Exhibit 10-8
NORTH CAROLINA
NASH COUNTY
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into this 9 day
of April, 1999, by, between and among X. Xxxxx Xxxxxxx, X.X., Xxxxx X. X.
Xxxxxx, O.D., and Optometric Eye Care Center, P.A. ("OECC, PA"), and
PrimeVision Health, Inc. ("Prime"), PrimeVision of North Carolina, Inc.,
Consolidated Eye Care, Inc. ("CEC"), Xxxxxx X. Xxxxx, Bank Austria, AG,
successor by merger to Creditanstalt-Bankverein (the "Bank"), and Bank Austria
Creditanstalt Corporate Finance, Inc. ("Lender"). The above-identified parties
are at times referred to herein collectively as "Parties" and individually as a
"Party."
W I T N E S S E T H:
WHEREAS, the Parties have had, between and among themselves, a number
of business-related disputes; and
WHEREAS, the Parties have heretofore been parties to that certain
lawsuit currently pending in Xxxx County Superior Court (99-CVS-634) (the
"Court"); and
WHEREAS, the Parties have arrived at a mutually agreeable resolution
to their respective disputes.
NOW THEREFORE, in consideration of the promises and representations
provided for herein, the receipt, sufficiency, and acceptance of which are
hereby acknowledged, the Parties agree as follows:
1. Upon signing this Agreement, Drs. Xxxxxxx and Xxxxxx will move the
Court to dismiss without prejudice that certain action between and among the
parties currently pending in Xxxx County Superior Court (99-CVS-634), including
the Temporary Restraining Order associated with that action ("TRO"). Upon the
filing of such motion for dismissal, without further action on the part of any
Party: (A) that certain letter dated April 1, 1999, purporting to terminate the
Administrative Services Agreement ("ASA") by and between CEC and OECC, PA,
shall be deemed rescinded; (b) Drs. Xxxxxxx and Xxxxxx shall be deemed to have
rescinded their resignations from Prime, and Prime agrees to restore Drs.
Xxxxxxx and Xxxxxx to their former positions as Directors of Prime; (c) Drs.
Xxxxxxx and Xxxxxx shall be deemed to have rescinded their respective
resignations from CEC dated March 30, 1999, and shall be deemed restored to
their former status as Prime employees, with no resulting interruption or
alteration of compensation or benefits, except as specifically referenced
herein. Upon closing of the business combination between Prime and OptiCare Eye
Health Centers, Inc. ("OptiCare"), Drs. Xxxxxxx and Xxxxxx will move the Court
to dismiss the action referenced above with prejudice. All parties except Bank
and Lender will execute mutually acceptable releases. Bank and Lender will
release only Xxxxxxx and Xxxxxx.
2. Upon signing this Agreement, the Parties (other than the Bank and
Lender) will cause $1 million in cash to be deposited into an escrow account
agreeable to the Parties from funds previously transferred to the Xxxx County
Clerk of Superior Court. The Escrow Agreement governing the account ("Escrow
Agreement") will state that the funds will be released as follows to Drs.
Xxxxxxx and Xxxxxx:
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(a) $250,000 when any and all investigations of Prime
and its affiliates arising out of that certain
Request for Declaratory Ruling From the North
Carolina State Board of Examiners in Optometry (the
"Request for Declaratory Ruling") have been
concluded on terms and conditions reasonably
satisfactory to the Lender;
(b) $250,000 when OECC, PA and CEC execute a new
Administrative Services Agreement in accordance with
Section 8 hereof;
(c) $500,000 upon the closing of the business
combination between Prime and OptiCare or the
failure of such combination to close by September
30,1999, whichever shall first occur;
The Escrow Agreement will state that the funds will be released to Prime as
follows:
(i) the $250,000 referenced in subparagraph
(a) above if the investigation of Prime and its
affiliates arising out of the Request for
Declaratory Ruling has been concluded on terms that
the Lender has reasonably determined are not
satisfactory to it; or
(ii) any funds remaining in escrow if
Xxxxxx, Xxxxxxx or OECC, PA (collectively, the "OECC
Parties") breach the terms of this Agreement.
