchase
Price will be allocated among the Assets in accordance with Schedule 1.5
attached hereto.
ARTICLE II
Representations and Warranties of PMSI and Prime
PMSI and Prime hereby represent and warrant to Caster and
Seller, jointly and severally, that each of the following matters is true and
correct in all respects as of the Closing Date (with the understanding that such
representations and warranties shall survive the Closing and are being
materially relied on by Caster and Seller 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"):
2.1 Due Organization and Principal Executive Office. Prime is a limited
liability company 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. Since the Effective Time, there has been no
material adverse change in the financial condition or operations of PMSI or
Prime.
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 (collectively, "Laws") applicable to it or its properties
(provided, however, that any representation or warranty by Prime or PMSI with
respect to 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 and 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. Furthermore, neither Prime nor PMSI has
any actual knowledge on the Closing Date that the structure of the transactions
contemplated by this Agreement is reasonably certain to result in a breach by
Caster or Seller of the representations made by them with respect to (y)
compliance with Laws regulating or legislating the provision of healthcare or
the practice of medicine, or (z) the effect of any such Laws on any Permits of
Caster or Seller.
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. No inquiry, action, or proceeding has been
asserted, instituted, or (to the knowledge of Prime or PMSI) threatened against
Prime or PMSI, by any court, federal, state or local governmental agency or
other body having the right to regulate all or any portion of their respective
business operations, 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.
2.5 Investment Representations. Each of PMSI and Prime:
--------------------------
(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
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, Caster, Seller, the affiliates of
Caster or Seller, or the officers, directors, shareholders, employees, partners,
members, agents, consultants, personnel or similarly related parties of Caster
or Seller, 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 Seller and Caster
Caster and Seller hereby represent and warrant to Prime, jointly and
severally, that each of the following matters is true and correct in all
respects as of the Closing Date (with the understanding that such
representations and warranties shall survive the Closing and are being
materially relied on by Prime and PMSI in entering into and performing this
Agreement).
3.1 Due Organization. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California and has
full power and authority to carry on its business as now conducted and as
proposed to be conducted. Seller is qualified to do business and is in good
standing in every jurisdiction where such qualification is required for the
conduct of Seller's business as conducted on the Closing Date. As of the Closing
Date, Caster is the sole holder of all equity ownership interests in Seller,
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 Seller.
3.2 Subsidiaries. Seller 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 Seller and Caster has full power and
authority to enter into and perform this Agreement and each Transaction Document
required to be executed by Seller or Caster 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 Seller, its
directors, its officers and its shareholders. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and Caster and constitutes a valid and binding obligation of Seller and Caster,
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 Caster and/or Seller do not (a) violate any
Law applicable to Seller, the Business or the Assets (provided, however, that
the representation and warranty in this sentence, the first sentence, and the
last sentence of this Section 3.3 does not extend to any Law that might give
rise to Covered Taxes, as such term is hereinafter defined, and provided
further, that any representation or warranty by Caster or Seller with respect to
Laws regulating or legislating the provision of healthcare or the practice of
medicine shall be limited to the actual knowledge possessed by Caster and Seller
on the Closing Date), (b) violate or conflict with, or permit the cancellation
of, any agreement to which Seller is a party, or by which Seller or its
properties are bound, or 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 Caster or Seller, or any indebtedness
secured by the property of Seller (but this provision does not extend to any
assertion of Covered Taxes), or (d) violate or conflict with any provision of
the organizational documents of Seller. No action, consent, waiver or approval
of, or filing with, any federal, state, county or local governmental authority
is required by Caster or Seller 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 of Seller as of and for each of the years ended December 31, 1998 and
1999, and the unaudited balance sheet and income statement of Seller as of and
for the period beginning on January 1, 2000, and ending on February 29, 2000
(the "Balance Sheet Date") are attached hereto as Exhibit B (collectively, the
"Financial Statements"). To the knowledge of Seller, the Financial Statements
have been prepared using the cash method of accounting consistently applied
(except as specifically noted therein or in Schedule 3.4), and the Financial
Statements (taking into account the effect of the obligations specifically
disclosed in the Schedules to this Agreement which may not be reflected on such
financial statements) fairly present the financial position and results of
operations of Seller as of the indicated dates and for the indicated periods.
Except as reflected on the Financial Statements or in the Schedules to this
Agreement, and except for open account trade payables incurred in the ordinary
course of business and amounts owed to Caster, as of the Closing Date, Seller
has no claims, debts, liabilities, or obligations, 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, and any
liabilities arising from any litigation or civil, criminal or regulatory
proceeding involving or related to Seller, its assets or the Business). Seller
and Caster each agree to indemnify and hold harmless Prime and its affiliates
from and against any and all such claims, debts, liabilities and obligations.
Except as set forth in Schedule 3.4 hereto, since the Effective Time there has
been no material adverse change in the assets of Seller, the Business, or the
results of operations or financial position of Seller.
3.5 Conduct of Business; Certain Actions. Except as set forth on
Schedule 3.5 attached hereto, and except as expressly required or contemplated
under the terms of this Agreement and the other Transaction Documents, since the
Balance Sheet Date, Seller has conducted its operations in the ordinary course
and consistent with its past practices and has not (a) increased the
compensation of any employees, agents, contractors, vendors or other parties
providing services to Seller, except for wage and salary increases made in the
ordinary course of business and consistent with the past practices of Seller,
(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 or suspended
its procedures for collecting accounts receivable and paying its accounts
payable, (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,
or (n) experienced or effected any shutdown, slow-down, or cessation of any
operations conducted by, or constituting part of, it.
3.6 Assets; Licenses, Permits, etc. Other than the personnel, the
Assets include all property and assets, real, personal and mixed, tangible and
intangible (other than goodwill), 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 necessary in the Business as conducted prior
to the Closing Date, or used primarily in, materially relied on for, or
substantially related to the conduct of the Business by Seller as it exists on
the Closing Date. Except as set forth on Schedule 3.6(a), Seller has good and
marketable title to all of the Assets, in each case 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 conduct of the
Business. 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 Seller and used or relied on (or to be used or relied on) in connection with
the Assets or the Business ("Permits"). Seller has complied in all material
respects, and Seller is 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 as presently conducted (provided
that, with respect to any Permit required under a Law regulating or legislating
the provision of healthcare or the practice of medicine, this representation
shall be limited to the actual knowledge possessed by Seller and Caster on the
Closing Date). No claim has been made by any governmental authority (and, to the
knowledge of Caster and Seller, no such claim has been threatened) to the effect
that a Permit not possessed by Seller 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 (provided that, with respect to any Permit required under a Law
regulating or legislating the provision of healthcare or the practice of
medicine, this representation shall be limited to the actual knowledge possessed
by Seller and Caster on the Closing Date).
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) Seller has 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 Seller 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 or the
financial position of Seller.
(c) Seller has not 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
its 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. To the knowledge of Seller and
Caster, and except for: (i) the Iris IP; (ii) rights granted under medical
equipment contracts to which Seller is a party; and (iii) those items disclosed
on Schedule 3.8, there are no patents, trademarks, trade names, or copyrights,
and no applications therefor, owned by or registered in the name of Seller or
Caster or in which Seller or Caster has any right, license, or interest;
provided, however, that the foregoing representation does not apply to any
patents, tradenames, copyrights or applications owned by or registered in the
name of Caster to the extent such items do not pertain to the conduct of the
Business. Except as disclosed on Schedule 3.8, Seller is not a party to any
license agreement, either as licensor or licensee, with respect to any patents,
trademarks, trade names, or copyrights. Seller has not 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 Seller and Caster, Seller
has complied in all material respects, and Seller is in compliance in all
material respects, with all Laws currently in effect (provided however, that any
representation or warranty by Caster or Seller with respect to Laws regulating
or legislating the provision of healthcare or the practice of medicine shall be
limited to the actual knowledge possessed by Caster and Seller on the Closing
Date). No claim has been made or (to the knowledge of Seller and Caster)
threatened by any governmental authority against Seller to the effect that the
business conducted by Seller 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 Seller 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, and annual premium. To the
knowledge of Seller and Caster, no event directly relating to Seller 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 Seller during the past three (3) years,
including without limitation any change which has resulted in any period during
which Seller had no insurance coverage. Excluding insurance policies which have
expired and been replaced, no insurance policy of Seller has been canceled
within the last three (3) years and no threat has been made to cancel any
insurance policy of Seller within such period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11,
Seller does not maintain nor does it contribute nor is it 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). Seller does not presently maintain and has never 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. Except for Trade Payables, 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) to which Seller
is a party or by which Seller or any of its Assets is 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
(collectively the "Contracts" and individually, a "Contract"). Seller is not
and, to the best knowledge of Seller and Caster, 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 by Seller or, to the best
knowledge of Seller and Caster, by any other party thereto) under any Contract.