In the event that the funds are released to Drs. Xxxxxxx and Xxxxxx due to
2(a), (b) and (c) above, such payments, together with, the $250,000 paid to
Drs. Xxxxxxx and Xxxxxx out of the funds on deposit with the Xxxx County Clerk
will represent an advance payment against the next $1.25 million due and
payable under the currently effective employment agreements between Prime
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and Xx. Xxxxxxx, and Prime and Xx. Xxxxxx, each dated July 1, 1996. In the
event that Prime or Lender determine that the OECC Parties have breached this
Agreement, they shall notify the OECC Parties and the escrow agent under the
Escrow Agreement (the "Escrow Agent") of such default, specifying the nature of
such default. Unless one or more of the OECC Parties notify Prime, the Lender
and the Escrow Agent within seven days of their receipt of such notice, that
such OECC Party disputes the existence of such default, the Escrow Agent shall
disburse the funds to the Lender for application to the term loan of Prime
owing to the Lender. If one or more of the OECC Parties notify Prime, the
Lender and the Escrow Agent within such time period that such OECC Party
disputes the existence of such default, the funds shall be retained by the
Escrow Agent and disbursed in accordance with the dispute resolution provisions
of the Escrow Agreement.
3. Upon the closing of the business combination between Prime and
OptiCare, Prime will pay to Drs. Xxxxxxx and Xxxxxx another $1.25 million in
cash in the aggregate. OptiCare has represented and the Bank shall request that
OptiCare sign a letter in the form attached as Exhibit A which is incorporated
by reference.
4. By no later than May 6, 1999, Prime and Drs. Xxxxxxx and Xxxxxx
will execute a Share Grant Agreement under which they will be issued common
stock in Prime at closing of the business combination with OptiCare to produce
a share position on a primary basis of 32% of Prime before and subject to the
closing of the business combination with OptiCare. Such Share Grant Agreement,
and the shares of stock issued thereunder, are granted to Xxxxxx and Xxxxxxx in
satisfaction of all claims of the OECC Parties arising under or in respect of
(a) that certain promissory note in the original principal amount of $364,896
dated August 1, 1994 executed by
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CEC in favor of OECC, PA (the "OECC Note") and (b) the $482,193 by the OECC
Parties held by CEC on July 3, 1996 and alleged by the OECC Parties to belong
to OECC, PA (the "1996 Cash"). Upon the execution of the Share Grant Agreement
the OECC Parties shall suspend all efforts to make claims under or in respect
of the OECC Note and/or the 1996 Cash and upon consummation of the business
combination with OptiCare, the OECC Note shall be deemed cancelled and all
rights of the OECC Parties to the 1996 Cash shall terminate. To the extent the
business combination with OptiCare is abandoned after the issuance of the
additional shares under the Share Grant Agreement, the issuance of such shares
shall be rescinded, such shares shall be returned to Prime for cancellation or
other appropriate action, and the OECC Parties shall be free to pursue any and
all such claims against the OECC Note and the 1996 Cash.
5. By no later than May 6, 1999, Drs. Xxxxxxx and Xxxxxx will each
sign an Employment Agreement with OptiCare to be effective at the closing of
the business combination between Prime and OptiCare, which Employment
Agreements will replace and supersede the current Employment Agreements, and
will have the terms summarized below.