Seller has not 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. Seller has not guaranteed any obligation
of any other person or entity.
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 Seller and Caster, threatened against Seller or
Caster, 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
Seller which (individually or in the aggregate) is material, and Seller has not
been, and Seller is not now, subject to any order, judgment, decree,
stipulation, or consent of any court, governmental body, or agency that could
reasonably be expected to materially and adversely affect the Assets or the
Business. No inquiry, action, or proceeding has been asserted, instituted, or
(to the knowledge of Seller or Caster) threatened against Seller or Caster 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
Seller 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 Seller. Seller has provided Prime with true and complete
copies of all Returns filed for or with respect to any period occurring between
January 1, 1996 and December 31, 1999. All Taxes, assessments, penalties, and
interest which have become due pursuant to such Returns have been paid or will
be paid by Caster or Seller when due (but shall not, under any circumstances, be
included in Assumed Liabilities). Seller has not 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 Seller with respect to any Taxes owed or allegedly owed by
Seller. There are no tax liens on any of the assets of Seller. Proper and
accurate amounts have been withheld and remitted by Seller from and in respect
of all persons from whom it is required by applicable law to withhold for all
periods in compliance with the tax withholding provisions of all applicable laws
and regulations. Seller is not 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
Seller 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 Seller 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 Seller is a party
and all severance benefits which any director, officer, Employee or sales
representative of Seller is or may be entitled to receive. Seller has delivered
to Prime accurate and complete copies of all such employment agreements,
confidentiality agreements, and all other agreements, plans, and other
instruments to which Seller is a party and under which its employees are
entitled to receive benefits of any nature. Schedule 3.15 also sets forth
personal expenses incurred by Seller for any of its employees that were not
incurred in the ordinary course of Seller's business. Except as described on
Schedule 3.13 attached hereto, there is no pending or (to the knowledge of
Seller or Caster) threatened (i) labor dispute or union organization campaign
relating to Seller, (ii) claims against Seller by any employees of Seller, or
(iii) terminations, resignations or retirements of any employees of Seller. None
of the employees of Seller are represented by any labor union or organization.
There is no unfair labor practice claim against Seller before the National Labor
Relations Board or any strike, labor dispute, work slowdown, or work stoppage
pending or (to the knowledge of Seller or Caster) threatened against or
involving Seller.
3.16 Business Relations. Seller has no reason to believe and has not
been notified that any supplier or customer of Seller will cease or refuse to do
business with Seller in the same manner as previously conducted with Seller 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
Goodwill, the Assets or the Business. Seller has not received any notice of any
disruption (including delayed deliveries or allocations by suppliers) in the
availability of the materials or products used by Seller.
3.17 Agents. Except as set forth on Schedule 3.17 attached hereto,
Seller has not designated or appointed any person (other than Seller'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. Except as specifically reflected in the Financial Statements or set
forth on Schedule 3.18, Seller does not owe any indebtedness to Caster or any of
its directors, officers, shareholders, employees or affiliates, or have
indebtedness owed to it from Caster or any of its directors, officers,
shareholders, employees or affiliates, excluding indebtedness for travel
advances or similar advances for expenses incurred on behalf of and in the
ordinary course of business of Seller and consistent with Seller's past
practices. As of the Effective Time and the Closing Date all amounts due Seller
from any of its 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, Seller does not employ or have any relationship with any
individual, corporation, partnership, or other entity whose compensation from
Seller 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, and except for consents obtained and provided to Prime prior to or at
the Closing, there are no consents, waivers, or approvals required to be
executed and/or obtained by Seller from third parties (including, without
limitation, the spouse, if any, of Caster) in connection with the execution,
delivery, and performance of this Agreement or any other Transaction Document
(provided that, with respect to any such consent required under a Law regulating
or legislating the provision of healthcare or the practice of medicine, this
representation shall be limited to the actual knowledge possessed by Seller and
Caster on the Closing Date).
3.21 Brokers. Seller has not engaged, or caused any liability to be
incurred to, any finder, broker, or sales agent (and has not paid, and will not
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 Seller nor any affiliate of
Seller, and to the knowledge of Seller and Caster, no director, officer,
employee or affiliate of Seller or any affiliate of any director, officer,
employee or affiliate of Seller, has any ownership interest in any competitor,
customer or supplier of Seller (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, Seller has not
made any warranties or guarantees to third parties with respect to any products
sold or services rendered by it, other than those arising solely by operation of
law without any agreement or arrangement by Seller. Except as set forth on
Schedule 3.23 attached hereto, no claims for breach of product or service
warranties have ever been made against Seller in connection with Refractive
Surgery.
3.24 Billing Arrangement. Prior to the Closing, Seller has operated
subject to an arrangement between Seller and Westside Ambulatory Surgical
Medical Center, Inc., a California corporation ("Westside"), pursuant to which
Westside has performed certain billing and related tasks on behalf of Seller.
With respect to Westside: (a) Caster is the sole owner of all of the outstanding
capital stock and other ownership interests of Westside (assuming the
conversion, exercise or exchange of all rights and securities that are
convertible into, or exercisable or exchangeable for, capital stock or other
ownership interests of Westside); (b) since its formation, Westside has not
engaged in any material business operations that were not related to the
Business and the operations of Seller; and (c) Westside has provided to Prime
prior to the Closing true and complete copies of each and every written
contract, agreement or arrangement to which Westside is a party, and has also
provided to Prime prior to the Closing a complete and accurate description
reflecting each oral contract, agreement or arrangement to which Westside is a
party (with sufficient detail to accurately depict all material aspects of the
terms and provisions thereof).
3.25 Investment Representations. Each of Seller and Caster:
--------------------------
(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 California
Corporate Securities Law of 1968, 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
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. Each of Caster and Seller agrees that following the
Closing Date, Seller will change its name from, and cease using the name,
"Caster Eye Center Medical Group" or any words or phrases which are deceptively
similar to such name; provided, however, that Seller shall not be required to
change its legal name from "Caster Eye Center Medical Group" for the period
beginning on the Closing Date and ending on the earlier of (i) the expiration of
one hundred eighty (180) days immediately following the Closing Date and (ii)
Seller's receipt of a new Medicare/Medicaid provider number applicable to the
name Seller intends to use after the Closing (the "Interim Period"); and
provided further that Seller may use such name as the name of Seller during the
Interim Period, and Newco hereby grants a non-exclusive license to Seller to use
such name after the Interim Period, limited in both cases to only the following
instances: (a) advertising and promotional materials, as long as such use is not
in connection with, or for the promotion of, any activity that is a violation of
this Agreement, including, without limitation, Section 9.2 of this Agreement,
(b) billing for procedures or services that involve the use of Newco's equipment
or facilities, and (c) any other use that is consistent with the express
provisions of this Agreement and any other Transaction Document. The foregoing
license and use of such name shall be terminated (y) upon delivery of notice to
Caster by Newco of a material breach (subject to any rights to cure such breach)
by Caster or Seller of this Agreement or any other Transaction Document or (z)
automatically upon any delivery of the Termination Notice pursuant to Section
9.3(a) hereof or breach by Caster of the provisions of or default under ARTICLE
VIII or ARTICLE IX hereof (either, a "Trigger Event"). Promptly following any
such termination, Seller agrees to terminate any use of such name and to execute
all documents reasonably necessary or requested by Prime concerning such
cessation of use and the vesting of use in Prime or Prime's nominee.
Notwithstanding any contrary provision of this Agreement, nothing herein shall
preclude Caster from using his full legal individual name and professional
accomplishments in the practice of medicine.
4.2 Cooperation Relating to Financial Statements. Seller agrees to
cooperate with Prime, at Newco's expense, in the preparation of any financial
statements of Seller which Prime or its affiliates may be required by any
applicable law to prepare.
4.3 Action by Owners; Joint and Several Liability of Caster. Caster
agrees to vote any interest it owns in Seller, and to take such other actions as
may be necessary in his capacity as the sole director and sole shareholder of
Seller, to authorize and direct Seller to perform all of its obligations under
this Agreement and under the Organizational Documents and other Transaction
Documents to which Seller is a party. Furthermore, Caster and Seller 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 Seller to any person other than Caster, a Permitted Trust
or a Permitted Entity (as such terms are defined in Newco's Limited Liability
Company Agreement) or (ii) transfer, assign, pledge, hypothecate, or in any way
alienate any capital stock of Seller, or any interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, to any person other
than Caster, a Permitted Trust or a Permitted Entity, 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. All evidences of
ownership in Seller, 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. THE CONTRIBUTION AGREEMENT LIMITS THE USE OF THE
INTERESTS REPRESENTED HEREBY AS COLLATERAL FOR ANY LOAN WHETHER BY
PLEDGE, HYPOTHECATION OR OTHERWISE. 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."
Caster shall be jointly and severally liable for the payment and
performance of each and every obligation of Seller hereunder and under each of
the Transaction Documents, including without limitation, under the Limited
Liability Company Agreement of Newco.
4.4 Public Statements and Press Releases. The parties hereto covenant
and agree that, except as provided for herein below, 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 in the case of announcements, statements,
acknowledgments or revelations which either party is required by law to make,
issue or release, the making, issuing or releasing of any such announcement,
statement, acknowledgments or revelation by the party so required to do so by
law shall not constitute a breach of this Agreement if such party shall have
given, to the extent reasonably possible, prior notice to the other parties
hereto; provided further, that the foregoing prohibition shall not preclude oral
disclosures by Caster after the Closing to other individuals concerning the
existence of the transactions contemplated by this Agreement and the other
Transaction Documents. 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 Joint and Several Liability of PMSI. PMSI shall be jointly and
severally liable for the payment and performance of each and every obligation of
Prime hereunder and under each of the other Transaction Documents. Without
limiting the foregoing, PMSI agrees that if Prime shall default in any
obligation to pay to Seller or Caster any amount then due and payable by Prime
to Seller or Caster under ARTICLE I or ARTICLE VII hereunder, PMSI shall
immediately pay such amount to Seller or Caster. PMSI hereby agrees not to
require Seller or Caster to proceed against Prime or any other person or to
pursue any other remedy before proceeding against PMSI under this Agreement.
4.6 Working Capital Line. Caster 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 must be repaid by Newco prior to Newco's
distribution of any of its earnings to Prime.
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 Caster, Seller and Newco 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 A, and financing statements securing the rights granted
pursuant to Section 10.2 hereof for the States of Texas and California, and to
the extent permitted under applicable law, the California county of Los Angeles,
and the Texas county of Xxxxxx), 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 Caster, Seller and Newco shall have executed and
delivered that certain Facility Use Agreement, in the form attached hereto as
Exhibit C (the "Facility Use Agreement");
(c) 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 Seller, the Assets or the Business;
(d) Prime and PMSI shall have obtained the approval of their
unaffiliated lenders under any of the credit facilities of PMSI or any
subsidiary of PMSI that owns, directly or indirectly, an interest in Prime;
(e) each of the representations and warranties made by Caster
or Seller in this Agreement or any other Transaction Document shall be true,
correct and not misleading in any material respect; and
(f) each of Caster and Seller shall have delivered such good
standing certificates, officer certificates, and similar documents and
certificates as counsel for Prime may have reasonably requested.
5.2 Caster's and Seller's Conditions to Closing. Each of Caster's and
Seller'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 Caster and
Seller in writing. Upon failure of any of the following conditions, Caster or
Seller may terminate this Agreement:
(a) each of Prime and Newco 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 A, and the Facility Use Agreement), 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, including, without limitation, the payment of the
Asset Purchase Price to Seller and the Goodwill Purchase Price to Caster;
(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 Prime or PMSI;
(c) 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
(d) Prime shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Caster and Seller may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime. Each of Caster and Seller agrees to
indemnify and hold harmless Prime, each parent company, subsidiary and/or
affiliate of Prime (including, without limitation, Seller and 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") 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
Caster or Seller of any of the representations, warranties, covenants or
agreements contained in this Agreement or any Transaction Document, (b) except
for Assumed Liabilities, any claim, debt, obligation or liability of Caster or
Seller, (c) except for Assumed Liabilities, any actual or alleged actions or
omissions by Caster, Seller, or any of Seller'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) all
Taxes owed by Seller or Caster, including, without limitation, Taxes arising as
a result of the transactions contemplated by this Agreement, including, without
limitation, any Covered Taxes (as hereinafter defined) in excess of Covered
Taxes required to be paid or reimbursed by Prime or PMSI pursuant to Section
7.1(b); provided this clause (d) shall not be construed to require Sellers or
Caster to provide any indemnity for the amounts required to be reimbursed by
Prime or PMSI pursuant to Section 7.1(b)
Prior to receiving indemnification under this Section, a Prime
Indemnified Party must seek recovery from then existing applicable insurance
policies, but in no event is a Prime Indemnified Party required to exhaust
remedies against insurance companies if coverage is non-existent, limited or
declined; provided, however, that the Prime Indemnified Party may be required,
upon request by the indemnifying parties, to obtain the advice of such Prime
Indemnified Party's own legal counsel advising that there is a reasonable basis
for denial of insurance of limitation of insurance coverage; and provided
further, that the Prime Indemnified Party must, as a condition to receiving
recovery under this Section, assign whatever rights to denied benefits that such
Prime Indemnified Party may have and may legally assign, subject to any
contractual or other limitations on assignment. Without in any manner
restricting a Prime Indemnified Party's right to independently obtain insurance,
no Prime Indemnified Party shall be required to acquire or maintain insurance as
a condition to exercising its rights under this Section.
For purposes of this Section 6.1 only, 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 clause (c) of this
Section, shall, to the extent indemnification with respect thereto has not
already been paid directly to a Prime Indemnified Party, 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.
Notwithstanding any provision of this Agreement or any other
Transaction Document to the contrary, none of Caster, Seller or any other Seller
Indemnified Party may, and each hereby agrees not to, seek contribution,
indemnification or reimbursement from Newco for any amount Caster or Seller is
required to pay pursuant to this ARTICLE, regardless of whether Caster, Seller
or such other Seller Indemnified Party is entitled to contribution,
indemnification or reimbursement under any Transaction Document, the
organizational documents of Newco or applicable law.
Furthermore, the Prime Indemnified Parties, collectively, may
not, with respect to any Indemnified Cost, recover more than the aggregate
amount of such Indemnified Cost, or recover Indemnified Costs in the event of
any act or omission of Caster or Seller resulting solely and exclusively from
Caster's death or Permanent Disability (including, without limitation, a breach
or default under this Agreement resulting solely and exclusively therefrom). For
purposes of this Agreement, "Permanent Disability" with respect to Caster shall
mean Caster's having a mental or physical incapacity that can reasonably be
anticipated to prevent Caster's resumption of the normal performance of his
medical practice within the six (6) months succeeding the commencement of
Caster's incapacity, or (b) Caster's receipt of benefits for a period of six (6)
consecutive months by reason of disability under a salary continuation, or other
disability plan.
In addition, and notwithstanding any provision of this
Agreement or any other Transaction Document to the contrary, the provisions of
ARTICLE VI concerning the indemnification of Prime Indemnified Parties shall
have no application to a violation or breach by Caster or Seller of any
applicable covenant or provision contained in ARTICLE VIII or in ARTICLE IX of
this Agreement, it being the intent of the parties that the remedies provided
for in Sections 9.7(a) and 9.7(b) of this Agreement shall constitute the sole
remedies of the Prime Indemnified Parties.
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Caster, 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 Caster shall not relieve
Caster or Seller from any liability that either may have to such Prime
Indemnified Party under this ARTICLE unless the failure to give such notice
materially and adversely prejudices Caster. Caster 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) Caster 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) Caster 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) Caster 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 Caster 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 Caster, without the prior written consent of Caster, which consent
may be given, withheld, or conditioned in Caster's sole and absolute discretion;
(e) Caster 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 entitled 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
Caster 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. Without limiting the foregoing, with
respect to any Indemnified Costs asserted pursuant to Section 6.1(e), Prime
agrees to cooperate fully with Caster to vigorously defend the assertion of any
Covered Taxes.
ARTICLE VII
Indemnification of Caster and Seller
7.1 Indemnification of Caster and Seller.
(a) PMSI and Prime, jointly and severally, agree to indemnify
and hold harmless Caster, Seller, their respective affiliates, including
Westside, and each of their agents, employees and representatives (collectively,
the "Seller Indemnified Parties"), from and against any and all Indemnified
Costs in connection with the commencement or assertion of any Third-Party Action
which any of the Seller Indemnified Parties may sustain, arising out of or
related to (i) any breach or default by Prime of any of the representations,
warranties, covenants or agreements contained in this Agreement or any
Transaction Document, (ii) any claim, debt, obligation or liability of PMSI or
Prime, and (iii) any actual or alleged actions or omissions by PMSI, Prime, or
the directors, officers, shareholders, agents, employees, representatives,
subsidiaries and/or affiliates of either of PMSI or Prime occurring prior to the
Closing Date (regardless of whether such Indemnified Costs are asserted at any
time before or after the Closing Date).