(a) Term of 7 years from execution;
(b) Base salary of $150,000 per year;
(c) Other features (including bonus rights,
non-competition, etc.) identical to the Employment
Agreement between OptiCare and Xxxxxx X. Xxxxxx,
dated January 1, 1999, except as provided in 5(d) or
(e) below;
(d) In the event that either Drs. Xxxxxxx or Xxxxxx or
both are involuntarily terminated without cause or
via a change of control or non-renewal of their
respective Employment Agreements (but explicitly not
in the event of a
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voluntary termination or a termination for cause or
a voluntary termination upon a change of control),
the non-competition feature of their Employment
Agreements will permit Drs. Xxxxxxx and Xxxxxx
following such termination to engage in the practice
of optometry in Xxxx County, North Carolina and
contiguous counties.
(e) In the event that either Drs. Xxxxxxx or Xxxxxx are
terminated without cause (but explicitly not in the
event of a voluntary termination or a termination
for cause), the base salary for the remaining
balance of the 7 year term of his employment
agreement shall be paid in cash promptly in a lump
sum settlement. In the event that either Xx. Xxxxxxx
or Xx. Xxxxxx voluntarily terminates his employment
as a result of a change of control of OptiCare, such
terminating person shall be entitled to receive a
lump sum payment in cash equal to one year's base
salary.
6. In the event of an OptiCare liquidation (narrowly defined to mean
insolvency or bankruptcy) and the failure of OptiCare to meet its obligations
under the Employment Agreements due only to financial hardship (and
specifically not due to a dispute between the Parties), Drs. Xxxxxxx and Xxxxxx
will have the right to:
(a) Purchase the retail business operations referenced
below from OptiCare for cash consideration of 3
times the immediately preceding 12 months earnings
before interest, taxes, depreciation and
amortization excluding the effect of all
extraordinary items and non-recurring charges
(EBITDA) from said retail business operations and
the affiliated practices:
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o 3 presently in Rocky Mount (Golden East,
Tarrytown, Sunset);
o 1 presently in Roanoke Rapids;
o 1 presently in Wilson;
o 1 presently in New Bern
Said right shall be more fully evidenced in a document executed by the
appropriate Parties on or before May 6, 1999. Prime agrees that proceeds from
such sale shall be applied to the permanent reduction of the indebtedness owed
to Lender.
(b) Such right shall be available to Drs. Xxxxxxx and
Xxxxxx, until such time as (i) the aggregate market
value (calculated on the basis of the publicly
quoted closing price, as published in The Wall
Street Journal) of their stock in OptiCare (or in
any company of which OptiCare is a subsidiary)
exceeds $7,000,000 and (ii) shares of their stock in
OptiCare (or in any company of which OptiCare is a
subsidiary) are first eligible to be sold in market
transactions, regardless of whether all of their
shares may then be sold in such transactions.
7. Prime will cause the Merger Agreement with OptiCare to provide that
one Board seat on the OptiCare Board of Directors (post closing of the business
combination with Prime) will be offered to either Xx.
Xxxxxxx or Xx. Xxxxxx, as they may determine.
8. Prime, CEC, OECC, and Drs. Xxxxxxx and Xxxxxx agree that Prime
shall engage Xxxxx Xxxxx Mulliss & Xxxxx LLP to prepare a new Administrative
Services Agreement between CEC and OECC, PA which is consistent with the rules
and regulations of the North Carolina State Board of Examiners in Optometry
(the "Optometry Board") and is economically
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similar to the method by which OptiCare contracts with OptiCare, P.C. Such
Administrative Services Agreement shall have a term of thirty (30) years;
provided, however, that such Administrative Services Agreement shall
automatically become terminable on thirty (30) days notice if the business
combination with OptiCare (a) is abandoned or (b) is not closed by September
30, 1999. The Parties agree to execute such Administrative Services Agreement
no later than April 28, 1999. Upon the request of Drs. Xxxxxx and Xxxxxxx,
Prime will cause additional officers of CEC to be elected and authorized to
execute and deliver such Administrative Services Agreement and will designate a
Doctor of Optometry licensed in North Carolina to be elected as an officer of
OECC, PA to be given the authority to execute and deliver such Administrative
Services Agreement.