(b) Each of PMSI and Prime, jointly and severally, agrees to
indemnify and promptly reimburse Seller and/or Caster, as and when incurred, for
any corporate income and/or corporate franchise taxes that either or both the
State of California or the United States Internal Revenue Service may assess
against Seller as a result of the consummation of the transactions contemplated
by Section 1.1 of this Agreement and only (notwithstanding the other provisions
of this ARTICLE) those actually paid by Seller (collectively, the "Covered
Taxes"), together with one-half of any interest and penalties related to Covered
Taxes and one-half of any costs (including actual attorney's fees and costs)
arising out of, incurred and paid by either or both of Seller and Caster in
connection with any audit, administrative proceeding or suit by or against a
taxing authority or governmental entity related to any Covered Taxes.
Notwithstanding the foregoing, Prime's and PMSI's aggregate obligation under
this subsection (b) shall not exceed (i) an amount equal to the lesser of
thirty-seven and one half percent (37.5%) of the amount of any Covered Taxes or
$900,000, plus (ii) fifty percent (50%) of all interest and penalties related to
Covered Taxes, plus (iii) fifty percent (50%) of all costs (including actual
attorneys' fees and costs) arising out of, incurred and paid by either or both
of Seller and Caster in connection with any audit, administrative proceeding, or
suit by or against a taxing authority or governmental entity related to any
Covered Taxes. Furthermore, Prime's and PMSI's obligation under this subsection
(b) is contingent on Seller's and Caster's compliance with their obligations
under Section 7.2. Seller and Caster, jointly and severally, agree that they
shall indemnify Prime and PMSI from and against any Covered Taxes (and such
related amounts described above) that are in excess of the amount Prime and PMSI
are required to pay pursuant to this subsection (b).
(c) Prior to receiving indemnification under this Section, a
Seller Indemnified Party must seek recovery from then existing applicable
insurance policies, but in no event is a Seller Indemnified Party required to
exhaust remedies against insurance companies if coverage is non-existent,
limited or declined; provided, however, that the Seller Indemnified Party may be
required, upon request by the indemnifying parties, to obtain the advice of such
Seller Indemnified Party's own legal counsel advising that there is a reasonable
basis for denial of insurance of limitation of insurance coverage; and provided
further, that the Seller Indemnified Party must, as a condition to receiving
recovery under this Section, assign whatever rights to denied benefits that such
Seller Indemnified Party may have and may legally assign, subject to any
contractual or other limitations on assignment. Without in any manner
restricting a Seller Indemnified Party's right to independently obtain
insurance, no Seller Indemnified Party shall be required to acquire or maintain
insurance as a condition to exercising its rights under this Section.
(d) For purposes of this Section 7.1 only, any decrease in the
value of a Seller Indemnified Party's ownership interest (if any) in Newco, as a
result of the acts, omissions or circumstances described in clause (a)(iii) of
this Section, shall, to the extent indemnification with respect thereto has not
already been paid directly to a Seller Indemnified Party, be deemed an
Indemnified Cost, and such Seller Indemnified Party shall be entitled to
indemnification hereunder in an amount equal to such decrease in value.
(e) Notwithstanding any provision of this Agreement or any
other Transaction Document to the contrary, none of Prime, PMSI or any other
Prime Indemnified Party may, and each hereby agrees not to, seek contribution,
indemnification or reimbursement from Newco for any amount Prime or PMSI is
required to pay pursuant to this ARTICLE, regardless of whether Prime, PMSI or
such other Prime Indemnified Party is entitled to contribution, indemnification
or reimbursement under any Transaction Document, the organizational documents of
Newco or applicable law.
(f) Furthermore, the Seller Indemnified Parties, collectively,
may not, with respect to any Indemnified Cost, recover more than the aggregate
amount of such Indemnified Cost.
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
Third-Party Action in respect of which such Seller 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 Seller Indemnified Party under
this ARTICLE unless 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 Seller 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
Seller 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 Seller Indemnified Party (provided, however, that Prime may,
but is not obligated to, pay directly to the appropriate agency or service
provider any amount it is required to pay pursuant to Section 7.1(b), without
obtaining the prior written approval of the Seller 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
Seller 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 Seller
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 Seller 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, which consent may be given,
withheld, or conditioned in Prime's sole and absolute discretion.
(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 Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller 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.
(g) Notwithstanding the foregoing provisions of this Section
7.2, this subsection 7.2(g) shall apply with respect to the assertion of Covered
Taxes. Seller and Caster shall have the right to control the defense of, settle,
or otherwise dispose of such Third-Party Action, as long as they vigorously
contest such Third-Party Action; provided, however, that Seller and Caster shall
not enter into any settlement or other agreement with any governmental taxing
authority regarding Covered Taxes without having first obtained the consent of
Prime (not to be unreasonably withheld). Further, Caster shall obtain Prime's
consent (not to be unreasonably withheld) on all material aspects of the defense
of such Third-Party Action, including without limitation, the selection of lead
tax counsel, necessary appraisers, and, if necessary, accountants. Prime shall
cooperate fully with Caster and Seller to vigorously defend the assertion of any
Covered Taxes, and shall be entitled, at its own expense, to participate in the
defense of such Third-Party Action. The other provisions of this Section 7.2
which are not inconsistent with the terms of this subsection 7.2(g) shall apply
to Third Party Actions relating to the assertion of Covered Taxes.
ARTICLE VIII
Covenants Regarding Future Acquisitions and Developments
in Los Angeles County, California
8.1 Restrictions on Acquisitions and Development in Los Angeles County,
California.
(a) De Novo Development. Except as expressly provided below,
each of PMSI, Prime, the Company and Caster agrees that, following the Closing
Date, it will not, without obtaining the prior written consent of the other
parties to this Agreement, directly or indirectly through any affiliate, except
through Newco or one of its subsidiaries, develop or establish (which does not
include the acquisition of an existing facility) a facility equipped to perform,
among other things, Refractive Surgery (a "New Center"), anywhere within Los
Angeles County, California (the "Restricted Area").
(b) Acquisitions. Except as expressly provided below, each of
PMSI, Prime, the Company and Caster agrees that, following the Closing Date, it
will not, without obtaining the prior written consent of the other parties to
this Agreement, directly or indirectly through any affiliate, except through
Newco or one of its subsidiaries, acquire an existing facility or business, or
convert such an acquisition into a facility or business, that provides
Refractive Surgery as a substantial component of its business operations (an
"Existing Center"), anywhere within the Restricted Area.
8.2 Additional Qualifications, Limitations. In addition to the qualifications
and limitations set forth elsewhere in this ARTICLE, the following shall apply:
(a) Notwithstanding the provisions of Section 8.1, any party
shall be free to independently develop or acquire all or any portion of any New
Center or any Existing Center (collectively, "Target Centers" and individually,
"Target Center") whose physical location is outside the Restricted Area;
(b) No provision of this Article shall be construed to require any party to
this Agreement to acquire or develop any Target Center;
(c) Notwithstanding the provisions of Section 8.1, any party
shall be free to independently acquire all or any portion of the assets and
business of any Target Center, that are not related to Refractive Surgery or
ophthalmology, regardless of whether such Target Center is in the Restricted
Area, to the extent those assets and business are not used primarily in,
materially relied on for, or substantially related to the conduct of Refractive
Surgery by such Target Center;
(d) Notwithstanding the provisions of Section 8.1, as part of
a larger acquisition transaction any party shall be free to independently
acquire, or with respect to PMSI or Prime merge with, any existing business if,
with respect to such existing business, (i) the prior year's revenues that arose
from Refractive Surgery comprise not more than ten percent (10%) of the total
prior year's revenues or (ii) the number of Refractive Surgery procedures done
during the prior year within the Restricted Area comprise not more than ten
percent (10%) of the total number of Refractive Surgery procedures done during
the prior year; provided, however, that if PMSI acquires, directly or
indirectly, an interest in a center that is located within the Restricted Area
(an "Incidental Center"), then PMSI shall, to the extent allowed under the
credit facilities of PMSI and its subsidiaries, within thirty (30) days of such
acquisition, notify Caster thereof and provide him with such information
concerning the Incidental Center as he shall reasonably request in order to make
his investment decision hereunder), and Caster shall have thirty (30) days
following receipt of such notice within which Caster may elect to acquire a
forty percent (40%) profits interest (not ownership interest) with respect to
PMSI's economic interest in such Incidental Center (the "Profits Acquisition").
For example, and only for purposes of illustration, if a subsidiary of PMSI
acquired a sixty percent (60%) ownership interest in an Incidental Center, the
Profits Acquisition pursuant to this subsection (d) would enable Caster to
acquire, indirectly through such subsidiary, the right to twenty-four percent
(24%) of the profits of the Incidental Center (i.e. 40% multiplied by 60%). The
closing of any Profits Acquisition must occur within sixty (60) days following
delivery of Caster's election to acquire a profits interest, with the price
determined using the allocable portion of the purchase price paid by PMSI or its
affiliate in the acquisition giving rise to the Incidental Center, and upon such
other terms and conditions as may be negotiated by the parties in good faith. If
Caster elects not to acquire a profits interest in an Incidental Center, or
fails to notify PMSI of his election to do so within the 30-day period provided
above (which shall be deemed an election not to acquire), or if such acquisition
is prohibited under the credit facilities or subordinated debt indenture of PMSI
or its subsidiaries, then PMSI must elect, or cause its acquiring subsidiary to
elect, among the following alternative actions, which selected action must be
taken within the time period specified below.
(i) Within one hundred twenty (120) days of such
election not to acquire a profits interest, Prime or PMSI, as
applicable, shall convert the Incidental Center to a Discount Center
(as hereinafter defined).
(ii) Within one hundred twenty (120) days of such
election not to acquire a profits interest, Prime or PMSI, as
applicable, shall terminate all of the operations of such Incidental
Center that consist of and are reasonably related to the conduct of
Refractive Surgery.
(iii) Within one (1) year of such election not to
acquire a profits interest, PMSI shall (but only if PMSI has not
elected one of the alternatives specified in clauses (i) and (ii)
above) sell all of its direct or indirect interest in such Incidental
Center to a third party, retaining no interest of any kind, whether
direct or indirect, in said Incidental Center (except that PMSI may
retain a creditor interest, but not a profits interest or other
interest measured by operations or results of operations, with respect
to any deferred portion of the purchase price applicable to such sale);
provided further, that PMSI must exercise commercially reasonable
efforts to sell such interest as soon as practical, and PMSI will
ensure that neither it nor any of its affiliates or subsidiaries will
share Proprietary Information (as hereinafter defined) with the
Incidental Center pending such sale.
8.3 Exceptions. Notwithstanding the provisions of Section 8.1, the
following acquisitions or developments of Target Centers located or to be
located within the Restricted Area are permitted:
(a) Developments of Volume Centers. The development of any New
Center by any party if the following conditions are satisfied: (i) the standard,
undiscounted fee that will generally be charged to the patients treated at such
New Center will be less than the product of fifty-four percent (54%) multiplied
by the greater of (A) the Patient Fee (as defined in the Facility Use Agreement)
then being charged with respect to procedures done by Caster utilizing Newco's
facilities (taking into account any imminent or planned reductions by Newco) and
(B) $1,435 (such product is hereinafter referred to as the "Threshold Patient
Fee", and a New Center satisfying the criteria in (i) is also referred to herein
as a "Discount Center"); and (ii) Caster (if the developing party is Prime) or
Prime (if the developing party is Caster) has been offered the opportunity to
purchase and receive up to ten percent (10%) of the interest being acquired by
the developing party (or, if the developing party is Prime, such lesser
percentage interest as would allow Prime to acquire not less than fifty-one
percent (51%) of the aggregate ownership interests of the New Center), on the
same terms and conditions afforded the developing party; provided, however, that
nothing in this subsection (a) shall require that the developing party be given
a guarantee or other financial or credit assistance from Newco or any other
party;
(b) Developments of Luminary Centers. The development of any
New Center by any party if the following conditions are satisfied: (i) the
standard, undiscounted fee that will generally be charged to the patients
treated at such New Center will be greater than the Threshold Patient Fee; (ii)
Newco has been offered the opportunity to develop the New Center but is
financially unable to develop the New Center using its existing financial
resources (without requiring a guarantee or other financial or credit assistance
from any of its members or their affiliates), as reasonably determined in good
faith by the affirmative vote or written consent of two of the three managers of
Newco (provided that, as long as a Trigger Event has not previously occurred,
Caster, Seller or their manager designee must be one of the affirming managers);
and (iii) two of the three managers of Newco elect to require capital
contributions from Newco's members in order to develop such New Center (provided
that, as long as a Trigger Event has not previously occurred, Caster, Seller or
their manager designee must be one of the affirming managers), and Caster or
Seller (if the developing party is Prime) or Prime (if the developing party is
Caster) fails to contribute to Newco its proportionate share (in accordance with
its membership interest in Newco) of the costs necessary to fund the development
of such New Center, in each case, on or before the date that development of such
New Center could begin following the determination made in (ii) above. Nothing
in this subsection (b) shall require that the developing party be given a
guarantee or other financial or credit assistance from Newco or any other party.
Furthermore, and notwithstanding the foregoing, neither Caster nor Seller shall
be required to make any contribution of any kind for the development of a New
Center undertaken by Newco without Caster's or Seller's manager designees'
consent; provided this shall not be construed to allow the revocation of any
consent once given.
8.4 Acquisition of Existing Centers. In determining the manner of
funding an acquisition of an Existing Center desired by the managers of Newco,
Newco agrees to acquire the Existing Center using its own resources prior to
seeking contributions from its members; provided further, that any contribution
sought by Newco from its members shall be allocated among the Members according
to their respective percentage ownership interests of Newco, and no member or
its affiliates shall be required to contribute its share of such contribution or
otherwise provide any money, or any guarantee or financial or credit assistance,
for such acquisition. If, however, two of the three managers of Newco elect to
require capital contributions from Newco's members in order to acquire such
Existing Center (provided that, as long as a Trigger Event has not previously
occurred, Caster, Seller or their manager designee must be one of the affirming
managers), such decision shall be final, and if either Caster or Seller on the
one hand, or Prime on the other hand, fails to contribute to Newco its
proportionate share (in accordance with its membership interest in Newco) of the
costs necessary to acquire the Existing Center, in each case, on or before the
earliest date such Existing Center can be acquired, the other party shall be
entitled to independently acquire the Existing Center, notwithstanding the
provisions of Section 8.1. Notwithstanding the foregoing, neither Caster nor
Seller shall be required to make any contribution of any kind for the
acquisition of an Existing Center undertaken by Newco without Caster's or
Seller's manager designee's consent; provided this shall not be construed to
allow the revocation of any consent once given.
8.5 Automatic Termination. This entire ARTICLE shall terminate and become null
and void automatically:
(a) If any party to this Agreement: (i) becomes insolvent, or
makes a transfer in fraud of creditors, or makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as they become
due; (ii) generally is not paying its debts as such debts become due, and one of
the other parties, in good faith, determines that such event or condition could
frustrate the operation of this ARTICLE or otherwise inhibit the delinquent
party's ability to perform its obligations under this Agreement or any
Transaction Document; (iii) has a receiver, trustee or custodian appointed for,
or take possession of, all or substantially all of the assets of such party,
either in a proceeding brought by such party or in a proceeding brought against
such party; (iv) files a petition for relief under the United States Bankruptcy
Code or any other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law"), or an involuntary petition for relief is filed against such
party under any Applicable Bankruptcy Law, or an order for relief naming such
party is entered under any Applicable Bankruptcy Law which is not discharged
within ninety (90) days of filing, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is requested
or consented to by such party; (v) fails to have discharged within a period of
ninety (90) days any attachment, sequestration or similar writ levied upon, or
any claim against or affecting, any property of such party; or (vi) fails to pay
within thirty (30) days any final money judgment against such party (the events
described in this Section are hereinafter referred to as "Bankruptcy Events");
(b) If, at any time after the Closing, Caster, Seller and any
entity owned or controlled by Caster, and all Permitted Trusts and Permitted
Entities, collectively own less than forty (40%) of the total outstanding
membership interests of Newco (after assuming the conversion, exchange or
exercise of any and all securities or rights convertible into, or exchangeable
or exercisable for, ownership interests of Newco), unless and only to the extent
Prime consented in writing to the transaction(s) that caused the decrease in
Caster's, Seller's and such other entities' percentage ownership of Newco;
(c) upon the expiration or termination of the Restricted
Period (as hereinafter defined), unless and as long as Caster is still complying
with the provisions of Section 9.3(b) hereof as if there was no six (6) year
limitation on the obligations contained in Section 9.3(b);
(d) upon a material breach (subject to any applicable cure period) by
either party of the provisions of this ARTICLE or ARTICLE IX; or
(e) upon the death or Permanent Disability of Caster.