9. By no later than May 6, 1999, Prime and Drs. Xxxxxxx and Xxxxxx
agree to execute a Succession Agreement which would take effect at closing of
the business combination between Prime and OptiCare, whereby ownership of the
OECC, PA can be passed to another Doctor of Optometry licensed in North
Carolina or, to the extent permitted by North Carolina law, a Doctor of
Medicine licensed in North Carolina, acceptable to the post-closing company, at
the discretion of OptiCare. Such Succession Agreement will be a closing
condition of the Merger Agreement between Prime and OptiCare.
10. By no later than May 6, 1999, Drs. Xxxxxxx and Xxxxxx and CEC will
transfer all OECC, PA retail location leases to CEC, which transfers shall take
effect upon closing of the Merger Agreement between Prime and OptiCare. Such
Transfer Agreements will include elimination of Drs. Xxxxxxx and Xxxxxx as
guarantors on the applicable leases, or the commitment by OptiCare to use
reasonable efforts to remove Drs. Xxxxxxx and Xxxxxx as guarantors on such
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leases (which efforts shall include, if needed, the guaranty of OptiCare of
such leases) together with an indemnification of Drs. Xxxxxxx and Xxxxxx for
any amounts thereafter required to by paid by them under such guaranties.
11. Promptly upon signing of this Agreement, CEC will transfer such
interest as is currently held by CEC in the Xxxxxxxx Drive property to such
real estate partnership as is designated by Drs. Xxxxxxx and Xxxxxx.
12. Drs. Xxxxxxx and Xxxxxx will waive their dissenters= rights in
respect of and will vote their shares in Prime for, the merger between Prime
and OptiCare, subject to the percentage ownership of Prime in the combined
company at closing being within 1% of 48.755% of the total ownership calculated
on a primary basis.
13. (a) Upon execution of this Agreement, the Parties agree to
immediately resume a normal, good faith and financially appropriate working
relationship amongst each other. Without limiting the generality of the
foregoing, upon the execution of this Agreement that certain Sublease dated
March 30, 1999, by, between and among X. Xxxxx Xxxxxxx, Xxxxx X. X. Xxxxxx and
Consolidated Eye Care, Inc., shall be deemed rescinded and shall be void and of
no further effect.
(b) The Parties agree with Lender that (i) the monies,
released from the Xxxx County Superior Court Clerk, will be applied first to
the payment of $250,000 to Xxxxxxx and Xxxxxx, second to the extent of
$1,000,000, to the delivery into escrow of the amount required by Section 2
hereof, third, to the extent of $1,906,797.00, to the payment in full of all
past due amounts owed to Lender and legal fees associated herewith, fourth to
provide for the working capital and managed care needs of Prime and its
subsidiaries, as agreed to by Lender and Prime,
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and last to the prepayment of the Term Loan owed by Prime to Lender; (ii) all
cash received by OECC, PA between the date of the TRO and the date of this
Agreement shall be turned over to CEC and deposited in an account designated by
Prime; and (iii) all cash received by OECC, PA and CEC shall be deposited in
accounts satisfactory to Lender for which, commencing on April 15, 1999, the
sole signature rights will be held by Xxxxx Xxxxxx or Xxxxx Xxxxxxxxx or their
designees. Prime agrees to provide to Lender, as soon as available but not
later than April 30, 1999, a cash flow analysis satisfactory to Lender of the
working capital and managed care requirements of Prime and its subsidiaries for
the subsequent eight (8) weeks. All cash held by Prime, its subsidiaries or
OECC, PA in excess of the reasonable working capital requirements as set forth
in the cash flow analysis shall be paid to the Bank on May 6, 1999 and applied
to the principal installments of the Term Loan owing to Lender, in the inverse
order of maturity.
(c) CEC's lease payments shall after the execution of this
Agreement continue in the ordinary course of business in accordance with the
terms of applicable leases, on the same basis as the previous three years.
14. If the various agreements referenced in Sections 4, 5, 8, 9, and
10 above are not signed by May 6, 1999, the Parties shall be free to pursue any
and all legal remedies and actions which they may have.
15. The Parties do hereby represent to each other that each has full
power and legal authority to execute and perform this Agreement and that each
has not assigned, transferred, or conveyed to any person or entity nor pledged,
encumbered, or granted any form of security interest in or to any of the
claims, rights, actions or causes of action addressed in this Agreement.
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16. The Parties acknowledge and agree that this settlement is in
compromise of disputed claims and that nothing herein shall be construed as an
admission of liability on the part of any Party and that said Parties deny any
and all liability and intend merely to avoid litigation and buy their peace.
17. The Parties agree that they will not provide a copy of this
Agreement to anyone, introduce or attempt to introduce this Agreement in any
proceeding, or disclose the terms of this Agreement in any other manner to
anyone, except that: (i) the Parties may, subject to the applicable rules of
procedure and evidence, introduce this Agreement in an action or other
proceeding for violation of this Agreement; (ii) the Parties may, as reasonably
necessary for the conduct of their business affairs, disclose this Agreement
and its terms to their accountants, attorneys and regulators and (iii) the
Parties may disclose this Agreement and its terms to the extent required by
law. The Parties further agree that they shall not disparage each other.
18. The Parties acknowledge and agree that, except for certain
inducements given to the Bank and the Lender by Prime and by Xxxxxx Capital,
L.P., no promise, inducement, agreement, or factual or legal representation not
contained in this Agreement has been made to them and that this Agreement and
the Escrow Agreement contain the entire agreement among them regarding the
subject matter hereof. The Parties further acknowledge and agree that the terms
of this Agreement are contractual and not a mere recital.
19. The Parties represent and acknowledge that each of them has read
and understands the whole of this Agreement. The Parties further acknowledge
that each of them has had available legal counsel for any consultation that
they may have desired concerning the terms of this Agreement or the meaning
thereof before the execution of this Agreement.
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20. With the exception of Bank and the Lender, whose attorneys= fees
are reimbursed by Prime, the Parties shall bear their own attorney's fees and
costs, including but not limited to those incurred in the Xxxx County action
(99-CVS-634) referenced above.
21. This Agreement may not be altered or amended except by a writing
signed by all the Parties.
22. The Parties agree that in the event any portion of this Agreement
is held to be void or unenforceable, the remaining portions shall remain in
full force and effect.
23. This Agreement is deemed executed in and shall be construed under
the laws of the State of North Carolina. The Superior Court of Xxxx County,
North Carolina shall be the exclusive venue of any litigation brought for
enforcement or violation of this Agreement.
24. This Agreement may be executed in several counterparts each of
which shall be considered an original.
25. Nothing contained in this Agreement, the Escrow Agreement or any
other instrument, document and agreement executed pursuant hereto or thereto or
in connection herewith or therewith shall be deemed or construed to limit or
impair any rights the Lender has under that certain Amended and Restated Loan
and Security Agreement, dated as of May 30, 1997, as amended (the "Loan
Agreement"), or under any of the "Loan Documents," as such term is defined in
the Loan Agreement, including, but not limited to, the "Master Guaranty" or
"Master Security Agreement," as such terms are defined in the Loan Agreement.
OECC, PA and Drs. Xxxxxx and Xxxxxxx, in consideration of the amounts received
hereunder, agree that they shall not challenge, contest or dispute (a) the
validity or enforceability of OECC, PA's
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obligations under the Master Guaranty and the Master Security Agreement, or (b)
the validity, perfection or first priority status of the liens in the assets of
OECC, PA in favor of the Lender.