ARTICLE IX
Restrictive Covenants
9.1 Confidentiality Agreement. Each of Caster, Seller, PMSI and Prime
agrees that it has been and may continue to be, through its relationship with
Newco, exposed to confidential information and trade secrets pertaining to, or
arising from, the business of the other parties hereto (including, without
limitation, Newco) and/or each of the other parties' present or future
affiliates (which, with respect to Prime and PMSI, includes each present or
future affiliate or subsidiary of PMSI) (in any instance, the party or parties
to whom such information belongs are hereinafter referred to, individually and
collectively, as "Discloser"). The parties agree 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 Caster, Seller, Prime and PMSI
agrees to keep in strict secrecy and confidence, both during and after the
period during which Discloser 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 of Discloser covered by this Agreement shall include, but shall not
be limited to, information of Discloser 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 (a) substantially pertaining to or
arising from the business of Seller and Caster prior to the Closing Date or (b)
that constitute the practice of medicine.
Except with prior written approval of Discloser, each of Caster,
Seller, Prime and PMSI 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; provided, however,
that nothing in this Section shall preclude Prime from disclosing the
Proprietary Information of Newco for the purpose of benefiting affiliates and
subsidiaries of Prime or PMSI that operate other centers in a manner not
prohibited by this Agreement. Within forty-eight (48) hours of the time at which
any of Caster, Seller, Prime or PMSI no longer directly or indirectly owns any
voting equity interests in Newco, whether the result of voluntary or involuntary
disposition, such party will deliver to the remaining owners of Newco (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 Newco's business, all other tangible
Proprietary Information in its possession or control, and all of Newco'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.
9.2 Non-Solicitation and Non-Interference Agreement. Each of the
parties to this Agreement hereby agrees that during the Restricted Period (as
hereinafter defined), and thereafter as long as Caster is retired from the
practice of medicine, such party will not, directly or indirectly, either for
its own benefit or for the benefit of any other person, corporation or other
entity, without the prior written consent of the other parties to this
Agreement, commit any of the following acts, which acts shall be considered
violations of this Section:
(y) Request or advise any person, firm, physician, corporation
or other entity having a business relationship with another party to this
Agreement (or any of such party's affiliates), to withdraw, curtail, or cancel
its business with such party; or
(z) Hire any employee of, or induce or attempt to induce the
termination of such employee's employment by, another party to this Agreement
(or any of such party's affiliates).
9.3 Exclusive Use and Efforts Agreement.
(a) As used in this Agreement, the "Restricted Period" shall
mean the period of time beginning on the Closing Date and ending on the later of
(i) the expiration of eight (8) years following the Closing Date or (ii) the
expiration of two and one-half (2.5) years following delivery of written notice
by Caster stating that Caster desires to terminate the terms of this Section 9.3
(the "Termination Notice"); provided, that Caster cannot deliver notice of
termination prior to the expiration of five and one-half (5.5) years following
the Closing Date, and any Termination Notice may be withdrawn in writing
delivered to Prime (which Prime may reject in writing in its sole discretion
within fifteen days of receiving the withdrawal notice) prior to the expiration
of two and one-half (2.5) years following delivery thereof (with the
understanding that, if the Withdrawal Notice is not rejected by Prime, the
Restricted Period will remain in effect until the expiration of a contiguous two
and one-half (2.5) year period following delivery of a subsequent Termination
Notice that is not withdrawn). Except as expressly otherwise provided in the
immediately following sentence, and notwithstanding the provisions of subsection
(b) below, during the Restricted Period, Caster hereby agrees that Caster will,
and will direct any other medically trained or licensed medical professionals
under the direction or control of Caster to, perform Refractive Surgery and any
services related to Refractive Surgery at and using the facilities and equipment
of Newco. Notwithstanding the foregoing, the parties agree that the following
shall not be a breach by Caster of this Section (including the provisions of
subsection (b) below): (i) the performance of procedures by Caster at a facility
described in Section 10.8 hereof, but only to the extent and subject to the
conditions under which such procedures are allowed under Section 10.8 hereof;
(ii) the performance of procedures by Caster at a facility described in Section
10.9 hereof, but only to the extent and subject to the conditions under which
such procedures are allowed under Section 10.9 hereof; or (iii) Caster's
cessation of his professional medical services at the end of six (6) months
following Caster's notice of termination as described in this Section 9.3(a).
Furthermore, Caster's inability to comply with this subsection (a) because of a
temporary disability occurring during the period while Caster is obligated under
subsection (b) below shall not be deemed a breach of this subsection (a), but
the running of the Restricted Period shall be tolled until such time as the
temporary disability no longer prevents compliance with the obligations under
subsection (b).
(b) Without limiting or restricting the provisions of
subsection (a) of this Section, Caster further agrees that, at all times prior
to the expiration of six (6) years immediately following the Closing Date,
Caster shall devote Caster's full business time and attention (above or
consistent with Caster's practices prior to the Effective Time) to rendering
professional ophthalmic and medical services in Beverly Hills, California or the
immediate vicinity thereof. Without limiting or restricting the provisions of
subsection (a) of this Section, the parties agree that the following shall not
be a breach by Caster of this subsection (b): (i) the devotion of a reasonable
amount of time to charitable and community activities; (ii) the management of
personal investments that are passive in nature; (iii) the writing or editing of
books, articles and journals or other literature pertaining to Refractive
Surgery, ophthalmology, or the practice of medicine; (iv) Caster's taking of
vacation, holidays or sick time consistent with past practices; (v) the death or
Permanent Disability of Caster; (vi) attending continuing education and other
professional conferences; (vii) the management of any interest in any Target
Center independently acquired by Caster pursuant to ARTICLE VIII hereof; or
(viii) the management of any center established pursuant to Section 10.8 hereof,
but only to the extent allowed under Section 10.8 hereof; provided however, that
the time and effort spent on activities described in clauses (i) through (iv)
and (vi) (inclusive) of this sentence must be below or consistent with the time
and effort devoted to such matters prior to the Effective Time. The parties
expressly acknowledge and agree that (I) Caster's inability to comply with this
subsection (b) because of a temporary disability shall not be deemed a breach of
this subsection (b), but the running of six (6) year period described above
shall be tolled until such time as the temporary disability no longer prevents
compliance, and (II) without limiting the application of this subsection (b),
the retirement or cessation by Caster of professional medical services during
the six (6) year period described above (as extended due to any temporary
disability) shall necessarily be a breach and default under this subsection (b).
9.4 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 Caster, or any other medically
trained or licensed medical professionals under the direction or control of
Caster, to perform Refractive Surgery at the facilities of, or use the equipment
of, Newco, if in Caster's professional medical judgment, such use would be
detrimental to Caster'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 other instance where the operation of this
Agreement would constitute a violation of applicable law.
9.5 Compliance with Applicable Law. In accordance with Texas Business &
Commerce Code Section 15.50 (the "Applicable Statutory Provision"), this
Agreement hereby provides for the following:
(a) Caster shall not hereby be denied access to any list of Caster's
patients whom Caster has seen or treated;
(b) Caster shall not hereby be denied access to medical
records of Caster's patients upon authorization of the patient, and any copies
of such medical records obtained or possessed by any of PMSI, Prime, Seller or
Newco shall be provided to Caster for a reasonable fee as established by the
Texas State Board of Medical Examiners under Section 5.08(o), Medical Practice
Act (Article 4495b, Vernon's Texas Civil Statutes);
(c) access to any such list of patients or to any such
patients' medical records referred to in (i) or (ii) above, shall not require
such list or records to be provided in a format different than that by which
such records are maintained, except by the mutual consent of Newco and Caster;
(d) Caster shall be entitled to buy out his performance of
obligations arising under Sections 9.2 and 9.3 of this Agreement (but only such
obligations as is necessary in order for this Agreement to comply with the
Applicable Statutory Provision) for an amount equal to the Aggregate Purchase
Price, less any amounts paid pursuant to Section 9.7 hereof; provided, however,
that in order for such buy out to be effective, Caster must also convey or cause
to be conveyed, free of any encumbrance, any equity interest in Newco held by
either Caster or Seller; and
(e) Caster shall not hereby be prohibited from providing
continuing care and treatment to a specific patient or patients during the
course of an acute illness.
Caster agrees that the buy out amount set forth in this Section is a
reasonable price and represents a fair value for his performance of Caster's
obligations hereunder. Caster and Prime have each elected to utilize such
reasonable price in lieu of arbitration pursuant to the Applicable Statutory
Provision.
9.6 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.
9.7 Remedies.
(a) General. Each party agrees that a violation on its part of
any applicable covenant contained in this ARTICLE or in ARTICLE VIII 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; provided, however, that no party shall be entitled to seek specific
performance or injunctive relief (except for a breach of the provisions of
Section 9.1) if Prime, PMSI or any of their affiliates has received full payment
from Caster of the liquidated damages provided for in (b) below.