26. The Parties hereby agree that their intent is that all agreements,
policies and procedures comply with applicable law, including, but not limited
to, the rules and regulations of the Optometry Board. The Parties agree to
undertake a review of the policies and procedures between CEC and OECC, PA and
will undertake to correct any deficiencies found therein and to demonstrate, in
connection with any investigation undertaken by the Optometry Board, that the
Parties are in compliance with applicable law.
IN WITNESS WHEREOF, the Parties have executed this Agreement, or have
caused their duly authorized representatives to execute this Agreement,
effective as of the date first written above.
[Signatures follow on next page.]
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PRIMEVISION HEALTH, INC.,
a Delaware corporation
By: /s/ Xxxxx Xxxxx
----------------------------------
Xxxxx Xxxxx, Ass't Secretary
PRIMEVISION OF NORTH CAROLINA, INC.,
a North Carolina corporation
By: /s/ Xxxxx Xxxxx
----------------------------------
Xxxxx Xxxxx, Ass't Secretary
CONSOLIDATED EYE CARE, INC., a
North Carolina corporation
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx, President
AGREED:
XXXXX XXXXX MULLISS & XXXXX, L.L.P.
By: /s/ Xxxxx X. Xxxx
----------------------------
Xxxxx X. Xxxx
0 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Attorneys for Prime Vision Health, Inc.,
PrimeVision of North Carolina, Inc., and
Consolidated Eye Care, Inc.
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XXXXXXXX XXXX AUTHORIZED:
/s/ Xxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxx
---------------------------------(SEAL)
Xxxxxx X. Xxxxx
AGREED:
FITCH & ASSOCIATES
By: /S/ Xxxx X. Xxxxx
-----------------------------
Xxxx X. Xxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Attorneys for Defendant Xxxxxx X. Xxxxx
BANK AUSTRIA, AG, successor by merger to
CREDITANSTALT-BANKVEREIN, an
Austrian banking corporation
By: /s/ Xxxxx Xxxx
----------------------------------
Xxxxx Xxxx, Vice President
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC., a
Delaware corporation
By: /s/ Xxxx Xxxxxxxx
----------------------------------
Xxxx Xxxxxxxx, Associate
AGREED:
XXXXXX & XXXXXXX, L.L.P.
By: /s/ Xxxx X. Xxxxx
------------------------------
Xxxx X. Xxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Attorneys for Bank Austria, AG, successor by merger
to Creditanstalt-Bankverein, and Bank Austria
Creditanstalt Corporate Finance, Inc.
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XXXXXXXX XXXX AUTHORIZED:
/s/ D. Xxxxx Xxxxxx
/s/ D. Xxxxx Xxxxxxx
----------------------------(SEAL)
D. Xxxxx Xxxxxxx
ATTORNEY DULY AUTHORIZED:
/s/ D. Xxxxx Xxxxxx
/s/ Xxxxx X. X. Xxxxxx
----------------------------(SEAL)
Xxxxx X. X. Xxxxxx
OPTOMETRIC EYE CARE CENTER, P.A.,
a North Carolina corporation
ATTORNEY DULY AUTHORIZED:
/s/ D. Xxxxx Xxxxxx
By: /s/ D. Xxxxx Xxxxxxx
-------------------------------
D. Xxxxx Xxxxxxx, President
AGREED:
/s/ Xxxxx X. Xxxxxx, Xx.
------------------------------
Xxxxx X. Xxxxxx, Xx.
000 Xxxxxxxxxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Attorneys for X. Xxxxx Xxxxxxx, X.X.,
Xxxxx X. X. Xxxxxx, O.D., and Optometric Eye Care Center, P.A.
XXXXXX XXXXXX & XXXXX, P.A.
By: /s/ D. Xxxxx Xxxxxx
--------------------------
D. Xxxxx Xxxxxx
By: /s/ Xxxxx X. Xxxxx
---------------------------
Xxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Attorneys for X. Xxxxx Xxxxxxx, X.X.,
Xxxxx X. X. Xxxxxx, O.D., and Optometric Eye Care Center, P.A.
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