(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 (subject to any right to cure such
breach), the parties agree that, in the event of such a breach by Caster and/or
Seller, (i) Caster and Seller shall be obligated to pay to Prime as liquidated
damages, an amount determined by multiplying the Aggregate Purchase Price by a
fraction, the numerator of which is the difference between sixty (60) and the
number of entire consecutive months passed after the Closing Date and prior to
such breach, and the denominator of which is the number sixty (60), (ii) Prime,
PMSI and Newco shall be released from all of their obligations under this
ARTICLE (excluding the provisions of Section 9.1 which shall remain
enforceable), ARTICLE VIII and, to the extent elected by Prime, the Facility Use
Agreement, and (iii) Caster and Seller shall lose, and hereby agree not to
exercise or seek to exercise (directly or through any otherwise required
approval of a Caster or Seller designated manager of Newco), any mandatory right
of approval or consent as a member or manager (or through a manager designee) of
Newco and which mandatory right of approval or consent is otherwise required or
provided for in this Agreement or any other Transaction Document (including,
without limitation, Newco's Limited Liability Company Agreement). It is
understood and agreed that the provisions of clause (iii) of the preceding
sentence is not intended, and should not be construed, to result in any of the
following: (x) the requirement that Caster or Seller be required to make any
capital contribution to Newco after the Closing without Caster's or Seller's
consent or the consent of Caster's or Seller's manager designee (it being
understood that this is not intended to allow the revocation of any consent once
given), (y) Newco being relieved of its obligation to make distributions to pay
taxes as provided in Section 5.2 of Newco's Limited Liability Company Agreement,
or (z) Caster, Seller or any Caster or Seller designated manager of Newco losing
any approval or consent rights which arise solely under the Delaware Limited
Liability Company Act and not under the terms of this Agreement or Any
Transaction Document. Upon payment of such liquidated damages to Prime, Caster
and Seller shall be excused from any further performance under this ARTICLE
(excluding the provisions of Section 9.1 which shall remain enforceable),
ARTICLE VIII and the Facility Use Agreement. Each of PMSI and Prime agrees that,
in the event of a material breach of this ARTICLE or ARTICLE VIII (subject to
any right to cure such breach), Caster and Seller shall be excused from any
further performance under this ARTICLE (excluding the provisions of Section 9.1
which shall remain enforceable), ARTICLE VIII and, to the extent elected by
Caster and Seller, the Facility Use Agreement.
(c) Cure Right. As a condition to the right of a party to seek
any remedy under this Agreement (excluding injunctive relief), the breaching
party shall be given thirty (30) days following delivery of written notice by
the party asserting the breach, identifying such material breach, within which
the breaching party may attempt to cure such material breach; and, such 30-day
period shall be extended up to sixty (60) additional days as long as the
breaching party is diligently attempting to cure such material breach.
Notwithstanding the foregoing or any other provision of this Agreement or any
other Transaction Document, the parties agree that a breach by Caster of the
provisions of Section 9.3(b) of this Agreement cannot be cured.
(d) Death or Permanent Disability. The parties hereby
acknowledge and agree that, although the death or Permanent Disability of Caster
shall not be a breach of any of the provisions of this Agreement, Prime, PMSI
and Newco shall have the following rights upon the occurrence of either Caster's
death or Permanent Disability: (i) Prime, PMSI and Newco shall be released from
all of their obligations under this ARTICLE (excluding the provisions of Section
9.1 which shall remain enforceable), ARTICLE VIII and, to the extent elected by
Prime, the Facility Use Agreement.
ARTICLE X
Post Closing Agreements
10.1 Transition of Business. Each of Caster and Seller agrees to
cooperate fully with Prime and Newco in transitioning the Business existing
prior to the Closing, including the relationships maintained by Caster and
Seller with respect to the Business, to Newco after the Closing; and, each of
Prime, PMSI, Caster and Seller 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 patient,
or other service recipient, person or entity which did business with Seller
prior to the Closing.
10.2 Right of Set Off. Caster and Seller agree that Newco shall have
rights of offset against distributions to them in respect of any ownership
interest they may have in Newco at any time following the Closing, for any and
all debts, obligations or liabilities that they may have to Prime, PMSI or any
affiliate or subsidiary of PMSI, including, without limitation, any liability
arising out of or relating to its obligations under Section 6.1 of this
Agreement, or other obligations owed under this Agreement or any other
Transaction Document. Caster and Seller each 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
Caster and Seller under this Agreement and each other Transaction Document,
Caster and Seller hereby grant to Prime a continuing security interest in and to
distributions they may be entitled to receive at any time after the Closing in
respect of any ownership interest held by them in Newco. In connection with the
grant of a security interest contained in this Section, each of Caster and
Seller 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,
for a period of five (5) years after the Closing, 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.
Caster and Seller acknowledge and agree that the rights and obligations
contained in this Section shall remain attached to any membership interests of
Newco conveyed by them, 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.
10.3 Ratification by Newco. Each of Prime, Caster and Seller agrees
that by executing this Agreement it is deemed to be voting any ownership
interests 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 other
Transaction Documents to which Newco is a party. Each of Prime, Caster and
Seller 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.
10.4 Post-Closing Capital Contributions. 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, except as
may be expressly provided otherwise in Section 8.3 hereof or pursuant to Newco's
Limited Liability Company Agreement.
10.5 Legend. On and after the Closing, each certificate or document
representing Caster's, Seller's or Prime's 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 MARCH 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.
10.6 Covenants Relating to Westside. Caster hereby covenants that he
will not transfer, assign or encumber in any way any of his capital stock of (or
other ownership interests in) Westside or allow Westside to issue any capital
stock or other rights or interests convertible into, or exercisable or
exchangeable for, its capital stock. Caster further agrees, in Caster's capacity
as the sole owner of all of the outstanding capital stock of Westside, to take
all actions (including, without limitation, the election of new directors) that
may be necessary to cause Westside, notwithstanding any existing contract,
agreement or arrangement between Westside and Seller and/or Newco to the
contrary, (a) to operate exclusively for the benefit of Newco, (b) to continue
to perform, for the benefit of Newco, the same services that Westside performed
for Seller prior to the Closing, and any additional services determined by the
affirmative vote or written consent of two of the three managers of Newco
(provided that, as long as a Trigger Event has not previously occurred), Caster
or Seller's manager designee must be one of the affirming managers), (c) to
promptly remit to Newco, without request therefor, all gross revenues received
by Westside for services provided after the Effective Time, regardless of the
source of such revenues, without offset or deduction made for any expenses or
costs of Westside of any nature. As long as Westside complies with the
foregoing, Newco shall reimburse Westside for its accounting and tax expenses
paid to unrelated third parties and incurred solely as a result of its provision
of services to Newco following the Closing Date. As a condition to such
reimbursement, the amount of such expenses must have been agreed upon by the
affirmative vote or written consent of two of the three managers of Newco
(provided that, as long as a Trigger Event has not previously occurred, Caster
or Seller's manager designee must be one of the affirming managers).
10.7 Warrants. As partial consideration for Caster's covenants and
agreements contained herein, PMSI agrees that it shall, subject to satisfaction
of the conditions set forth in this Section, issue to Caster, on or before April
30 in the years 2001, 2002, 2003, 2004 and 2005 (the "Warrant Issue Dates"),
five warrants (one on each Warrant Issue Date) in substantially the form
attached hereto as Exhibit D (the "Warrants"), each entitling Caster to purchase
twenty thousand (20,000) shares (as adjusted for any stock splits, stock
dividends, recapitalizations and the like after the Effective Time) of $0.01 par
value common stock of PMSI. As used herein, a "Warrant Issue Period" shall mean,
with respect to any Warrant Issue Date, the preceding twelve (12) month period
ending on the last day of February of that year. As a condition to PMSI's
obligation to issue a Warrant on the Warrant Issue Date of April 30, 2001,
Newco's consolidated net income, determined using generally accepted accounting
principles consistently applied ("Consolidated Net Income"), for the respective
Warrant Issue Period must exceed one hundred twenty percent (120%) of the
Consolidated Net Income for the period beginning March 1, 1999 and ending
February 29, 2000. As a condition to PMSI's obligation to issue a Warrant on any
of the Warrant Issue Dates in the years 2002, 2003, 2004 and 2005, Newco's
increase in Consolidated Net Income for the respective Warrant Issue Period must
exceed a target amount to be determined in advance of each Warrant Issue Period
by the vote or written consent of two of the three managers of Newco; provided,
however, that such target amount cannot exceed (a) one hundred twenty percent
(120%) of the Consolidated Net Income for the Warrant Issue Period ending on the
last day of February in the full calendar year immediately preceding the Warrant
Issue Date, or (b) with respect to Warrants issuable on or after the 2003
Warrant Issue Date, one hundred forty-four percent (144%) of the Consolidated
Net Income for the Warrant Issue Period ending on the last day of February in
the second most recent full calendar year that precedes the Warrant Issue Date.
The rights under each Warrant issued pursuant to this Section shall
vest twenty percent (20%) upon the expiration of each full year following the
date of grant, until completely vested, and the Warrant and any unexercised
right to purchase shares shall terminate immediately upon the expiration of six
(6) years following the date of grant. The per share exercise price applicable
to each Warrant shall equal one hundred percent (100%) of the average of the
closing NASDAQ per share price for the ten (10) trading days immediately prior
to December 31 of the year immediately preceding the date of grant of such
Warrant. The total maximum number of shares with respect to which Warrants may
be issued pursuant to this Section is one hundred thousand (100,000) (as
adjusted for any stock splits, stock dividends, recapitalizations and the like
after the Effective Time). The total maximum number of Warrants that may be
issued pursuant to this Section is five (5).
10.8 Mexico Facility. The parties agree that, notwithstanding the
provisions of Section 9.3, and subject to the terms and conditions of this
Section, Caster shall be entitled to invest in and perform procedures at any
center in the country of Mexico that provides the performance of Refractive
Surgery procedures that cannot, at the time such procedures are performed, be
lawfully performed in the United States; provided, however, that Caster's
investment in and/or use of such a facility shall be at any point in time
restricted to a single facility identified in written notice delivered by Caster
to Prime, and Caster may elect to change the facility by delivering written
notice to Prime naming the successor facility (the "Mexico Center"). Caster may
not spend more than twelve (12) days per calendar year performing procedures at
the Mexico Center, and all twelve (12) of those days must occur on Saturdays,
Sundays, or calendar days that Caster has not historically performed procedures
at Seller's facilities. Caster may only perform procedures at the Mexico
Facility if, at the time such procedures are performed, they cannot be lawfully
performed in the United States. In addition, as a condition to the availability
of Caster's rights under this Section, all pre-operative and post-operative care
related to procedures performed at the Mexico Center must, to the extent legally
permitted, be done at Newco's center and using Newco's facilities. Caster shall
be solely entitled to the surgeon fees arising out of any operation described in
this Section. For purposes of this Section, "surgeon fees" shall mean the total
fees for the surgical procedure less (a) travel expenses for Caster and the
patient and (b) the amounts paid for the use of the Mexico facility, its
equipment and supplies. Notwithstanding the foregoing sentence, Newco will be
entitled to a co-management fee in an amount equal to twenty percent (20%) of
the surgeon fees.
10.9 Autonomous Laser Center. The parties acknowledge that Caster is
currently performing certain procedures at the Cedars-Sinai facility using an
autonomous laser that, in light of the nature of such procedures, is deemed by
Caster to be a medically necessary alternative to the lasers owned or leased by
Seller at the time of Closing. The parties agree that, notwithstanding the
provisions of Section 9.3, and subject to the terms and conditions of this
Section, Caster shall be entitled to perform procedures at (but not invest in,
manage or benefit from any similar relationship) a facility (which can be the
Cedars-Sinai facility) providing use of an autonomous laser of substantially the
type located at the Cedars-Sinai facility (the "Autonomous Center"); provided,
however, that Caster may only perform at the Autonomous Center those procedures
that (a) in Caster's medical judgment, cannot be performed using the facilities
or equipment made available at such time by Newco and (b) cannot, in Caster's
judgment, be postponed until such time as Newco is able to make available the
necessary facilities. In addition, as a condition to the availability of
Caster's rights under this Section, the full Facility Usage Fee (as defined in
the Facility Use Agreement) that would have been payable if Caster had used
Newco's facilities shall be paid to Newco, and Newco shall pay any facility
usage fee owed to the Autonomous Center (not to exceed the amount paid to
Newco).
10.10 Insurance After Closing. The parties hereto agree that Schedule
3.10 attached hereto sets forth all of the insurance relating to or benefiting
Newco (and the other insureds described therein) or Newco's business that are
required to be in force immediately following the Closing, and each party agrees
to cause Newco to maintain such insurance in effect, and with the additional
assureds described on Schedule 3.10 in accordance with the provisions of Newco's
Limited Liability Company Agreement governing changes to insurance. In addition,
Newco hereby agrees that if both Seller and Prime are members of Newco upon
Caster's retirement from the practice of medicine, Newco will, as long as Caster
and Seller are not then in material breach of this Agreement or any Transaction
Document (subject to any right to cure), acquire a tail insurance policy
providing coverage substantially similar to the coverage benefiting Caster prior
to such retirement, for a period of time customarily applicable to retiring
physicians in ophthalmology. Subject to the foregoing obligations of Newco and
any other obligations of Newco pursuant to its Limited Liability Company
Agreement, each party may elect to acquire in its own name and maintain whatever
level or amount of insurance it desires, without seeking or obtaining the advice
or consent of the other parties hereto.
10.11 Guarantees By PMSI and Prime. With respect to any contractual
obligation that is an Assumed Liability hereunder, and that has been clearly
identified on Schedule 1.4 as having been personally guaranteed by Caster, each
of Prime and PMSI agrees that it shall guarantee the same obligation, to the
same extent actually guaranteed by Caster, on a joint and several basis with
Caster, when and if the party to whom such obligation is owed seeks to enforce
Caster's guaranty. Caster shall give prompt written notice to Prime after any
such party threatens or actually commences any enforcement action. Caster and
PMSI agree that they shall bear any liability under such guaranty 40%/60%,
respectively, and shall indemnify and hold the other harmless from amounts in
excess thereof.
ARTICLE X
Miscellaneous
11.1 Collateral Agreements, Amendments, and Waivers. This Agreement
(together with the other Transaction Documents) 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 Transaction Document unless otherwise
expressly provided therein) may be made only by an instrument in writing
executed by each party thereto.
11.2 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 Transaction Document) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
11.3 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 $2,500 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.
11.4 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.
11.5 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.
11.6 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:
Prime: 0000 Xxxxxxx xx Xxxxx Xxxxxxx
Xxxxx X-000
Xxxxxx, Xxxxx 00000
Attention: President
with a copy to: Xx. Xxxxxxx X. XxXxxx
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Seller: Caster Eye Center Medical Group
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000X
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx, M.D.
with a copy to: Xxxxxxx Xxxxxxxxxx & Xxxxx LLP
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Caster: Xxxxxx Xxxxxx, M.D.
Caster Eye Center Medical Group
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000X
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
with a copy to: Xxxxxxx Coppenrath & Xxxxx LLP
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Each party may change its address for purposes of this Section by
proper notice to the other parties.
11.7 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.
11.8 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.
11.9 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) Seller, it shall mean such items
as are within the actual knowledge of Caster or any person employed by Seller
prior to the Closing Date who becomes an employee of Newco after the Closing
Date. For purposes of this Agreement, when the term "affiliate" is used with
respect to PMSI or Prime, it shall not include Seller or Caster, and when
"affiliate" is used with respect to Seller or Caster, it shall not include PMSI
or Prime.
11.10 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 a material breach by it
of this Agreement, for all purposes.
11.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
11.12 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 if the amount
in controversy is less than $2,000,000 and three arbitrators if the amount in
controversy is more than $2,000,000. Except as otherwise expressly provided in
this Section, the arbitration shall be conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration shall
be conducted in Phoenix, Arizona and the arbitrator shall have the right to
award actual damages and attorney fees and costs resulting from a breach or
default by any party under this Agreement, any other Transaction Document or
otherwise, consistent with the provisions of this Agreement, but shall not have
the right to award punitive or exemplary damages against either party.
11.13 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.
Xxxxx Xxxxxx, Treasurer
Prime: Prime Refractive, L.L.C.
Xxxxx Xxxxxx, Treasurer
Newco: Caster One, L.L.C.
Xxxxx Xxxxxx, signing as a manager of Newco
and on behalf of Prime, as a member of Newco
Xxxxxx Xxxxxx, signing as both a manager
and as president of Seller on behalf of Seller, as a member of Newco
Caster:
Xxxxxx Xxxxxx, M.D.
Seller: Caster Eye Center Medical Group
Xxxxxx Xxxxxx, M.D., President
Exhibit A
Limited Liability Company Agreement
of Newco
Exhibit B
Seller's Financial Statements
Exhibit C
Facility Use Agreement
Exhibit D
Form of Warrant
